Part of the much talked-about BRIC ensemble, ex-poster child Brazil has joined China and India in fighting slow growth and sluggish economic development. Spurred on by public fury over rising inflation, high taxes, poor public services and political corruption is rising, the 199-million people nation has entered a phase of economic re-adjustment that has also inspired the private sector to take action.
Multi-national corporation Randon, for instance, has now adopted an extensive expansion program that will see the expansion of the company’s footprint around the country alongside additional investment into future growth markets outside South America.
The plan, which includes the company’s assets and working capital, aims to increase Randon’s total gross revenue from a current 6.4 billion Reais (€2.1 billion) to 10.2 billion Reais (€3.4 billion) by 2016.
Part of the program is the appointment of 54-year-old Geraldo Santa Catharina as the new head of Randon’s trailing equipment and component section. He succeeds Astor Milton Schmitt, who retired in June after announcing the ambitious future growth program.
“Our expansion and development plan incorporates strategic targets to consolidate our position in the Brazilian market. Also, we want to be recognized as an important player in our businesses in the international scenario,” says Santa Catharina, who has been working at Randon for more than 30 years in Corporate Finance, Mergers & Acquisitions and Strategic Planning.
According to Santa Catharina, the main objective behind the plan is to maintain the company’s average growth rate by expanding it beyond organic growth, as well as maintaining or increasing its operating margins and results.
To him, the crisis is part of a natural economic cycle and bound to recede, hence local companies like Randon “need to invest” to be prepared for the next growth phase.
Overall, the Randon management plans to invest some €830 million into the construction of a new factory in Chapecó, as well as the expansion of existing sites in São Paulo and Rio de Janeiro. Globally, the corporation will boost the expansion of braking expert Fras-le – a fully-owned subsidiary also headquartered in Brazil and controlled by the Randon family – in Pinghu, China and Alabama, USA.
On a domestic level, that investment will include the acquisition and upgrade of a new factory in Chapecó in the south of Brazil. “We made the decision to move to that region in late 2011,” says Santa Catharina, then CFO of the company. “30 per cent of all domestically produced refrigerated semi-trailers are used in Chapecó area, so we saw an urgent need to be there.”
Instead of building an entirely new site, Randon chose to purchase an existing factory and upgrade it gradually. As a result, the new location is up and running already, but has not reached full capacity as yet. “We are currently setting up production with a base staff of 60, but we intend to have 400 people working in Chapecó over the next five years,” says Santa Catharina, who plans to manufacture some 30 units a month at peak utilisation.
The initial investment in Chapecó is said to be around €74 million including acquisition, capacity expansion, modernisation and working capital. Annual revenue is expected to reach €260 million once the site is fully operational.
In addition, Randon will set up a new factory in the São Paulo area. A Memorandum of Understanding between the city of Araraquara and the State of São Paulo was signed in October 2012 and construction will begin shortly.
“Araraquara was chosen because is a regional sugarcane industry hub with sufficient infrastructure to set up a modern operation, including road and rail access and the availability of manpower,” says Santa Catharina, revealing that Randon will produce both semi-trailers and rail cars in the 200,000 people city. “Just like in Chapecó, we wanted to move closer to the consumer and Araraquara certainly is the place to be in the sugarcane game.”
However, Randon’s main focus will remain of the old head office in Caxias do Sul, a bustling city in the mountainous Serra Gaúcha region, where 80 per cent of the company’s revenue is being generated. “We will continue to upgrade and expand our home facility in Caxias do Sul, but we also need to be able to react to regional shifts in demand more flexibly. That’s why we invested into new facilities in strategic locations all around the country.”
According to Santa Catharina, infrastructure investment in Brazil has not grown proportionally to population growth and consumption, so he is expecting significant demand for road and rail transport equipment going forward – even though Forbes recently said Brazil’s economy is no longer “hot” and the high currency is making it hard to compete.
“All Randon companies will continue to forge ahead and be innovative – despite the ups and downs of the economy. We know that the Brazilian market still has enormous potential for growth and fleet renewal, which reinforces our belief in the opportunities in the domestic market.”
Recent developments in Brazil could soon yield a point to Randon’s optimistic CEO. After a record harvest in 2013, Brazil’s economy is showing signs of recovery and may even rediscover an appetite for reform. Santa Catharina: “Incentives linked to financing and tax exemptions are important to try to encourage the manufacturing sector to continue investing in the economy and make the wheel spin.”
Playing it safe, Randon’s chief is expecting a scenario of moderate growth, “but still with good levels of production. Experience tells me that every challenge is accompanied by an opportunity.”