By Brazil Stock Guide – WEG (B3: WEGE3) reported second-quarter net income of R$ 1.56 billion, down 2.1% from a year earlier, as slower domestic revenue and softer margins offset continued strength in international markets.
Net operating revenue edged 0.6% lower year over year to R$ 10.14 billion, while EBITDA declined 2.1% to R$ 2.21 billion, with the EBITDA margin narrowing to 21.8% from 22.1% a year earlier.
Despite the modest decline in earnings, the Brazilian industrial equipment maker continued to post one of the strongest profitability profiles in the sector. Return on invested capital (ROIC) rose to 33.6%, up 0.7 percentage point from a year earlier, underscoring the company’s ability to sustain high returns despite a more challenging operating environment.
International markets remained the main engine of growth. Overseas revenue increased 2.3% in Brazilian reais and 14.7% in U.S. dollar terms, led by continued expansion in North America and Europe. Currency translation, however, reduced the contribution to reported revenue after the appreciation of the Brazilian real against the U.S. dollar.
North America, which accounted for just over half of international sales, posted 20% growth in dollar terms, while Europe expanded 16.3%. WEG said demand remained strong for industrial motors, automation equipment and high-voltage systems, particularly in the oil and gas, HVAC and data center industries.
The company’s Industrial Electrical Equipment division continued to benefit from healthy manufacturing activity across key markets, while orders for long-cycle products remained solid, supporting a healthy backlog entering the second half of the year.
The Power Generation, Transmission and Distribution business delivered a mixed performance. In Brazil, revenue was pressured by the absence of new utility-scale solar generation projects, although deliveries related to transmission and distribution infrastructure remained robust. Internationally, growth was supported by grid modernization projects in the United States and continued demand for Marathon generators used primarily as backup power systems for data centers.
Gross margin narrowed to 33.2%, from 33.7% a year earlier, reflecting higher raw material costs, particularly copper. Management said ongoing productivity gains and operational efficiencies helped preserve healthy margins while the company continued investing to expand manufacturing capacity.
Capital expenditures reached R$ 794.9 million during the quarter, with more than half allocated to international operations, including transformer plants in Mexico, Colombia and the United States, as well as manufacturing expansion in China. Domestic investments remained focused on expanding transmission and distribution equipment capacity and modernizing electric motor production.
WEG ended June with a net cash position of R$ 3.74 billion, reinforcing one of the strongest balance sheets among global industrial manufacturers and providing ample financial flexibility to continue investing in electrification, grid infrastructure and international expansion.
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