Annual Report
03 05 06 09 12 14 25 28 31 36 38 41
Highlights About this Report Iochpe-Maxion: Corporate Profile Industry Panel Message from the Chief Executive Officer Corporate Governance Strategy Operating Performance – Divisions and Joint Venture Economic and Financial Performance Prospects Sustainability Corporate Information
Annual Report
Highlights
The following charts offer a quick, direct and concise glance at the main performance indicators which Iochpe-Maxion achieved during 2008. Comparisons, when indicated, refer to the performance recorded in 2007:
Net Operating Revenue – (in R$ millions)
Gross Profit – (in R$ millions)
+ 41.8%
+ 51.4% 1,828
357
1,494 1,099
2004
2005
289 1,248
1,289
2006
2007
228
2008
Exports – (in R$ millions)
2004
219
2005
2006
236
2007
Operating Income (EBIT) – (in R$ millions) + 21.3%
+ 83.8% 146
119
2008
232
120
178
96
136
127
126
47
2004
2005
2006
2007
2008
2004
2005
2006
2007
2008
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Annual Report
EBITDA – (in R$ millions)
Net Bank Indebtedness – (in R$ millions)
+ 71.7% 268
256
205 163
156
156 115
2004
2005
2006
2007
2008
Net Financial Expenses– (in R$ millions)
2003
125
132
128
2005
2006
2007
102
2004
2008
Capex – (in R$ millions)
28
113 84 73 68
37 33 2004
2005
21 2006
68
10
2007
2008
2004
2005
2006
2007
2008
Net Income – (in R$ millions)
214*
72 51 2004
2005
58 2006
72
2007
2008
* Non-recurring gain of R$ 76 million arising from the merger of Maxion Sistemas Automotivos into Iochpe-Maxion.
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Annual Report
About this Report
This Annual Report has been prepared and structured
of the information, so as to ensure its preciseness and
for the purpose of offering all interested parties – including
strategic relevance. The structure adopted, in turn, is also
shareholders, investors, analysts
focused on transparency, with a visual conception combining
and
capital
market
professionals – clear, precise and complete information
with equilibrium, modernity and practicality.
about the business and results of Iochpe-Maxion S.A. and
Through this Annual Report, which seeks to take into
its subsidiaries in the period from January 1 to December
account the recommendations of the Brazilian Association
31, 2008. Subsequent information, and therefore outside the
of Public Companies (ABRASCA), Iochpe-Maxion reiterates
established period, is duly highlighted when mentioned.
its commitment to best corporate governance practices, and
Preparation of this document in line with the information
as a result, also to the principles of ethics and responsibility
published in the Management Report – audited by KPMG
in carrying on its business. We further reiterate the proposal
Auditores Independentes – and on the Investor Relations
to recognize the value of transparency as the basis for
site of Iochpe-Maxion, had the support of our company’s
establishing increasingly positive and productive relationships,
top executives, from the process of gathering the most
which are not by chance the essence of healthy growth
important facts recorded during the period, to the checking
among the best companies.
5
CORPORATE PROFILE
Iochpe-Maxion is Brazil’s largest manufacturer of wheels and chassis for commercial vehicles and railway freight cars and castings.
Annual Report
PRODUCTION CENTERS IN BRAZIL AND CHINA AND SALES TO OVER 40 COUNTRIES ON ALL CONTINENTS.
Specialization and focus on Results.
Iochpe-Maxion S.A. has its origins in the Iochpe Group, whose business began in 1918, in Rio Grande do Sul State.
production centers in Brazil and China, and sales to over 40 countries on all continents, the highlight being the markets
Its business diversification strategy, which for many years
in the United States and Latin America. With its central
was the hallmark of the company’s operations, was replaced
management in São Paulo, the company has been public
in the nineties by specialization, with the focus on the auto
since 1984, and its control is shared between the Iochpe
parts and railway equipment sectors of industry.
family and Banco Nacional de Desenvolvimento Econômico
Iochpe-Maxion is Brazil’s largest manufacturer of wheels and chassis for commercial vehicles and railway freight cars and castings, with a relevant market share in each of these segments. It also has important international business, with
SHAREHOLDERS Iochpe family BNDESPAR Controlling parties Other Total Iochpe-Maxion
e Social – Participações (BNDESPAR), both of whom are represented on the board of directors. The following table shows the company’s shareholder composition on December 31, 2008:
Quantity of Registered Common Shares (ON)
Percentage
13,443,357 11,593,401 25,036,758 22,394,928 47,431,686
28.34% 24.44% 52.78% 47.22% 100.00%
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Annual Report
On July 1, 2008, a special shareholders’ meeting approved the merger of the subsidiary, Maxion Sistemas Automotivos Ltda. into Iochpe-Maxion S.A., a restructuring for the purpose of simplifying our company’s operating and corporate structure. Within this new context, IochpeMaxion S.A. began to operate through two divisions and a joint venture. Together they offer close to 7,100 direct jobs and operate six manufacturing plants in the states of São Paulo, Minas Gerais and Rio de Janeiro, in addition to a new unit in China, which became operational in July of 2008. • Wheels and Chassis Division With industrial units in the cities of Cruzeiro, in the State of São Paulo; Resende, in the state of Rio de Janeiro, and in the city of Nantong in China, the company manufactures
WITH THE AIM OF SIMPLIFYING ITS OPERATING AND CORPORATE STRUCTURE, IN JULY APPROVAL WAS GIVEN FOR THE MERGER OF THE SUBSIDIARY, MAXION SISTEMAS AUTOMOTIVOS LTDA. INTO IOCHPE-MAXION S.A.
and sells steel wheels for trucks, buses and farm machinery and complete frames, sidebars and crossbars for trucks, buses and light commercial vehicles. The Division, which employs around 4,600 employees, accounted for 66.5% of consolidated net operating revenue in 2008, with growth of 35.8% in net operating revenue in comparison with 2007. • Automotive Components Division Operates in the segment of automotive components for passenger vehicles, the highlight being production of welded, structural stamped units, brake levers, pedal sets, bolts and locks, in addition to cylinders and keys. Installed Development of markets and products which produce synergies with its current business is part of the company’s growth strategy.
in the city of Contagem, in the state of Minas Gerais,
• Amsted-Maxion
this Division employs around 680 employees. In 2008, it
Ferroviários S.A.
Fundição
e
Equipamentos
accounted for 6.5% of consolidated net operating revenue,
A joint venture with Amsted Industries – a US company
recording growth in net operating revenue of the order of
which is world reference in developing and applying
3.8% in relation to the previous year.
technologies in the railway castings sector – produces railway freight cars, railway components and railway and industrial castings. It has production units in São Paulo, in the cities of Cruzeiro, Osasco and Hortolândia, where it employs around 3,600 staff. Amsted-Maxion accounted for 27.0% of consolidated net operating revenue in 2008, recording growth of 76.6% in net operating revenue in relation to 2007. The company closed the financial year retaining absolute leadership in the Brazilian freight car market, with an approximate share of 85%. The growth strategy of Iochpe-Maxion is based on constantly refining its business portfolio, in expanding and internationalizing its production capacity and in developing new markets and products that produce synergies with its current business.
8
INDUSTRY PANEL
IN 2008, THE MARKETS WHERE IOCHPE-MAXION OPERATES MIRRORED THE OVERALL PERFORMANCE OF THE ECONOMY, WITH A SHARP SLOWDOWN BEGINING IN THE LAST MONTHS OF THE YEAR.
Annual Report
IN SPITE OF THE CONTEXT, ALL MARKET POSTED A POSITIVE PERFORMANCE FOR THE YEAR AS A WHOLE, WHICH BENEFITED THE COMPANY’S RESULTS.
One scenario, two cycles.
Brazilian market
into decline much later, partly because of the earlier difficulty faced by vehicle manufacturers in fulfilling orders in their
The markets in which Iochpe-Maxion operates through
portfolios, with waiting lists of several months. The railway
its two divisions and the Amsted-Maxion joint venture during
cars market, in turn, which has a longer time cycle in regard
2008 reflected the performance of the economy as a whole,
to orders and actual delivery of the units, showed limited
characterized by an increase in demand during most of the
effects of the crisis in 2008, but with a probable impact on
year, followed by a sharp decline in the final stretch, reflecting
demand in 2009.
the financial crisis which rapidly engulfed the world. This
In spite of this context characterized by two quite
scenario affected the company at different moments, and as
distinct periods, all markets registered positive performances
a result, caused different impacts.
for the year as a whole, benefiting Iochpe-Maxion’s results
The passenger vehicle market, for example, declined
in 2008.
sharply beginning in the last quarter of 2008, which directly
According to data published by the National Association
affected the business of the Automotive Components
of Automotive Vehicle Manufacturers (Anfavea), Brazilian
Division, while the truck, farm machinery and bus market
production of vehicles and farm machinery showed the
– where the Wheels and Chassis Division operates – went
following behavior in the periods indicated (in units):
SEGMENT Cars Light commercial vehicles Trucks Buses Total vehicles Farm machinery
2008
2007
Var.
2,567,044 448,451 167,330 44,111 3,226,936 84,986
2,388,402 406,277 137,052 39,087 2,970,818 65,003
7.5% 10.4% 22.1% 12.9% 8.6% 30.7%
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Annual Report
The following table shows domestic demand in the railway industry in the periods indicated, according to estimates by Amsted-Maxion:
SEGMENT Freight Cars (units) Railway wheels (units)* Railway castings (tons)*
2008
2007
Var.
5,118 48,256 4,763
1,249 48,010 5,673
309.8% 0.5% -16.0%
* Aftermarket only. Does not include wheels and railway castings used in building cars.
The following table shows the volumes of certain products sold by Iochpe-Maxion in the periods indicated:
SEGMENT Railway wheels (thousands of units) Railway wheels (units)* Freight Cars (units) Castings (tons)*
2008
2007
Var.
1,919 44,227 4,491 38,977
1,751 52,885 1,163 48,369
9.5% -16.4% 286.2% -19.4%
* Aftermarket only. Does not include wheels and railway castings used in building cars.
Exports
decline in 2008 in comparison to 2007 the exception being the bus segment, which showed a slightly positive variance of
On account of internal demand and the appreciating
1.7%. According to the Anfavea, Brazilian exports of vehicles
exchange rate which were features of most of the year,
and farm machinery posted the following figures in the
Brazilian exports of vehicles and farm machinery showed a
periods indicated (units):
SEGMENT Cars Light commercial vehicles Trucks Buses Total vehicles Farm machinery
2008
2007
Var.
558,207 122,022 38,510 15,689 734,428 30,216
588,346 144,388 41,213 15,432 789,379 27,248
-5.1% -15.5% -6.6% 1.7% -7.0% 10.9%
In spite of the reduction in Brazilian exports of vehicles,
million – or R$272.0 million – representing an increase in US
trucks and farm machinery, Iochpe-Maxion was successfully
dollar terms of 21.3% and 16.8% in Brazilian Reais when
increased overseas sales of its products
comparing 2008 with 2007.
The principal destinations of its products were the
The following table shows Iochpe-Maxion’s export
United States (with 47.9% of total exports), Latin America
performance through its two divisions and the Amsted-
(17.4%), Africa/Middle East (17%) and Europe (11.2%). In all,
Maxion joint venture:
Iochpe-Maxion exports and overseas sales totaled US$145.8
EXPORTS – R$ 000 Wheels and chassis Automotive components Amsted-Maxion Total Iochpe-Maxion
2008
2007
Var.
149,558 1,404 121,007 271,969
107,308 1,033 124,449 232,790
39.4% 35.9% -2.8% 16.8%
11
MESSAGE FROM THE CHIEF EXECUTIVE OFFICER
THE COMPANY ENDEAVORED TO RESPOND IN A PROPER MANNER TO THE DEMANDS AND CHALLENGES, ADAPTING ITS STRUCTURE AND COSTS TO THE NEW REALITY.
Annual Report
STRATEGIC ADVANCES: THE NEW TRUCK WHEEL PLANT IN CHINA AND THE SETTING UP OF A STRINGER AND FRAMES PLANT IN CHENNAI, IN INDIA.
Management and consistent expansion.
Iochpe-Maxion closed 2008 with a net income of R$214 million, in a year favorably impacted by growth in Brazilian production of vehicles and farm machinery, by the increase in domestic demand for railway cars, but also by the strong global downturn apparent during the latter months of the year. On account of this context, our company endeavored to respond in an adequate manner, on the one hand by managing business growth during most of the year, and on the other, the strong decline, by reducing costs and adjusting headcount to the new reality, while at the same time seeking opportunities for growth. Worthy of note here was the setting up of new truck wheel plant in China and the completion (which took place 2009) of negotiations to set up a new stringer and frames plant in Chennai, India. Taking the advances in 2008 as a whole, it is also worth drawing attention to the conclusion of the process of Iochpe-Maxion’s migration to the Bovespa Novo Mercado segment, involving the conversion of preferred shares to common shares, in addition to the merger of Maxion Sistemas Automotivos into Iochpe-Maxion, which has simplified the company’s organizational structure. For 2009, our planning points to (i) the development of new business in the welded structural stamped sets sector; (ii) the initial set-up of the new production unit in India; (iii) expanding our range of products and services, in the constant search to obtain synergies with our existing business.
Dan Ioschpe Chief Executive Officer
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Annual Report
CORPORATE GOVERNANCE
IOCHPE-MAXION REMAINS COMMITTED TO THE PRINCIPLES OF GOOD CORPORATE GOVERNANCE, IN LINE WITH BEST MARKET PRACTICES.
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Annual Report
IN MARCH OF 2008, IOCHPE-MAXION QUALIFIED TO JOIN THE NOVO MERCADO SEGMENT OF THE SÃO PAULO STOCK EXCHANGE
Transparency in our relationships.
Iochpe-Maxion adheres to the principles of good
to join the Novo Mercado segment of the São Paulo Stock
corporate governance, in line with best practices on the
Exchange on March 24, 2008, raising its level of governance
Brazilian and international markets. In the day-to-day
and expanding its prospects and opportunities for attracting
administration, this commitment applies to employing clear
new institutional investors. It is worth pointing out that since
guidelines on conduct and in respecting higher standards
2006, the Company has participated in Level I Corporate
than those required under legislation or by the regulatory
Governance of the São Paulo Stock Exchange.
agencies. This outlook, adapted as always to the new
Other initiatives also highlight and strengthen Iochpe-
demands underlying the search for increasingly positive
Maxion’s commitment in relation to good corporate
relationships, aims to advance and consolidate the respect
governance:
on the part of Iochpe-Maxion and of its management in relation to transparency, equity in dealing with shareholders, accountability and corporate responsibility.
• Definition of a “Code of Ethics” containing the principles for the Company’s conduct in its relationships with clients,
In January 2008, a special meeting of shareholders in
suppliers, employees and shareholders, among other publics;
possession of preferred shares approved the conversion
• Presence of the Audit and Remuneration Committees, for the
of the Company’s preferred shares to common shares, in
purpose of advising the Company’s board of directors; and
the proportion of 1.2 preferred shares for each common
• Adoption of the Procedure for Manifestations involving
share.The conversion was endorsed by special shareholders’
aspects of accounting and control. Through this, in a
meeting which also deliberated in favor of reformulating
confidential and anonymous manner, anyone can forward
the Company’s by-laws, approving the election of new
suggestions, criticisms and complaints directly to the audit
members of the board of directors, which rose from 9 to
committee of the board of directors.
13 members. With these changes, Iochpe-Maxion qualified
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Annual Report
Capital markets The common shares of Iochpe-Maxion (Bovespa: MYPK3)
Declared Dividends – 5-Year Growth
closed 2008 quoted at R$8.75, registering accumulated depreciation of 76.2% over the year. In the same period, the Ibovespa had an accumulated decline of 40.02%. 79.2
At the end of 2008, Iochpe-Maxion’s market cap totaled R$415.0 million. In 2008, Iochpe-Maxion’s securities continued to have an important presence in the daily transactions on the Bovespa, with an average daily financial trading volume of the order 28.0
of R$1.8 million (R$4.6 million in 2007) and an average of 71 daily trades (90 trades the previous year). According to Iochpe-Maxion’s by-laws, the basis for calculating dividends represents 37% of net income, after
16.1 2004
2005
22.8 2006
26.8
2007
2008
discounting any losses from previous years. Therefore taking Well-defined business
into account the net income of R$214.1 million assessed
has ensured that Iochpe-
in 2008, distribution of dividends in 2009 is likely to be
Maxion’s equity value
R$79.2 million (R$26.8 million in 2007), representing
has continued to grow,
1.670088282 per share (0.564704740 in 2007).
Dividends per common Shares – 5-Year Growth
especially in the last five years. 1.67
0.50 0.28 2004
2005
0.56 0.40 2006
2007
2008
Volume of Shares Traded – 5-Year Growth
4,557 3,456
1,755 416
443
2004
2005
2006
2007
2008
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Annual Report
Number of Trades – 5-Year Growth
134
90 71
23 2004
IOCHPE-MAXION’S SECURITIES CONTINUED TO HAVE AN IMPORTANT PRESENCE IN THE DAILY TRANSACTIONS ON THE BOVESPA, AVERAGING 71 DAILY TRADES.
18 2005
2006
2007
2008
Variance of the Common Shares X Ibovespa – 5-Year Growth
300.00%
MPYK3
258.77%
Ibovespa
250.00% 200.00% 150.00%
111.42%
100.00% 50.00%
30.36%
17.81%
43.65%
32.93%
-40.02%
27.71%
0.00%
-1.58%
-50.00%
-76.18%
-100.00% -150.00% 2004
2005
Iochpe-Maxion – Market Cap – 5-Year Growth
2006
2007
2008
Iochpe-Maxion – Equity Value – 5-Year Growth
2,094
443
311 230 744
900
895
267
186 415
2004
2005
2006
2007
2008
2004
2005
2006
2007
2008
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Annual Report
Price/Earnings – 5-Year Growth
Company Value/EBITDA – 5-Year Growth
27,5
14,7
13,5
16,7 12,5
5,4
5,0
6,1 2,5
1,9 2004
2005
2006
2007
2008
Disclosure Policy
2004
2005
2006
2007
2008
The principle of transparency is also the hallmark of our relationships, through direct contact in meetings with analysts
Iochpe-Maxion has adopted a “Policy of Disclosing” all
and investors. In 2008, Iochpe-Maxion participated in more than
information which in any manner may affect the quotation
ten events with investors at the invitation of banks and brokers
or the variance of its securities, or even the decision by
– in Brazil and abroad – in addition to four teleconferences for
investors to purchase, sell or hold the Company’s shares.
dealing with the quarterly results and other matters. A meeting
By doing so, it endeavors to increasingly guarantee and
was also held with representatives of the Association of Capital
consolidate the reliability, speed of response and horizontal
Market Analysts and Investment Professionals. The meeting, for
nature of the information available.
the ninth consecutive year, ensured the Company the “Golden
Information is disclosed using
“Relevant Facts” or
Seal”, a prize for recognition of assiduity granted awarded by
“Notices to the Market” published in widely-circulating
the Association of Capital Market Analysts and Investment
newspapers in Brazil and on the internet. In addition
Professionals (APIMEC).
to information on the areas of corporate governance, Iochpe-Maxion is continuing to work to diversify its client portfolio and to seek out new markets.
strategy and social responsibility, the Investor Relations site
Risk Management
– www.iochpe.com.br – carries detailed financial sections with coverage by analysts, Annual and Social Reports, presentations, teleconferences and Company news.
So that management is capable of minimizing any impacts on its manufacturing, operational and financial structure, Iochpe-Maxion produces periodic reports which monitor the more relevant risk factors. These documents represent an important reference so that the board of directors can make the adjustments and corrections required for carrying on the operation within pre-established risk parameters. Financial Risks • Indebtedness: On a monthly basis, Iochpe-Maxion monitors the amount of its indebtedness. This exercise establishes parameters for confronting and minimizing risks in adverse market situations, in addition to adjusting the volume of indebtedness (financial debt) to its ability to generate cash (EBITDA); • Average maturity period of bank debt: Also on a monthly basis, the Company also monitors the average maturity period of its bank debt, with the aim of reducing any risks and their impact on its financial structure and define parameters for the maturity profile, while always searching for the most suitable and balanced debt cost X maturity period relationship;
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Annual Report
• Exchange rate exposure: Iochpe-Maxion endeavors to
• Portfolio concentration: Iochpe-Maxion is continuing
reduce its exposure to foreign currencies by concentrating
its efforts to diversify its client portfolio, seeking out
its business in Brazilian reais. In cases of foreign currency
opportunities in new markets and minimizing the impact of
transactions,
is
the reduction in volumes caused by any variances in demand
accompanied by hedge transactions. When it is impossible
whenever
possible,
indebtedness
from important clients. The basis for this task lies in planning
to contract this protection, any debt created is then
for identifying opportunities which the Company can take
linked to the Company’s exports. In the task of constantly
advantage of in the event of a sudden interruption to its
monitoring its foreign currency exposure, the parameter
contracts, preserving as far as possible, and at a suitable level,
the Company uses is the maximum US dollar indebtedness
the Company’s financial and operating parameters.
equivalent to six months of the balance represented by exports less imports. This monitoring is also undertaken
Differential Competitive Advantages
every month.; • Payroll-to-net sales ratio: The increase in salary
Iochpe-Maxion enjoys competitive advantages focused
increase-related costs – especially those from collective
on contributing to and benefiting the obtaining of positive
bargaining agreements – is considered difficult to pass on
results, by creating values perceived by the market and
to the prices of our manufactured products.Therefore, and
by all those who, in different manners, participate in the
in order to face this challenge, every month Iochpe-Maxion
Company’s day-to-day business. Among these competitive
monitors its payroll-to-net sales ratio. At the same time, it
advantages, the highlights are:
develops and implements actions intended for increasing
• Financial discipline in investments: Iochpe-Maxion
productivity and operating efficiency. In this task the main
carefully analyzes all new investment projects, allocating priority
examples are:
to those opportunities which offer suitable returns without
• Management tools;
compromising its capital structure. This principle, valued as an
• Programs which encourage suggestions for improvement
essential part of the Company’s culture, is also the starting
with prizes for employees; • Enhancement of processes and elimination of production bottlenecks; • Investments in automation; and • Absorption of fixed costs and economies of scale by increasing the volume of production.
point for developing ideas, projects and solutions. • Brand recognition: The name Maxion is a reference in the segments where the Company operates and a brand which the market is used to associating with attributes like competitiveness, quality, punctuality, efficiency and reliability. • Long-term contractual relationships: Iochpe-Maxion
• Economic scenario: Demand for the articles produced
recognizes the value of long-term business relationships.
by Iochpe-Maxion is directly linked to the economic
In practice, this differentiating feature lies in the Company’s
scenario in Brazil and is therefore also linked to the
involvement and interaction with almost its entire portfolio of
oscillations of the latter. Variances in Gross Domestic
clients in Brazil and overseas, which benefits the establishment
Product, for example, have an influence on the need for
of increasingly productive and positive partnerships.
transportation of cargoes, which directly affects the railway equipment business, wheels and chassis for trucks and light commercial vehicles. Similarly, fluctuations in the GDP have a direct impact on the renewal of car, light commercial vehicle and bus fleets. Commercial risks • Competition and price compression: The systematic investment policy adopted aims to, on one hand, maintain the Company technologically up-to-date and adjusted to the level of demand in the markets, and on the other, to preserve the focus on producing with better quality, greater efficiency and balanced costs. This practice has shown itself to be suitable for the goal of favorably positioning IochpeMaxion in an increasingly demanding and disputed market, preserving its ability to expand its business and to face up to
COMPETITIVE ADVANTAGES WHICH CONTRIBUTE TO OBTAINING POSITIVE RESULTS, CREATING VALUES PERCEIVED BY THE MARKET.
the pressures and challenges presented by the competition.
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Annual Report
• Leadership: Iochpe-Maxion is an important and high-profile leader in the segments which account for the
• Quality: The products and processes which Iochpe-Maxion
wheels and chassis for commercial vehicles, railway
uses enjoy recognized quality and international certification
freight cars and castings. This position enables it to obtain
awarded by government bodies and independent institutions.
economies of scales, an important differential in an
The Company is also a certified supplier to the major vehicle
increasingly competitive and demanding market.
manufacturers and railway operators in Brazil, expanding the
• Operating in market segments with growth
opportunities for meeting new demands in the domestic
potential: Iochpe-Maxion operates in market segments,
and international markets. The principal certifications which
which in the long term, continue to show growth potential
the Company has obtained are the following:
exceeding the expansion of Brazil’s GDP. This positive
• Wheels and Chassis Division of Maxion Sistemas
scenario can be attributed to the projects for expanding
Automotivos: ISO/TS 16949, ISO 14001 and OHSAS
and improving the railway and highway networks, as well
18000, certified by Bureau Veritas Quality International
increased volume of cargo to be transported. • Partnership and technology: Iochpe-Maxion maintains and enhances partnerships with world technology leaders
mundiais de tecnologia de
(BQVI); • Automotive Components Division of Maxion Sistemas Automotivos: ISO/TS 16949, certified by Bureau Veritas Quality International (BQVI); and
in those segments which are fundamental to its business.
• Amsted-Maxion: ISO 9001 certified by Lloyd’s
One example of this differentiating feature is the association,
Register and the AAR – American Association of
through Amsted-Maxion, with Amsted Industries, the main US
parcerias com líderes
within a short time frame and at competitive costs.
largest share of its net operating revenue, for example
as the need to renew the fleets and adapt them to the
A Iochpe-Maxion aprimora
the Company flexibility to rapidly meet specific demands
Railways – M1003 certified by IQC Inc.
manufacturer of railway castings and world leader in developing
• Qualifications: The entire management team at
technologies and products for the sector. As a result of this
Iochpe-Maxion has wide experience and knowledge of
partnership, the Company enjoys access to new production
the segments where the Company operates, yet another
techniques and to different products and markets.
differentiating factor which, year after year, has contributed
• Competitive costs: The focus on technology and on
to the growth of the Company’s main performance
structuring modern industrial facilities, which are continually
parameters. It was also because of this scenario focused on
expanding and up-to-date, enables Iochpe-Maxion to rapidly
improvements, that the Company channeled R$2 million
meet the demands of the Brazilian market, in addition to
into staff training and qualification initiatives.
efficient and competitive exports. Competitive production costs are also the result of verticalization in some sectors,
Board of Directors
specialization in processes and the use of certain materials
setores fundamentais de
such as steel. Differentiated manufacturing techniques
The board of directors of Iochpe-Maxion is composed
sua atividade.
and the use of world-level leading-edge equipment afford
of 13 members, of whom at least 20% are independent members, in accordance with the Company’s by-laws and the principles of Novo Mercado segment of the São Paulo Stock Exchange. The collective decision-making body, whose members serve a two-year term of office, with reelection possibility, the board established the general business policies and directives, as well as the long-term strategy. It normally convenes ten times a year, or on special occasions on notice of meeting from the chairman or in his absence, the deputy chairman or two directors together. Meetings take place in the presence of the majority of current office holders, as determined by the by-laws. Resolutions are approved by the majority of those present. The board of directors of Iochpe-Maxion is currently composed as follows:
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Annual Report
Members
Todos pela Educação” (Everyone Committed to Education), the
Ivoncy Brochmann Ioschpe
Ecofuturo Institute, the Padre Anchieta Foundation and advisor
Chairman of the board, 69 years old. He has a degree
to the Victor Civita Foundation. He has been a plenary member
in Economic Science from the Federal University of Rio
of the board of directors of Iochpe-Maxion since 2007. Debora
Grande do Sul, was President and member of the Institute
Berg Ioschpe Russowski is his alternate.
for Studies and Industrial Development (IEDI), in addition to being a member of the Trade and Business Development Council of the Brazilian Ministry of Foreign Affairs. He has
Mauro Knijnik He is 68 years of age and holds a degree in Economics
been a board member of Iochpe-Maxion since 1984. He is a
from the Federal University of Rio Grande do Sul (UFRGS).
plenary member and his alternate is Dan Ioschpe.
He was Secretary of Finance of the State of Rio Grande do
Salomão Ioschpe
do Sul (BANRISUL), President of the Financial Coordination
Sul, Chairman of the Board of Banco do Estado do Rio Grande He is 45 years old and holds a degree in Economics and
Body of the State of Rio Grande do Sul and Vice President
Finance and Political Studies from the Institute of Political Studies
of Iochpe-Maxion S.A. Since 1984 he has been a plenary
in Paris, and an MBA from Case Western Reserve University.
member of the board of directors of Iochpe-Maxion.
He has presided over Insolo since 2007, and since 2003 he has been owner and Chief Executive Officer of BMA Automotive,
Iboty Brochmann Ioschpe
a consultancy company based in Cleveland, Ohio, in the United
He is 59 years of age and holds a degree in Economic
States. A plenary member of the board, he was operations
Science from the Federal University of Rio Grande do Sul.
officer at Iochpe-Maxion in North America between 1994 and
He has been a plenary member since 1984 with Cláudia
1999. He has been a plenary member since 2008.
Ioschpe as his alternate.
Gustavo Berg Ioschpe
Mauro Litwin Iochpe
He is 31 years of age and holds a degree in Strategic
He is 59 years of age and holds a degree in Business
Management and Political Science from the University of
Administration from the Pontifical Catholic University of Porto
Pennsylvania and a Masters of Economic Development and
Alegre – State of Rio Grande do Sul. He has been a plenary
International Economics fromYale University. He is author and co-
member since 1992 and his alternate is Leandro Kolodny.
author of several books in the education sector, writes for several magazines and newspapers with nationwide circulation and a
Nildemar Secches
project consultant for the World Bank in the education sector, in
He is 58 years of age and holds a degree in Mechanical
addition to founder and president of G7 Cinema. He is a member
Engineering from the University of São Paulo, a postgraduate
of the board of the Iochpe Foundation, of the “Compromisso
degree in Finance from the Pontifical Catholic University of Rio de Janeiro and a doctorate in Economics from Unicamp– Campinas. He was Chief Executive Officer of the Perdigão Companies between 1995 and 2008, when he took up the position of chairman of the Company’s board of directors. He is also chairman of the board of directors of WEG and a member of the board of directors of Ultrapar since 2002. He has been a plenary member of the board of Iochpe-Maxion since 2004, with Ronald Aldworth as his alternate. Roberto Mangabeira Unger He is 62 years of age and is Special Minister of Strategic Affairs of the Federal Government. He holds a law degree from the Federal University of Rio de Janeiro and continued his studies in the United States at the University of Harvard. He has been a plenary member of the board of Iochpe-Maxion since 2008, with José Wellington Marques de Araújo as his alternate. Rodrigo Caldas Nunes He is 30 years of age and an Accountant from the Federal University of Rio de Janeiro, with an MBA in Management and Corporate Finance from the Getúlio
21
Annual Report
Vargas Foundation (FGV). He has been with the BNDES since 2005 and currently holds the post of Accountant in the Fundraising Department of the Capital Markets Area Monitoring Department. He has been a plenary member since March 2009, having been elected as alternate to Jorge Eduardo Martins Moraes in 2008. Thomas Bier Herrmann He is 58 years of age and holds a degree in Business Administration from the Federal University of Rio Grande do Sul and in Legal and Social Sciences from the Pontifical Catholic University of Rio Grande do Sul. He has been Chief
BOARD OF DIRECTORS AND EXECUTIVE BOARD: GOALS, ORIENTATION AND CONSOLIDATION OF THE BUSINESS ON THE LONG-TERM HORIZON. QUALIFICATION AS THE DIFFERENTIATING FACTOR.
Executive Officer and Market Relations Officer of Renner Herrmann since 1997, having begun his career in that company in 1973. He has been a plenary member of the board of Iochpe-Maxion since 2008. de Comunicação, Petrobras Distribuidora and Pão de Açúcar Israel Vanboin
Group. He was an officer of the Ultra group, Senior Investment
He is 64 years of age and holds a degree in Mechanical
Officer of the IFC, officer of the BNDES and of Banco Denasa
Engineering from the Federal University of Rio de Janeiro
de Investimentos. He is a member of the board of directors
(UFRJ) and an MBA from Stanford University, in the United
of TAM and member of the boards of MAM-SP, Renctas and
States. He is chairman of the board of Unibanco Holdings,
the Brazilian Cinema Academy, of which he was founder and
having been a member of its board since 1994. He joined
first president. He was a member of the boards of directors
Unibanco in 1969 and has been a member of its board of
of Aracruz, Arafertil, Copesul, Riocell, Perdigão and Pão de
directors since 1988. He has been an independent member
Açúcar. He has been an independent member of the board of
of the board of directors of Iochpe-Maxion since 2008.
directors of Iochpe-Maxion since 2008.
Luiz Antonio Correa Nunes Viana de Oliveira
Décio Silva
He graduated as a mechanical engineer from the Federal
He is 52 years of age and graduated as mechanical
University of Rio de Janeiro, with a postgraduate degree
engineer from the Federal University of Santa Catarina, with
from the Pontifical Catholic University of Rio de Janeiro
a postgraduate degree in Business Administration from the
quality and internationally
and the London Business School, England. He was Chief
Higher School of Administration and Management (Escola
certified.
Executive Officer (CEO) of Makro Atacadista, Net Serviços
The products and processes which Iochpe-Maxion utilizes are of recognized
Superior de Administração e Gerência or ESAG). He began his career at WEG in 1979, and has been Chief Executive Officer since 1989. He is a member of the board of directors of Perdigão. He has been an independent member of the board of directors of Iochpe-Maxion since 2008. Executive Management The executive management of Iochpe-Maxion is responsible for carrying on the day-to-day business and for executing the strategies defined by the board of directors. Its members, all of whom hold a two-year term of office with reelection possibility, do not have seats on the Company’s board of directors. The current members of the executive management are as follows: Dan Ioschpe He is 44 years of age. He graduated in 1986 from the Federal University of Rio Grande do Sul, with a postgraduate degree from the ESPM – State of São Paulo. He holds a Masters of Business Administration (MBA) from the Amos Tuck School at Dartmouth College (EUA), concluded in1991.
22
Annual Report
Ademar Rui Bratz He is 62 years of age and holds a degree in Business Administration from the Federal University of Rio Grande do Sul, in addition to a Master of Business Administration (MBA) from Syracuse University in the United States. In addition to being a member of the fiscal council of Iochpe-Maxion, he is also a consultant at Olvebra Industrial S/A. His alternate is Angélica Flessas. Anthonny Dias dos Santos He holds a bachelor’s degree in Accounting and Laywer, with professional extension in Societary Law from Ibemec-SP and Capital Market from Fipecafi. Work in Societary Law and Capital Market area and practises the function of fiscal council in public companies. Maurício Diácoli He is 49 years of age. He holds a bachelor’s degree He joined the Iochpe Company in1986, where he held
in Accounting Science from the FMUSP, with professional
several positions until June 1996, when he became Chief
extension courses in the areas of finance and accounting,
Executive Officer of AGCO in Brazil. He returned in January
specializing in Brazilian and international accounting (U.S.
1998, and that same year became Chief Executive Officer of
GAAP). He has over 15 years of professional experience in
Iochpe-Maxion. Since 2006, he has also been a director of
international audit and consultancy companies. His alternate
Profarma Distribuidora de Produtos Farmacêuticos.
is Ronald John Aldworth.
Oscar Antônio Fontoura Becker
Advisory Committees
He is 57 years of age and holds a degree in Business
Since 2005, the board of directors of Iochpe-Maxion
Administration from the São Judas Tadeu College. He
has relied on two “Advisory Committees”. The initiative
joined the Company in 1983 and held the position of chief
was intended to raise the Company’s levels of corporate
executive of Iochpe Seguradora between 1989 and 1994.
governance and advance the commitment to transparency
He has held the position of Corporate Finance and Investor
and best market practices.
Relations Officer of Iochpe-Maxion since 1994. In addition to the members of the executive board,
The committees are as follows: • Audit Committee
also worthy or mention are the superintendent officers
This has three members, all with a one-year term of
responsible for managing the divisions of Iochpe-Maxion:
office, defined by the board of directors. At least one of
Armando Ulbricht Junior (Wheels and Chassis Division),
its members must also be a director. The responsibilities
Marcos Luchese (Automotive Components Division) and
of the Audit Committee are:
Ricardo Chuahy (Amsted-Maxion), the joint venture between
• To evaluate and recommend to the board of directors
Iochpe-Maxion and Amsted-Industries of the United States.
companies which may be contracted as external auditors; • To issue an opinion on the choice or change of senior
Fiscal Council A body operating independently from the management and the auditors appointed by the board of directors, Iochpe-
internal audit executive or company accountant; • To evaluate the results of external audits and include reserves, as the case may be;
Maxion’s fiscal council is composed of three members elected
• To review quarterly balance sheets;
by the general meeting, with their respective alternates.They
• To review internal processes and controls;
all have a one-year term of office, with the possibility of
• To evaluate the systems which advise as to actual or
reelection. Among their main responsibilities are the analysis
potential risks, in addition to the risk management policy;
of the financial statements and notification of the respective
• To evaluate policies and practices in such a manner as to
opinions to the Company’s shareholders. Iochpe-Maxion’s fiscal council is currently comprised as follows:
ensure the integrity of the financial reports; • To evaluate any changes proposed in relation to the accounting principles and practices; and
23
Annual Report
• To evaluate the performance of the financial and internal and external audit teams.
recommendations to the board of directors. The Variable Compensation Committee is currently
The Audit Committee is currently composed as follows:
comprised as follows:
• Mauro Knijnik, plenary member of the board of
• Nildemar Secches, plenary member of the board of
directors; • Mauro Litwin Iochpe, plenary member of the board of directors; and • Pedro Ozires Predeus, 63 years old, is an accountant and was a partner at PricewaterhouseCoopers, the company
directors; • Luiz Antonio Correa Nunes Viana de Oliveira, independent member of the board of directors; and • Israel Vanboin, independent member of the board of directors.
where he worked for 30 years. External Audit • Remuneration Committee
Exchange Commission, we wish to advise that during financial
office, chosen by the board of directors. According to the
year 2008, Iochpe-Maxion and its subsidiaries contracted
Company’s by-laws, it is not mandatory for members of
services unrelated to external audit – including clarification
this board to be also directors of Iochpe-Maxion.
of doubts surrounding the interpretation of corporate
The Remuneration Committee has the following
and tax legislation, in addition to a feasibility analysis for
attributions:
organizing a company overseas – in a consolidated amount of
• To review and recommend to the board of directors the
R$81 thousand, with terms of less than one year, representing
salary, bonus, stock options and any other benefits for
15.2% of the amount of fees contracted for audit services
Company executives;
involving the financial statements. Iochpe-Maxion and its
• To periodically review and recommend the necessary
subsidiaries, in discussion with their independent auditors,
alterations to executive remuneration policies and
have concluded that such services provided did not affect
programs, so as to adapt them to market standards and
independence and objectivity, on account of the definition of
expected performance;
the scope and the procedures carried out. Iochpe-Maxion’s
• To periodically review and evaluate changes to the The company is also a
In compliance with Instruction 381 of the Securities
This has three members, all with a one-year term of
program which grants Company options, and to make
adopted policy is to comply with the regulations which define the restrictions on independent auditor services.
certified supplier to Brazil’s major railway operators.
24
Annual Report
STRATEGY
PLANNING BASED ON BALANCED GROWTH AND FINANCIAL DISCIPLINE, REFINING OF THE BUSINESS PORTFOLIO AND MAINTENANCE OF OPERATING MARGINS.
25
Annual Report
ESSENTIAL DIRECTIVES: MODERNIZATION OF THE INDUSTRIAL COMPLEX, INTERNATIONAL BUSINESS EXPANSION, PRIORITY FOR SYNERGY AND BALANCE IN EVALUATING GROWTH OPPORTUNITIES.
Balanced growth, with discipline.
Iochpe-Maxion remains committed to strategic planning
R$ millions
based on the search for balanced growth and financial discipline, permanent refining of its business portfolio and maintenance of operating margins which may remunerate 113,4
the capital invested and add value for its shareholders. In this task the main directives are: 84
Modernization
of
the
industrial
73
68
68
2006
2007
complex The Company will continue modernizing its manufacturing structure, so as to adapt it to market needs and to anticipate competitor movements and demand growth. It will also
2004
2005
2008
continue to update its products and processes, so as to fully meet its clients’ requirements in a differentiated manner, thereby strengthening its leadership of the Brazilian market while expanding its presence on the international market. The chart below shows total investments channeled to new product development and modernization of the industrial complex in the last five years:
26
Annual Report
International expansion
New synergy-based products
Iochpe-Maxion intends to expand its international
Iochpe-Maxion intends to continue expanding its
market share through exports, but especially by setting
product range by entering niche markets which present
up production centers outside Brazil, so as to ensure its
synergies with its current portfolio or client portfolio. An
products enjoy a competitive presence around the world.
example of this directive is the growth in recent years in the
This initiative reduces the Company’s exposure to the risks
automotive welded structural stamped sets sector.
of demand fluctuations on the domestic market, while enabling it to grow in a more balanced manner. The chart
Acquisitions
below shows the volume of exports and international sales The Company continually evaluates opportunities for
by the Company in the last five years:
growth via acquisitions which add synergy to the current business or client portfolios. US$ millions
145,8 119
120
2006
2007
96
47 Manufacturing update: more efficient processes
2004
2005
2008
so as to provide our clients with a full and differentiated service.
27
Annual Report
OPERATING PERFORMANCE – DIVISIONS AND JOINT VENTURE
IN SPITE OF THE DIFFICULTIES BROUGHT ON BY THE ECONOMIC SCENARIO, THE AUTOMOTIVE COMPONENT AND Wheels and chassis DIVISIONS SHOWED IMPROVEMENT IN THEIR DAY-TO-DAY BUSINESS IN 2008.
28
Annual Report
THE RECOVERY IN DOMESTIC DEMAND FOR RAILWAY FREIGHT CARS HAD A POSITIVE INFLUENCE ON THE PERFORMANCE OF AMSTED-MAXION, WITH A RELEVANT INCREASE IN NET OPERATING REVENUE.
Process efficiency, business expansion.
AUTOMOTIVE COMPONENTS DIVISION
this new project is expected to generate additional net revenue of around R$17 million in 2010, reaching a total of
The Automotive Components Division of Iochpe-Maxion
approximately R$75 million a year as from 2013.
closed the 2008 business year with net operating revenue of R$119 million, a figure which represents growth of 3.8%
Wheels and chassis DIVISION
in comparison with the performance of R$114.6 million for the previous year. In spite of this expansion, its share of
In 2008, the Wheels and Chassis Division registered net
consolidated net operating revenue fell from 8.9% in 2007
operating revenue of R$1,215 million, an increase of 35.8%
to 6.5%. This performance reflects the positive influence of
in relation to the previous year’s performance. In spite of this
the expansion of 7.5% in Brazilian automotive production,
important expansion, its share of consolidated net operating
which in turn felt the impact of the market decline as from
revenue showed a decline from 69.5% in 2007 to 66.5%.
the fourth quarter of the year. In 2008, the Division – which
The Division’s figures were favorably affected by increased
continues to invest in modernizing its production capacity and
production in Brazil of trucks, buses and farm machinery, of
expanding the efficiency of its processes – continued to post
22.1%, 12.9% and 30.7%, respectively, in comparison with
important results on account of the start of production of
2007, even in the face of the reduced pace of production
welded structural stamped sets for the “Punto” car.
growth as from the latter months of the year.
The experience acquired from this work – carried
The frames segment – which in addition to complete
out in partnership with the Wheels and Chassis Division,
frames, also includes stringers, crossbars and stamped parts
with its recognized know-how in stamping – enabled us
– recorded in 2008 net operating revenue of R$705 million,
to expand the relationship with Fiat and to develop new
and increase of 35.3% in relation to the R$521 million in
structural stamped sets for two of this auto manufacturer’s
2007. In this scenario, it behoves us to register the increase
new projects. With investments of around R$24 million,
of 76.6% in revenue from overseas sales. This performance
29
Annual Report
ensured the Division leadership in this market segment, with
Nantong, the result of investments of around US$20 million.
a share of approximately 65%.
In the period, the unit’s net operating revenue reached
In 2009, the Division is expected to begin work on
R$9.9 million, and its entire production is intended for
setting up a new unit in the Chennai region, an important
export to markets which are geographically close to China.
industrial center in India. The new project is the result of
Following the period of accelerated production at the
negotiations to supply stringers, crossbars and frames
unit, when production capacity of 600 thousand wheels a
assembly and painting of components and complete frames
year was attained, Iochpe-Maxion estimates additional net
to the new Daimler Hero Commercial Vehicles factory – an
revenue of around US$30 million per year.
affiliate company of the Daimler Group – which will produce a new family of light cargo trucks for the Indian market as
AMSTED-MAXION
from the end of 2010. “Maxion Chennai” will invest around
On the domestic market, Amsted-Maxion retains its high-profile leadership in the railway cars and castings segments.
R$35 million and is expected to generate annual net revenue
Amsted-Maxion, a joint venture between Iochpe-Maxion
of approximately R$23 million as from 2011. In addition to
and Amsted-Industries – an American company which is
the financial result, the importance of this new unit lies in
the main international referenced in the development and
the opportunity for Iochpe-Maxion to initiate operations in
application of technologies in the railway castings segment –
a strategic market, with enormous potential for expansion
registered (for the purposes of Iochpe-Maxion’s 50% equity
and under very satisfactory conditions.
interest) in 2008 net operating revenue of R$492.8 million,
The wheels segment – comprising highway wheels
which represents an increase of 76.6% in comparison with the
and wheels for farm and off-road vehicles – obtained net
previous year’s result of R$279.0 million.With this performance,
operating revenue of R$500.5 million in 2008, 33.7% up on
its share of consolidated net operating revenue rose from
the figures registered in 2007, of R$374 million. The major
21.6% in 2007 to 27% in 2008.
impact on this performance can be attributed to domestic
Amsted-Maxion’s performance was favorably impacted
market sales, which rose by 40.0%, from R$301.9 million in
by the strong recovery in domestic demand for railway
2007 to R$422.7 million in 2008. Thus the Division retained
freight cars, which itself was directly influenced by the
its leadership of this market segment, with a share of 62%.
increased pace of economic activity which was the hallmark
On the external front, the major highlight of 2008
of the first three quarters of the year. Thus in the domestic
was the start-up in the second semester of the new unit
market the Company retained its high-profile leadership in
for manufacturing of vehicle wheels in China, in the city of
the railway cars and castings segments, with a share of 85% and 80%, respectively, according to the Company itself. Sales to the overseas market, however, showed a slight decline in reais, with a resulting reduction in the value of exports of around 2.8% in relation to 2007. Still in 2008, the Amsted-Maxion plant in Hortolândia – State of São Paulo began producing the DH10, a hydraulic diesel locomotive designed for general line services, such as maneuvers in ports, cement factories, steel mills and railway and logistics operators. On account of the sharp reduction in demand for new railway freight cars forecast for 2009 – resulting from the international financial crisis which led markets to contract as from the final months of 2008 – orders for the Company’s railway cars for delivery in 2009 stand at around 900 units, representing gross revenue of approximately R$165 million (R$83 million for the purpose of Iochpe-Maxion’s 50% equity interest).
30
Annual Report
ECONOMIC AND FINANCIAL PERFORMANCE
IOCHPE-MAXION RECORDED A 41.8% INCREASE IN ITS NET OPERATING REVENUE, WHICH REFLECTS EXPANSION IN THE BRAZILIAN PRODUCTION OF TRUCKS AND FARM MACHINERY AND GROWTH OF DEMAND FOR TRUCKS AND RAILROAD WAGONS. 31
Annual Report
IN 2008, NET INCOME INCREASED BY 195.7% AGAINST THE PREVIOUS YEAR. OF THIS TOTAL, NONRECURRENT GAINS TOTALED R$76 MILLION.
Challenge, balanced management, and result.
The table below sets forth Iochpe-Maxion’s consolidated result for 2008. For purposes of comparison with the previous year and according to CVM Instruction 539/08 – distributed on March 14, 2009 – and the instruction issued by the Committee of Accounting Pronouncements, the amounts considered in 2008 and 2007 as Non-Operating Expenses – R$ -4 million and R$ -8.6 million, respectively – were incorporated into Operating Expenses. Therefore, EBIT and EBITDA decreased against the previous reports.
CONSOLIDATED STATEMENT OF INCOME – R$ THOUSANDS Net Operating Revenue Cost of Goods Sold Raw Material Labor Other
Net Net 2007 2008 Operating Operating (Adjusted) Revenue Revenue 1,827,726
100.0%
1,289,282
100.0%
(896,406) (284,595) (289,755) (1,470,756) 356,970
49.0% 15.6% 15.9% 80.5% 19.5%
(598,928) (222,604) (232,044) (1,053,576) 235,706
46.5% 17.3% 18.0% 81.7% 18.3%
(52,386) (73,158) 229 (125,315) 231,655
2.9% 4.0% 0.0% 6.9% 12.7%
(47,009) (55,749) (6,927) (109,685) 126,021
3.6% 4.3% -0.5% 8.5% 9.8%
13,795 (41,376) (27,582) 204,073
0.8% 2.3% 1.5% 11.2%
6,233 (15,839) (9,606) 116,415
0.5% 1.2% 0.7% 9.0%
-
0.0%
204,073
11.2%
116,415
9.0%
10,021
0.5%
(44,024)
-3.4%
Net income
214,094
11.7%
72,391
5.6%
EBITDA
267,727
14.6%
155,899
12.1%
Gross Profit Operating Expenses Administrative Expenses Commercial Expenses Other Expenses/Revenue Operating Income (EBIT) Financial Result Financial Revenue Financial Expenses Income before Financial Result Non-Operating Income Income before Income and social contribution taxes (IR/CS) Income and social contribution taxes
0.0%
32
Annual Report
Net Operating Revenue In 2008, consolidated net operating revenue totaled R$1,827.7 million, representing a 41.8% increase in comparison with the previous year. Two factors were a crucial determinant of this performance: expansion in the Brazilian production of trucks and farm machinery and growth of domestic demand for trucks and railroad wagons. Exports, in turn, totaled US$145.8 million – or R$272.0 million – a 21.3% increase in dollar amount and a 16.8% increase in reais against 2007. United States, Latin America, Africa/Middle East, with 17.0%, and Europe, with 11%, were the primary destinations of consolidated exports in 2008. The table below details our Net Operating Revenue by division or market in the periods indicated. Amounts are stated in R$ thousands.
REVENUE Wheels (Brazil) Domestic Market Overseas Market Total Wheels (China) Domestic Market Overseas Market Total Frames Domestic Market Overseas Market Total Wheels and Chassis Division Domestic Market Overseas Market Total Automotive Components Division Domestic Market Overseas Market Total Amsted-Maxion (50%) Domestic Market Overseas Market Total Consolidated Iochpe-Maxion Domestic Market Overseas Market Total
2008
2007
Var,
422,728 77,831 500,559
301,980 72,343 374,323
40.0% 7.6% 33.7%
9,973 9,973
-
643,435 61,754 705,189
486,250 34,965 521,215
32.3% 76.6% 35.3%
1,066,163 149,558 1,215,721
788,230 107,308 895,538
35.3% 39.4% 35.8%
117,619 1,404 119,023
113,620 1,033 114,653
3.5% 35.9% 3.8%
371,975 121,007 492,982
154,643 124,449 279,092
140.5% -2.8% 76.6%
1,555,757 271,969 1,827,726
1,056,492 232,790 1,289,282
47.3% 16.8% 41.8%
33
Annual Report
PRODUCTS SOLD
This growth primarily results from salary increases granted in 4Q08, expansion in variable selling expenses – resulting
In the year, the cost of goods sold totaled R$1,470.8 million,
accounting for 80.5% of the consolidated net
from increased domestic sales – and an increase with freight expenses given the higher volume of sales abroad.
operating revenue. This result reveals a 39.6% increase against 2007, when cost accounted for 81.7% of net
Operating Income before Financial Result
operating revenue.
(EBIT)
Gross Profit
In 2008, EBIT totaled R$231.6 million – accounting for 12.7% of the consolidated net operating revenue – an 83.8%
In 2008, gross profit totaled R$357.0 million, representing a gross margin of 19.5% and a 51.4% growth against 2007,
increase when compared with the amount of R$126.0 for 2007 – or 9.8% of the consolidated net operating revenue.
when gross profit totaled R$235.7 million, with a gross margin of 18.3%. Net Operating Expenses
Gross Cash Generation (EBITDA) EBITDA for 2008 totaled R$267.7 million, a 71.7% increase against the previous year. As far as the consolidated
Net operating expenses totaled R$125.3 million last year, a 14.2% increase when compared with 2007. Such expenses accounted for 6.9% of the consolidated net operating revenue for 2008 against 8.5% in the previous year.
EBITDA RECONCILIATION – R$ THOUSANDS Net income Income and social contribution taxes Financial Result Depreciation/Amortization EBITDA
net operating revenue is concerned, its share increased from 12.1% in 2007 to 14.6% in 2008. The table below sets forth the evolution of the EBITDA in the periods indicated:
2008
2007
Var.
214,094 10,021 (27,582) (36,072) 267,727
72,391 (44,024) (9,606) (29,878) 155,899
195.7% -122.8% 187.1% 20.7% 71.7%
Financial Result The financial result for the year was negative by R$27.6 million, representing a 187.1% increase against the negative
EBITDA WAS UP BY 71.7% AGAINST 2007. AS FAR AS THE CONSOLIDATED NET OPERATING REVENUE IS CONCERNED, ITS SHARE INCREASED FROM 12.1% TO 14.6% IN 2008.
result of R$9.6 million recorded in 2007. This performance primarily reflects the impact of the depreciation of the Brazilian real as from the end of 3Q08, which resulted in expenses in the amount of R$25.7 million with exchange variation on financing in foreign currency – revenue of R$11.7 million in 2007. It is further worthy of note the negative financial result of R$22.6 million in 4Q08 against a positive result of R$0.7 million in the same period of 2007. The depreciation of the Brazilian currency in the quarter led to a loss of R$8.0 million in NDF, Non Deliverable Forwards, transactions – against gains of R$6.1 million in 4Q07 and also in expenses in the
34
Annual Report
amount of R$18.8 million with exchange variation on financing
Consolidated net banking indebtedness totaled R$255.5
in foreign currency – revenue of R$2.2 million in the same
million at the end of 2008, representing a 99.0% increase
period of the previous year. On the other hand, depreciation
against December 2007.
resulted in gains of R$10.8 million with exchange variation on receivables – loss of R$1.5 million in 4Q07.
The ratio between this amount and EBITDA for the past 12 months was 1.0x at December 2008, therefore higher than the 0.8x ratio at December 2007.
Net income NDF transactions In 2008, Iochpe-Maxion recorded net income of R$214.1 million – R$4.5137 earnings per share – representing a
In order to fix the amount in Reais of a significant
195.7% increase against 2007 – R$1.3599 earnings per
portion of the amount of export shipments scheduled for
share. Of this result, R$76 million may be attributable
the following 12 months (Hedge Accounting), Iochpe-Maxion
to non-recurring gain arising from the merger of Maxion
uses NDF (Non Deliverable Forwards) transactions.
Sistemas Automotivos into Iochpe-Maxion in June 2008.This
At the end of 2008, consolidated contracted NDF
transaction being excluded, net income for the year would
transactions totaled US$60.8 million, with an average US
be R$138.0 million – R$ 2.9098 earnings per share – still
dollar rate of US$1.8940 for the period comprising January
representing a 90.6% increase against income for 2007.
2008 through September 2009. If settled at that time, such transactions would generate losses in the amount of R$30.0
Liquidity and indebtedness
million. Within this context, Iochpe-Maxion contracted fair value hedging to cover exchange risks in short-term foreign
Year after year, the company has been investing in the development of new products and processes and in the modernization of its industrial complex
At the end of 2008, consolidated cash and cash
currency loans, which could impact the company’s income.
equivalents totaled R$90.0 million, of which 99.7% were
At the end of 2008, contracted NDF transactions relating to
denominated in reais and 0.3% in US dollars. Financial
the purchase of future dollar totaled US$2.0 million, at an
investments accounted for 56.5% of total cash as of that
average dollar rate of R$1.6786 for the period of January
date and are recorded under current assets. Also as of
2009. If settled at that time, such transactions would generate
that date, consolidated gross banking indebtedness totaled
gains in the amount of R$1.3 million. Accordingly, if taken
R$345.5 million, of which R$219.9 million – or 63.6% – are
jointly, settlement of NDF transactions at the end of 2008
recorded under current assets and the remaining R$125.6
would generate losses in the amount of R$28.7 million.
million – or 36.4% – under non-current assets. The main indexes adjusting such indebtedness are TJLP, with 68.8% of
Shareholders’ equity
the total amount, followed by the US dollar, with 25.3% and YUAN/RENMIMBI with 5.1%.
At the end of the year, the shareholders’ equity of Iochpe-Maxion totaled R$442.9 million – or an equity value of R$9.34 per share – up against the shareholders’ equity for 2007 – which corresponds to an equity value per share of R$5.83. At the end of 2008, a negative equity accounting adjustment was made in the amount of R$2.5 million, as a result of the market value at the end of the year of NDF transactions and of exchange variation of investments made abroad. Investments In 2008, Iochpe-Maxion invested R$113.4 million – R$68.4 million in 2007 – in the development of new products and processes and in the modernization of its industrial complex.
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Annual Report
PROSPECTS
THE WORLD ECONOMY AND THEREFORE THE BRAZILIAN ECONOMY ARE EXPECTED TO CONTINUE TO FEEL THE EFFECTS OF THE INTERNATIONAL FINANCIAL CRISiS IN 2009, WITH DIRECT IMPACT ON THE DEMANDS FROM THE MARKETS WHERE IOCHPE-MAXION OPERATES. 36
Annual Report
EVEN BEFORE A LESS FAVORABLE SCENARIO, THE COMPANY WILL GO ON WITH ITS STRATEGIC PLANNING, WITH A VIEW TO THE SAFE AND CONSISTENT EXPANSION OF ITS BUSINESS.
New scenario, safe expansion.
It is Iochpe-Maxion’s belief – in line with the general
its business. The Automotive Components Division will start
understanding of the market and close day-to-day business
producing new structural stamped and welded components
partners – that in 2009 the world economy and therefore
for two new automobile models to be soon rolled out in the
the Brazilian economy will continue to feel the effects of the
domestic market. The Wheels and chassis Division agenda
international financial crisis, which should result in modest
for 2009 further includes two important stages: increasing
growth of the Gross Domestic Product, while preserving
production volume for the vehicle wheels unit in Nantong,
balance and macroeconomic stability. This scenario, in turn,
China – which ensures higher competitiveness for the
should directly impact the demand from the markets where
company on the overseas market – and implementation
the company operates, such as trucks, farm machinery, railway
of a new unit in the region of Chennai, India, for supply of
equipment and passenger vehicles. The latter, however,
stringers, crossbars and frames to Daimler Hero Commercial
should benefit from tax reduction programs deployed by
Vehicles, a subsidiary of the Daimler Group.
the Brazilian Government as of the end of 2008. The railway
Iochpe-Maxion, which in 2008 made all the necessary
freight car segments, in turn, given its longer maturation cycle
changes to meet the requirements of the Novo Mercado
from order to actual delivery of units, points to a significant
segment of the São Paulo Stock Exchange, in 2009 intends
reduction in demand in 2009, when comparing with the
to further advance in complying with the best practices
production level recorded in 2008.
and continue adopting higher governance and transparency
Even before a less favorable scenario when compared with 2008, in 2009 Iochpe-Maxion will go on with its strategic
parameters, which form the basis for an even closer, shared and productive relationship with the capital market.
planning, with a view to the safe and consistent expansion of
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Annual Report
SUSTAINABILITY
TO IOCHPE-MAXION BUSINESS EXPANSION STANDS ON EQUAL FOOTING WITH RESPECT FOR SUSTAINABILITY DEMANDS, THE BASIS FOR SOCIAL AND ENVIRONMENTAL RESPONSIBILITY. 38
Annual Report
THE COMPANY ADOPTED AS A PRINCIPLE ABSOLUTE RESPECT FOR DIVERSITY, A CORE FACTOR TO IMPROVEMENT OF AN INCREASINGLY TRANSPARENT AND SHARED RELATIONSHIP.
Respect as a rule.
Iochpe-Maxion belongs to a group of companies
Through its Divisions and the Amsted-Maxion joint
basing their strategy on the challenge of aligning business
venture, in 2008 Iochpe-Maxion generated over R$356
expansion with sustainability demands, the crucial element
million in taxes, while remuneration of over 8 thousand
of commitment to social and environmental responsibility.
employees exceeded R$286 million. Additionally, funds in
This is reflected, for instance, in the daily routine of all their
amounts approaching R$47 million were directed to making
industrial units.There, increasing effectiveness and production
a wide set of benefits feasible. All companies’ employees
always takes into account respect for environmental issues,
have health assistance plans, life insurance and are enrolled
employees’ needs and the need to support communities’
with meal programs.
economic growth and social improvement according to
Iochpe-Maxion adopted as a principle absolute
the best market practices, represented by compliance with
respect for diversity, which is considered a core factor to
internationally recognized standards set forth by certifications
improvement of relationships. Internally, this commitment
such as ISO 14000 and OHSAS 18001.
reflects in increase in women’s share of its staff, as well as in
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Annual Report
the presence of workers who are more than 45 years old, who convert experience and knowledge into attributes that make a difference. Respect for diversity is also present in the Projeto de Inclusão de Portadores de Necessidades Especiais (Project for Inclusion of Persons with Disabilities), which fosters qualification and insertion of citizens in the labor market, as well as promotion of physical changes in industrial facilities, so as to adapt them to the new collaborators. The Project also structures and systematizes the hiring processes, as well as the qualification of persons with disabilities. Iochpe-Maxion supports the dissemination of social solutions through its contribution for Fundação Iochpe,
IOCHPE-MAXION SUPPORTS THE DISSEMINATION OF SOCIAL SOLUTIONS AND VALUING OF EDUCATION AS AN INSTRUMENT FOR REDUCING INEQUALITIES THROUGH ITS CONTRIBUTION FOR FUNDAÇÃO IOCHPE.
an entity created in 1989 for purposes of structuring the corporate social responsibility policy, focusing on initiatives based on education as an instrument for vocational development, life quality improvement and reduction of inequalities. Throughout its history, Fundação Iochpe, a
Increasing effectiveness and production always takes into account respect for environmental issues, in compliance with
pioneer among Brazilian business foundations, specialized in
from the public teaching network, and Formare, a program
the construction of “co-responsibility bridges”, an expression
devoted to implementation of professional courses within
that translates into establishing different partnerships
the corporate environment.
intended to enlarge the reach of its initiatives. Within the
Synthesizing Iochpe-Maxion’s pioneer spirit regarding
context of Fundação Iochpe’s initiatives, two projects deserve
the practice of private social investment, Fundação Iochpe
special note: Arte na Escola (Art at School), a program in
congregates professionals and Managers of the company in
partnership with universities for qualification of art teachers
its Board of Trustees and Fiscal Council.
internationally recognized standards.
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Annual Report
CORPORATE INFORMATION Investor Relations Iochpe-Maxion S.A. Rua Luigi Galvani, 146 – 13º andar 04575-020 – São Paulo, SP Phone: (11) 5508-3800 – Fax: (11) 5506-7353 Luis Fernando Abreu e-mail: luisabreu@iochpe.com.br website: www.iochpe-maxion.com.br Shareholders and Book-Entry Shares Services Banco Bradesco S.A. Departamento de Ações e Custódia Cidade de Deus – Prédio Amarelo – 2º andar 06029-900 – Osasco, SP All branches of Banco Bradesco S.A. are qualified to serve the Company’s shareholders website: www.bradescocustodia.com.br ADRs level I Issuing Bank – Ticker: IOCJY 101 Braclay Street – 22nd West New York, NY 10286 United States of America website: www.adrbny.com Stock Exchange Trading Iochpe-Maxion stock is traded on all Brazilian Stock Exchanges; however, primary volumes are traded on the Bovespa – Bolsa de Valores de São Paulo (Ticker MYPK3). Board of Directors Ivoncy Brochmann Ioschpe – Chairman Décio Silva – Director Gustavo Berg Ioschpe – Director Iboty Brochmann Ioschpe – Director Israel Vainboim – Director Luiz Antonio Correa Nunes Viana de Oliveira – Director Mauro Litwin Iochpe – Director Mauro Knijnik – Director Nildemar Secches – Director Roberto Mangabeira Unger – Director Rodrigo Caldas Nunes – Director Salomão Ioschpe – Director Thomas Bier Herrmann – Director Fiscal Committee Ademar Rui Bratz Anthonny Dias dos Santos Maurício Diácoli Executive Board Dan Ioschpe – Chief Executive Officer Oscar A. Fontoura Becker – Chief Financial and Investor Relations Officer
Superintendent Officers – Subsidiary and Joint Venture Wheels and Chassis Division – Armando Ulbricht Jr. Automotive Components Division – Marcos Luchese Amsted-Maxion Fundição e Equipamentos Ferroviários S.A. – Ricardo Chuahy Advisory Boards Audit Committee Mauro Knijnik Mauro Litwin Iochpe Pedro Ozires Predeus Variable Compensation Committee Nildemar Secches Luiz Antonio Correa Nunes Viana de Oliveira Israel Vainboim External Auditor KPMG Auditores Independentes CRC 2SP014428/O-6 Addresses Iochpe-Maxion S.A. Rua Luigi Galvani, 146 – 13º andar 04575-020 – São Paulo – SP – Brazil Phone: (11) 5508-3800 – Fax: (11) 5506-7353 e-mail: iochpe@iochpe.com.br website: www.iochpe-maxion.com.br Amsted-Maxion Fundição e Equipamentos Ferroviários S.A. Rua Dr. Othon Barcellos, 77 12700-000 – Cruzeiro – SP – Brazil Phone: (12) 3184-1000 – Fax (12) 540-1185 e-mail: am@amsted-maxion.com.br website: www.amsted-maxion.com.br Wheels and chassis Division – Maxion Sistemas Automotivos Rua Dr. Othon Barcellos, 83 12700-000 – Cruzeiro – SP – Brazil Phone: (12) 3184-1000 – Fax (12) 540-1185 e-mail: vendas@maxioncr.com.br website: www.maxioncr.com.br Automotive Components Division – da Maxion Sistemas Automotivos Rua Haeckel Ben Hur Salvador, 100 32341-000 – Contagem – MG – Brazil Phone: (31) 2191-1500 – Fax: (31) 2191-1690 e-mail: maxioncomp@maxion.ind.br website: www.maxion.ind.br
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