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1 H05 Analystsand Investors Meeting
1. Localiza Rent a Car S.A.
1H05 Analysts and investors meeting
0
2. Car rental industry historical - USA
1930 / 1996
1923 1926 1970 1980
1918 1950 1954 1960
1940 October
Strong Car
Large HFS Buys
Expansion
Walter Manufacturer
Conglomerates Avis
After War
Jacobs in Participation
Participation
Sale to GM
Chicago (RCA) in
business
Sale to First Reserves’
Public
John Hertz Agencies in Centers
Offering
Airports Establishment
NYSE
1
3. Car rental industry historical - USA
1997
1996
1998-2000 2000-2002 2003 2005
April
November January June September
Hertz and Avis is listed Industry`s
Republic Ford
WTC`s fall
Budget are Substantial
in NYSE
Buys Announces
(09/11/2001)
listed in NYSE Increase
Alamo Hertz`s IPO
Ford Sells Republic Buys
Budget to Value
Team Rental Crisis in Industry
Budget Buys
Group Premier
Begin of
Recovery
2
4. Car rental industry : World
Geographic distribution of total revenue
Other
10%
Asia -
Pacific
15%
United
States
51%
Europe
24%
Source: Datamonitor
3
5. Car rental industry: USA
Five groups = 92%
8%
10%
34%
18%
10% 20%
Enterprise Hertz Avis + Budget Dollar + Thrifty Outros
National + Alamo
Source: Fleet Central. 2004 data
4
6. Car rental industry - Europe
Six groups = 72%
European Market of Car Rental
European Market of Car Rental
Revenue on 2001
Revenue on 1999
Avis
Avis
15%
18%
Other
Europcar
41% Other
13% 28%
Europcar
16%
Hertz Sixt
11% 8%
National Hertz
Sixt Budget
Budget 10% 6% 13%
5%
National
5%
11%
Source: CSFB, Datamonitor
5
7. Car rental industry: Brazil
Four groups = 31%
Market Share (2004)
Localiza
16%
Unidas
7%
Avis
4%
Hertz
Others
4%
69%
Source: Pactual Research, Datamonitor, ABLA, CSFB Research
6
8. Car rental industry: Brazil
Number of rental companies in Brazil
have been decreasing...
Number of car rental companies
3,000
2,511
2,340
2,500
1,985
2,000
1,500
1,000
500
-
2002 2003 2004
Source: Pactual Research, Datamonitor, ABLA, CSFB Research
7
9. Car rental industry: Brazil
...while fleet have been increasing
Total Fleet (thousand car)
: +7%
CAGR
203,7
181,9
178,0
2002 2003 2004
Source: Pactual Research, Datamonitor, ABLA, CSFB Research
8
10. Car rental industry: Brazil
USA and Europe Operation Localiza`s Operation
USA and Europe Operation Localiza`s Operation
Consolidated market Fragmented market
Companies, in general, are Strong presence in all segments,
specialized in certain segments operating synergies and scale
Fleet owner, having negotiation power
Buy back contracts with
with manufacturers and car sales
manufacturers
know-how
Frequent changes in management Stable management
Localiza`s business model is favorably comparable to both
international leaders companies in segment
9
11. Characteristics: car rental and fleet rental
Business Retail Wholesale
Clients portfolio Very large Concentrated
Operation Decentralized Centralized
Fixed costs High Low
Gain of scale High Lower
Seasonality Yes No
Yield management Yes No
Utilization rate 60 – 70% 98 – 99%
Fleet Standardized Diversified (Tailor – Made)
Car’s age 12 – 18 meses 12 – 48 meses
GPD’s reflex High Lower
Intensive capital Yes Yes
Asset sale Yes Yes
10
12. Car rental industry: Brazil
Car rental operating cycle – Ex. 1 year
+ Revenues
FLEET
FLEET
FLEET
BUSINESS OPERATION
ACTIVATION
SALE
SHUT
DOWN
- Expenses
+/- 35
8 319 3
0.8% 9.6%
2.0% 87.4%
+/- 365 DAYS
11
13. Car rental industry: Brazil
Financial cycle of car rental business
Car Sales
Principal
Revenue
Financing
90
100
Revenues
Expenses
1 2 11 12
100 Tariffs would be defined
120
in order to match profitability
Car and competitiveness Payment
acquisition
Principal + Interest
12
14. Localiza: timeline
70’s 80’s 90’s 00’s
70’s 80’s 90’s 00’s
Settled in 1973 with Intensive Starts used car Consolidated its
Settled in 1973 with Intensive Starts used car Consolidated its
6 used Beatle fleet geographic sales operation to business model and
6 used Beatle fleet geographic sales operation to business model and
expansion final consumers platform
expansion final consumers platform
Geographic
Geographic
expansion start In 1981, it was the Franchising is Reaches more than
expansion start In 1981, it was the Franchising is Reaches more than
largest car rental expanded to other R$ 600 million in
largest car rental expanded to other R$ 600 million in
company in Brazil in Latin America sales and an
company in Brazil in Latin America sales and an
number of agencies countries EBITDA of R$ 200
number of agencies countries EBITDA of R$ 200
million
million
Starts its franchising In 1997, DLJ private
Starts its franchising In 1997, DLJ private
activities in Brazil in equity acquires R$ 350 million of
activities in Brazil in equity acquires R$ 350 million of
1983 33.3% of the Debentures Public
1983 33.3% of the Debentures Public
Company Offering
Company Offering
Still in 1997, it Initial Public
Still in 1997, it Initial Public
issues US$100 Offering -- Bovespa/
issues US$100 Offering Bovespa/
million of Senior Novo Mercado
million of Senior Novo Mercado
Notes
Notes
Creates specialized
Creates specialized
company in fleet
company in fleet
management
management
Number of
7 307
7 307
Agencies (1)
13
(1) At the end of 70 decade and in June 30, 2005
15. Shareholders and corporate structure
18.95% 12.6% 18.95% 12.6% 36.9%
Antonio Flavio
Salim Eugenio
Free Float
Claudio Resende Resende
Mattar Mattar
Localiza
92.5% 92.5% 100% 100% 100% 100%
Franchising Franchising Localiza Rental
Total Fleet
Prime
(International) Brasil Car Rental International
99.9996%
MFA
(Argentina)
14
16. Localiza: company’s management
Years in the Company
Chief Executive Officer* Founder
Salim Mattar
Vice Chief Executive Officer* Founder
Antonio Cláudio
Vice Chief Executive Officer * Founder
Eugenio Mattar
Eugênia Rafael Car Rental 25 years
Franchising 23 years
Aristides Newton
Total Fleet
Daltro Leite 20 years
Seminovos 15 years
Marco Antônio Guimarâes
Chief Financial Officer and IR* 20 years
Roberto Mendes
Silvio Guerra Investors Relations 11 years
15
* Estatutory Officers
17. Company overview
#1 operator in Brazil with 91 corporate owned branches
Segments: Individuals, Corporate, Travel Industry, Replacement,
Mini Lease
Largest fleet in Brazil: 20,877 cars
EBITDA Share: 64%
Core Business
Presence in 8 countries: Brazil, Argentina, Bolivia, Chile,
Ecuador, Mexico, Paraguay and Uruguay
216 Franchised agencies, with a fleet of 7.293 cars
EBITDA Share: 1%
#1 operator in Brazil with a fleet of 10,514 cars
Approximately 200 corporate clients
EBITDA Share: 35%
13 points of sale located in the country’s largest cities
Support
9,856 sold cars in the first half of 2005
76.8% cars sold to final customers
16
18. Localiza: integrated business platform
Rent a Car
Core Business
Franchising Fleet Management
Synergy among the
main business
segments
- Cross-Selling
- Cost Reduction
Used Car Sales
Support
17
19. Localiza: market leadership
(number of agencies – Brazil)
1Q05
80
57
77
229
Localiza network has a larger presence when compared to the sum of second,
third and fourth competitors’ agencies
Source: CSFB Research, Internal Data
18
20. Localiza: market leadership
(number of agencies in airports)
1Q05
68
70
60
50
40 32
28
24
30
20
10
0
Localiza network has a larger presence in airports when compared to the sum of
second and third competitors’ airport agencies
Source: CSFB Research, Internal Data
19
21. Localiza: local peers comparison
BR GAAP (R$ thousand)
2004
(1)
Released
Serasa
Dallas Localiza
Unidas Locaralpha Master Hertz
(Avis) Consolidated
Net revenue 97,780 46,133 33,584 36,976 nd 616,398
68,480 42,671 41,203 30,192 nd 381,858
Cost
29,300 3,462 (7,619) 6,784 nd 234,540
Gross income
(6,577) --- --- (126) nd (46,771)
Sales expense
(19,223) 3,204 --- (5,671) nd (19,288)
Adm. exp./ revenue/ oper. exp.
3,500 6,666 (7,619) 987 nd 168,481
Operating income
(25,516) (7,367) (3,613) (870) nd (25,798)
Net financial expense
--- --- --- --- nd ---
Equity result
24,974 1,149 10,159 --- nd 70
Non oper. Income
(1,165) (183) (65) (26) nd (40,410)
Taxes/ SC
Net income 1,793 265 (1,138) 91 nd 102,343
Source: Serasa
(1) Released in 02-25-05 (Gazeta Mercantil, Estado de Minas and Valor Econômico)
20
23. Localiza: 1H05 highlights
19.5% increase in Net Income (R$31.4 million) when compared to
1H04 and EPS recorded R$0.92.
EBITDA (R$ 134.7 million) 39.3% higher than 1H04.
42.3% volume growth in the business of car rental segment.
6.6% volume growth in fleet rental segment.
Debentures issuance ended with an amount of R$350 million.
We hired Pactual CTVM to serve as our shares market maker.
Initial Public Offering concluded in June 23, with a distribution of 36.9%
of total and voting capital for a price of R$11.50 per share.
Payment of interest on own capital amounting to R$12 million,
corresponding to R$0.19 per share
22
24. Results in US GAAP better
reflects business performance
Assumptions
1 - ASSUMPTIONS Year 1 Year 2 Year 3 Observations
Car cost 100.00
Car Rental Revenue per year 50.00 50.00 50.00
Car sale net revenue 70.00 Sale Forecast at the end of third year
Maintenance Cost 5.00 10.00 15.00 Increase as mileage grows
Depreciation Cost BR-GAAP 20.00 20.00 20.00 Residual Book Value in year 3 is R$ 40.00
Depreciation Cost US-GAAP 15.00 10.00 5.00 Residual Book Value in year 3 is R$ 70.00
23
25. Results in US GAAP better
reflects business performance
Results in BR GAAP
2 - RESULTS IN BR-GAAP Year 1 Year 2 Year 3 Observations
Rental Revenue 50.00 50.00 50.00
Car Sales Revenue - - 70.00
Total Revenue 50.00 50.00 120.00
Depreciation Cost 20.00 20.00 20.00 20% per year Linear Depreciation
Maintenance Cost 5.00 10.00 15.00
Car Sales Cost - - 40.00
Total Cost 25.00 30.00 75.00
BR – GAAP Result 25.00 20.00 45.00 They don’t reflect exactly the performance
Margin over Rental Revenue 50% 40% 90% In periods
BR – GAAP Depreciation
BR GAAP depreciation is not based on market value foreseen for each car sale, model and mileage driven.
It’s calculated by linear method, fixed, of 20% for any model.
In the exemple above, total depreciation in 3 years is R$ 60.00 and the residual book value is R$ 40.00.
24
26. Results in US GAAP better
reflects business performance
Results in US GAAP
3 - RESULTS IN US-GAAP Year 1 Year 2 Year 3 Observations
Rental Revenue 50.00 50.00 50.00
Car Sale Revenue - - 70.00
Total Revenue 50.00 50.00 120.00
SOYD Method Depreciation
Depreciation Cost 15.00 10.00 5.00
Maintenance Cost 5.00 10.00 15.00
Sold Cars Cost - - 70.00
Total Cost 20.00 20.00 90.00
US-GAAP Result 30.00 30.00 30.00
Margin over Rental Revenue 60% 60% 60%
US-GAAP Depreciation
US GAAP Depreciation is based on market value foreseen for each car sale (by model and mileage driven foreseen).
It’s calculated bu SOYD method (sum of years: 3 + 2 + 1 = 6) : 3/6 in the first year, 2/6 inh the second year and 1/6 in the third.
In the exemple above, total 3 years depreciation is R$ 30.00 and the residual book value is R$ 70.00
Each car depreciation, in US GAAP, is periodically revised because of the changes in forecasts for used car sales prices
25
27. Results in US GAAP better
reflects business performance
Conclusion
4 - BR-GAAP x US-GAAP Result Year 1 Year 2 Year 3 TOTAL
Results in US-GAAP 30.00 30.00 30.00 90.00
Results in BR-GAAP 25.00 20.00 45.00 90.00
Conclusion:
• Sum of 3 years results is the same in BR-GAAP and US-GAAP.
• All the industry major players presents its results in international acconting procedures (US GAAP)
• US GAAP is a requirement for BOVESPA’s Novo Mercado .
26
28. Financial highlights
(R$ million, USGAAP)
Net Income
Net Revenue 84 %
CAGR: +
106
+46% + 20%
15%
CAGR: + 91
57
69*
425 64* 48
634 290
532
477 27
2002 2003 2004 1H04 1H05
2002 2003 2004 1H04 1H05
* Pro forma result disregarding mark-to-market (MTM) of derivatives contracts. In this
case, CAGR would be 19%
27
34. Net income breakdown
(R$ million, USGAAP)
Car Rental and
Used Car Sales Car Rental and
Net Revenues Used Car Sales
Operating
+134.2 Expenses
Total of
Other
Expenses
+0.9 Depreciation Net Taxes
Financial
-97.2 +1.3
Result
-9.1
-20.8 57.4
+19.5%
48.1
Net Income
Net Income
1H05
1H04
Net Margin: 13.5%
Net Margin: 16.6%
Earnings per share: R$0.92
Earnings per Share: R$3.13*
(*) Pro-forma income would be 0.78/share without the 4:1 split. 33
35. Fleet rental evolution
Fleet at the end of the period
+83%
25%
CAGR: + 20,877
19,531
12,590
11,379
12,418
2002 2003 2004 1H04 1H05
CAGR:
-5%
+24%
11,349*
10,879*
10,514*
9,793*
8,501*
2002 2003 2004 1H04 1H05
* Includes managed fleet
34
36. Investment in fleet
# of Purchased Cars 15,364 15,062 22,182 11,821
11,811 11,758
493
297
288
248
215
Investment in Fleet (1) 186
(R$ million, USGAAP)
2001 2003 2004 1H05
2002
2000
(1) Includes accessories expenses
35
37. Used car sales
Number of Sold Cars
15,715
15,468
13,331
10,430 9,856
6,173
2000 2001 2002 2003 2004 1H05
36
38. Operating income over rental net revenue
R$ thousand Income/Revenue
350,000 70%
300,000 60%
250,000 50%
200,000 40%
150,000 30%
100,000 20%
50,000 10%
0 0%
1999 2000 2001 2002 2003 2004 1S05
Operating Income Rental Net Revenue Income/Revenue
37
40. Net debt* / Fleet value
* Excluding short terms credits
53.2% 56.3%
46.2% 51.2%
45.4%
45.9%
22.4%
16.3%
2002 2003 2004 06/30/04 06/30/05
1999 2000 2001
Our ratio Net debt / Fleet value has remained stable at roughly 50%
39
42. Corporate governance - Localiza
Corporate Governance is not simply meeting Bovespa’s requirements, but having
atitudes in line with the interests of major shareholders, the management and
minority shareholders.
1- Transparency (Disclosure) Yes No Note
1.1 – Portuguese and English website x
1.2 – Investors Meeting x
1.3 - Road-shows x
1.4 - CRM with Demand Segmentation x Project
1.5 – Disclosure Policy / Material facts x
1.6 – Calendar of Events x
1.7 – Imediate Communication through CVM/Bovespa (ITR/IAN/DFP/IPE) and
Market (mailing to 4.200 addresses) x
1.8 – Conflict Solution by Arbitration determined in Bylaws x
1.9 - Independent Audit x
41
43. Corporate governance - Localiza
2 - Fairness Yes No Note
2.1 – Code of Ethics x
2.2 – Listed to Novo Mercado x
2.3 - Tag-Along ( 100% ) x
2.4 - Dividends (We don’t have Automatic Reinvestment Program ) x
2.5 - Free-Float ( Minimum of 25% of Free Float ) x
2.6 – Capital only represented by Common Shares x
42
44. Corporate governance - Localiza
3 - Accountability Yes No Note
x Foreseen
3.1 – Fiscal Council Established
x
3.2 – Board of Directors composed by 5 to 9 Members (the majority is not independent)
x
3.3 – One Year Terms, with reelection
x
3.4 – Board of Directors members Elected by Minority Shareholders
x
3.5 – Independent Directors Highly Qualified
x Project
3.6 – Board of Directors with Standardized Activities as per Internal rules
x
3.7 – Annual Report presents the Management Participation in the Company’s Capital
x
3.8 - Annual Report presents the Management’s Individual or Aggregated Compensation
x
3.9 –Financial Statements in International Accounting Procedures are available
x
3.10 - Auditing, Internal Controls ( COSO ) Project
x
3.11 – The Main Executive is Annually Evaluated by Board of Directors
x
3.12 – Board of Directors’ Payment is Structured in order to follow the Company’s Results
3.13 – The Company’s Main Executive and the Chairman of Board of Directors are the Same
x
Person
3.14 – Availability of:
x
3.14.1 – Report of Related Parties Contracts
x
3.14.2 – Shareholders Agreement
x
3.14.3 – Stock Option Programs
43
45. Corporate governance - Localiza
4 - Compliance Yes No Note
4.1 – We obbey Regulatory Rules Expressed in By-Laws, Internal Rules
and Legal Institutions of the Country x
4.2 - Image x
4.3 - Committees
4.3.1 - Ethics Committee x
4.3.2 - Disclosure and Trading Committee x
4.3.3 – Audit Committee x Fiscal Council
4.3.4 - Fiscal Committee x Project
Under
4.3.5 – Risk Analysis Committee x Development
Finalist on ANEFAC (National Association of Finance Administration
and Accounting Executives) Transparency Trophy in 2005
44
46. Total Fleet receives Valor 1000 Award
Total Fleet was chosen the best Company in Specialized
Services sector, according to a research made by Valor
newspaper.
The award, which is on its fifth edition, selects, among the 1000 largest
companies, the sector`s winners (27) which differ from the others by their
innovation and technical rigor.
Total Fleet`s strong financial performance, high productivity, quality and
tranparency associated to committed and qualified employees were the main
aspects to conquer the award.
45
47. Social Responsibility
Cultural project which 30 projects were
supports culture for more supported and 6,280
than 20 years in the whole people were
country (Brazil). contemplated by the
program only in 2004.
Social project which aims VOLUNTARYNESS:
to support institutions 2.3 ton of foods were
through voluntaryness collected besides of
and donations through hygienics items and
the Fundo Social da educational material for
Criança e Adolescente. 55 children
DONATIONS:
Missão Ramacrisna
and Cidade dos
Meninos
46
48. Social Responsibility
Educational project which 5.645 children were helped by
fosters integration the program in 2004.
opportunities from business
world through schools.
schools.
Localiza is one of the
donators of Junior
Achievement, whose
Achievement,
president, in Minas Gerais, is
president,
Eugenio Mattar.
Program which develops As an initial action,
action,
educative campaigns besides meetings are being made
of several initiatives in order with 5,000 Company`s
Company`s
to prevent accidents and suppliers in the whole
traffic violence. It is a long
violence. country;
term project which will seek
meetings with the 7,500
people conscientization on
travel agents, which are
agents,
the subject by promoting an
Localiza`s partners;
partners;
optimistic point of view.
view.
meetings for the
conscietization of the
2,400 employees, plus
employees,
distribution of manuals,
manuals,
caps and stickers with
the campaign`s theme.
campaign`s theme.
47
49. Comparison with international peers
LTM 2Q05 (1)
143(2)
EBITDA (US$ MM) 91(2) 2,471 447 326(2)
EBITDA Margin 32.2% 33.2% 30.2% 11.1% 9.8%
(4)(2)
31(2)
Net Income (US$ MM) 37(2) 51
393
Net Margin 13.0% 5.3% 3.4% 1.1% -0.3%
n.d. n.d. 13.7 14.4 23.3
P/E 2005(3) (x)
n.d. n.d. 6.1 4.3 4.0
EV/EBITDA(3) (x)
(1) LTM June 05 (Localiza, Dollar Thrifty); LTM March 05 (Hertz, Sixt e Avis Europe)
(2) Translated to US Dollars at average rate R$2.729 / US$1.00 and 0.805 / US$1.00
(3) P/E= At Stock Price as of August 4 and EPS supplied by First Call
48
50. Performance and average volume RENT3
RENT3 X IBOVESPA
17.0 35
16.0 30
RENT3
Volume (R$ thousands)
15.0 25
14.0 20
IBOVESPA
Price
CDI
13.0 15
12.0 10
11.0 5
10.0 0
27 y
ay
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24 g
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23
36.9% Free Float and foreign investors participation of roughly 80%
Average Volume of R$2.8 million or
Performance RENT3 since IPO: +43% (1)
R$2.4 million excluding date 05/23/05
Relative Performance RENT 3 x IBOV: +27% (1)
49
(1) From May 23 (Initial Public Offering date) to September 1, 2005
51. Disclaimer - Forward Looking Statements
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.
50
