Annual Report 2017 - Latin America

Latin America

Segment LATAM
Combined sales: € 1 394 million
Consolidated sales:  € 673 million
Capital expenditures (PP&E): (*) € 22 million
Total assets: (*) € 453 million
Employees: 6 773

(*) consolidated entities

Economic environment in 2017

GDP growth in Latin America, although nowhere near the estimated 3.5% global growth rate for 2017, turned slightly positive after an overall contraction in 2016. Increased oil and commodity prices, improved private consumption and the escape from recession by the two larger players, Brazil and Argentina, have induced a modest growth rate for the region in 2017.  

Long strikes in the Chilean mines and flood damage in Peru limited the economic expansion in the first half of the year. Political and economic uncertainty due to presidential elections (Ecuador, Chile) and the impact of widespread corruption cases on public infrastructure spending also hampered a real rebound. In Venezuela, the political, economic, and humanitarian crisis worsened further. 

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 almost 30% of combined sales.

Our activity performance

In Latin America, consolidated sales were 1% below last year. The divestment of the Sumaré entity accounted for -5.5% and an overall weak economic environment in the region drove demand for our products down, resulting in a volume loss of -5.6% for the year.  These effects were almost completely compensated at the top-line by the impact of passed-on higher wire rod prices and slightly positive currency effects.

The segment’s profitability was affected by the deterioration of the business climate in 2017. Underlying EBIT decreased by 18% due to weak market conditions and cost inflation, amongst other due to protective measures against wire rod imports in various countries.  The cancellation of the obligations under an onerous supply contract offset the divestment impact of the high-margin Sumaré entity. The underlying EBIT margin reached 8.2% for the full year.   

EBIT increased by more than 20% to € 80 million as a result of the gain on the sale of 55.5% of the shares of the Sumaré plant in Brazil and its integration into the BMB (Belgo Mineira Bekaert Artefatos de Arame Ltda) joint venture partnership with ArcelorMittal.   
Bekaert invested € 22 million in property, plant and equipment across the region, particularly in Chile and Peru.

The joint ventures in Brazil reported higher sales as a result of the Sumaré impact, a stronger average Brazilian real compared with last year and passed-on higher raw material prices. The share in the results of joint ventures increased by 5.5% due to the integration of the Sumaré entitiy within the joint venture partnership.

Salvaguardia enforces changes in sourcing policies

Bekaert’s activities in Ecuador and Chile have been affected by the trade barriers imposed on wire rod imports. These ‘salvaguardia’ measures forced us to change our sourcing policies, all while local sourcing is not always possible due to the capacity and quality constraints of the local steel mills. Such measures usually lead to higher costs affecting the competitiveness of our operations as well as that of our customers.

Transforming our business

Bekaert’s subsidiaries as well as the joint ventures with ArcelorMittal in Brazil have embraced the culture of change that comes with the implementation of the various transformation excellence programs. 

In 2017 the Bekaert manufacturing excellence program was rolled out in Costa Rica, Chile and Colombia, reflecting a significant extension of scope after the earlier implementations in Ecuador, Peru and Brazil. 

The customer excellence program, rolled out with specific attention on the particularities of the local markets and distribution models, will drive commercial excellence and increased collaboration on the regional level.

In order to reach a very large customer network in a country extending more than 4000 km from north to south, Prodalam, our sales & distribution organization in Chile, with headquarters in Santiago, operates 35 ‘one-stop-shop’ branches scattered across the country. Building companies, fence installers, hardware stores and other customers find their way to a retail-like shopping experience at Prodalam.



Prepared to seize opportunities...

In Ecuador the ‘Casa para Todos’ social housing program that benefited our business in 2016, will be reactivated in 2018. IdealAlambrec-Bekaert is ready to seize the opportunities that will arise from this program. Last year our subsidiary has updated the detailed construction manual with architectural plans and building guidance, in anticipation of a new public construction wave, which the Government would start in the course of 2018.

In Chile, our activities project a better economic climate in 2018. The demand pick-up at the end of 2017, political stability after the presidential election year, and more government income from higher copper and other commodity prices all bode well for an improved economy.  Our activities are poised to capture growth from increased consumer spending, more mining activity – particularly underground mining – and an active role in the growing aquaculture sector.

... while cautious about policy uncertainties

Upcoming elections in many countries including Brazil, Venezuela, Paraguay, Colombia, Mexico and Costa Rica could delay the execution of major infrastructure projects in 2018. Tax and other policy reforms may also create additional uncertainties for the business climate in the region.
Steel mesh structures protect people and traffic
In downtown Santiago, Chile, the main roads cross the city in a continuous sequence of open-air, half-tunnel and tunnel tracks. To protect pedestrians from falling into open-air underground tracks, and drivers from stone throwing vandalism, tunnel entries and exits and all open-air underground tracks are protected by structures made of steel wire mesh produced by Bekaert’s subsidiaries in Chile. This is an attractive solution that enhances traffic safety for everybody on the road.