Latin America

Bekaert combined sales by sector LATAM
Combined sales: € 1 320 million
Consolidated sales:  € 682 million
Capital expenditures (PP&E):  (*) € 14 million
Total assets:  (*) € 464 million
Employees: 7 144

(*) consolidated entities

Economic environment in 2016

After five years of deceleration, economic growth in Latin America turned negative in 2016. Prolonged recessions in Brazil and Venezuela and weakened economies in Ecuador and Argentina largely explain the aggregate performance in the region. While these four countries contracted in 2016, the region suffered a generalized slowdown – not only due to its exposure to external shocks, such as the low oil and commodity prices and heightened exchange rate volatility, but also due to some structural weaknesses, which undermined the region’s growth potential.

Venezuela’s economic depression continues to drag on the region’s growth. Political instability, lower oil output and prices, the total collapse of the bolivar, and a shortage of foreign currency are causing a variety of difficulties with little sign of an immediate upturn. 

Peru, Colombia and Chile had stable or contracting GDP numbers at already low levels. While prices for copper and other commodities have surged in the last quarter of 2016, the full year averages were low and continued to affect the mining and public infrastructure markets across Latin America.

In Latin America, Bekaert manufactures an extensive product portfolio to serve construction, mining, agriculture and a wide range of industrial and consumer markets across the region. Bekaert has wholly owned and majority owned subsidiaries in Costa Rica, Ecuador, Colombia, Venezuela, Peru, Chile and Brazil and also runs joint ventures in Brazil in a 45/55 partnership with ArcelorMittal.
Bekaert’s activities in Latin America go back to 1950. Today, they represent 30% of combined sales. 

Our activity performance

Bekaert’s consolidated sales in Latin America were down 4% as a result of negative currency effects and the volume losses in Venezuela caused by shutdown periods in the plants which fell short of raw materials.

Bekaert’s activities outperformed the market in most countries.

EBIT and ROCE increased by about 50% and the EBITDA margin of 13% drove strong cash generation. These excellent figures were the result of:
  • a strengthened business portfolio in the region, particularly in Ecuador and Brazil;
  • strong demand and a very well operating distribution model in Chile;
  • better pricing and cost competitiveness in Peru.
Bekaert invested € 14 million in property, plant and equipment across the region, particularly in Ecuador and Chile.

Bekaert’s combined sales declined slightly (-1%) as a result of the average currency impact of the Brazilian real, despite its steep climb in the second half of 2016. The results of our joint ventures in Brazil outperformed the weak economic conditions in the country and their contribution to Bekaert’s net result was equal to 2015.

Transforming our business

Bekaert’s subsidiaries in Latin America are on the implementation radar of the global excellence programs that aim to drive value creation across all regions and platforms. The Bekaert manufacturing excellence program (Bekaert Manufacturing System or BMS) is in implementation in Ecuador, Peru, Chile and Brazil. The Bekaert Customer Excellence program (BCE) is being rolled out with specific attention for the particularities of the local markets and distribution models. Vicson of Venezuela is leading the pilot implementation of the global safety program BeCare in the region.

The success of BMS has not gone unnoticed to our partners and joint ventures. Bekaert’s joint ventures with ArcelorMittal in Brazil have kicked off BBMS (Belgo-Bekaert Manufacturing System) to enable similar benefits in the plants within the partnership.

Changes in shareholding in 2017

We are in discussions of bringing Bekaert’s wholly-owned subsidiary in Sumaré (Brazil), a high-margin tire cord subsidiary acquired from Pirelli, into the BMB (Belgo-Mineira Bekaert) joint venture partnership with ArcelorMittal. Bekaert holds 44.5% of the shares in the joint venture and would – upon reaching an agreement and receiving regulatory approvals – no longer report the results of the Sumaré plant in its consolidated statements.

Ecuador: reconstruction after the earthquake

Ecuador was struck with a devastating earthquake in April 2016. It killed hundreds of people and affected about a quarter-million in total who faced the loss or material damage to their homes or work place.

The destruction in the region was so extensive due to the poor quality of buildings which could not withstand the power of this earthquake.
In Ecuador, there is a lot of informal building, including constructions without permits. People would for instance add on floors to a rather weak construction base. 

In order to address this market segment with construction guidance and qualitative materials, IdealAlambrec-Bekaert developed more than 5 years ago a detailed ‘Construction Manual’ with architectural plans and detailed guidance for 15 standard social houses. All specifications meet the strict earthquake resistance standards.  IdealAlambrec-Bekaert also produces a wide range of the steel wire reinforcement products needed and has a broad network of customers and distributors offering the other construction materials.

The Ecuadorian Government decided to reconstruct social houses with tougher buildings codes and earthquake-resistant enforcement. They invited potential partners to help provide the materials and the technical guidance. IdealAlambrec-Bekaert was the only company who could provide an immediate solution with the readily available construction manual, the construction kits, the training services and a broad network of on-site technical help. Some 15 000 kits were supplied in 2016 for an equal number of houses and for 150 additional houses IdealAlambrec-Bekaert acted as the contractor. 

The business opportunity was not the only focus. Bekaert donated 10 houses to heavily affected families. Read more in our Sustainability Chapter
 Bekaert case T8