One of Brazil’s top producers of special speed reducers, Renk Zanini has never shied away from a challenge. As Michael Sommers discovers, despite being hit by the current global crisis, the company is on its way to a speedy recovery as a result of rapid restructuring and diversification into new markets.
In 2008, Renk Zanini, one of Brazil’s leading manufacturers of special gear reducers and power transmission components, experienced a record year in terms of sales, earning revenues of R$120 million. Business was booming like never before due to the prominence of Brazil’s sugar/alcohol industry, which had been thrust to the vanguard due to innovative new uses of sugar cane bagasse (the fibrous part of the cane traditionally treated as waste by the sugar refining industry) as a biofuel.
A BRAND NEW BIOFUEL
Renk Zanini had been supplying reducers to Brazil’s sugar mills since it first began operations in the mid-1970s. However, with recently developed technology that transforms bagasse into an efficient and non-polluting source of thermal energy – sugar mills not only use bagasse for their own energy needs, but also sell the leftovers to third parties – the company had also hit upon a great new opportunity. “Many investors began creating companies that transform bagasse and even sugarcane straw into fuels,” says Rolf Ramminger, Renk Zanini’s commercial director. “We realized that the growth potential for this biomass market was enormous.”
Renk Zanini had already established itself as a specialist in the sugar market with a vast range of products and options that few competitors could match. Indeed, in 2008, the sugar/alcohol market accounted for more than 50 percent of the company’s business. As such, Renk Zanini and all the suppliers of this market was understandably “excited about the new opportunities available, not only in Brazil, but in Europe as well, where there is a marked preference for products that are made using renewable energy sources along with government and social pressure to reduce carbon dioxide levels,” says Ramminger.
The only problem with this promising state of affairs was that 2008 was also the year a financial crisis rocked the world markets. Among the casualties were the many investors that had taken out significant loans to invest in Brazil’s fledgling biomass energy segment. Overly enthusiastic, many players had entered the market en masse, creating a situation in which supply and production capacity far outstripped demand, causing prices to fall. When the crisis hit, these companies were left with high debts, big losses, and no cash flow or credit.
RESTRUCTURING AMIDST THE GLOBAL CRISIS
As a result, Renk Zanini made rapid modifications. “This year, our activity will be only one-third of what it was in 2008, although we do hope to arrive at 50 percent of our capacity by the end of the year,” admits Ramminger. “Due to the crisis, everything has changed. Right now, our goal is stabilization and, if possible, some incremental growth. With this in mind, we are restructuring the company and redirecting both our investments and activities.”
Fortunately, the company has a long history and lots of experience to draw upon. Founded in 1976, as a partnership between Zanini, a São Paulo manufacturer of heavy equipment and Germany’s Renk, a leading worldwide producer of high tech gearboxes and power transmission components, Renk Zanini quickly acquired a solid reputation as a maker of special made-to-order speed reducers, for which there was great demand due to Brazil’s vast industrial expansion. In 1983, Renk withdrew from the joint venture, leaving the company completely under Brazilian ownership. However, to this day, Renk Zanini retains strong ties with the German company and benefits enormously from Renk’s technological know-how as well as its norms and processes.
Over the years, Renk Zanini kept pace with Brazil’s growing industries, creating special products for different applications at its 66,000-square-foot facility in the municipality of Cravinhos, São Paulo. For sugar/alcohol refineries the company created applications for mills and diffusers, as well as generators, cutters, shredders, conveyor belts, bombs, fans and exhausts. But it also created gear reducers for rubber, cement, and paper and cellulose manufacturers, as well as the Brazilian Navy (for which it is the only national supplier) and gear boxes for rail systems. From the outset, mining and steel companies have also been important clients.
The challenge the company is currently facing is how to restructure in order to meet the demands of the markets that are currently most productive. “The sugar/alcohol market has fallen a lot compared to many other segments, although we do expect it to recuperate by 2010-1011,” says Ramminger. “Meanwhile, the cement market is already quite healthy again as are the steel and mining segments. Apart from the thermal energy market for sugarcane bagasse, other energy markets represent new alternatives that have great potential for us.”
DIVERSIFICATION OF MARKETS AND METHODS
Ramminger is referring to wind energy that has been a growing segment in Brazil as well as small hydroelectric plants that represent the future in a country in which over 90 percent of energy needs are generated by water. Mega plants such as Itaipu and Tucurui – controversial undertakings that entailed vast transformations of major waterways and created significant social and environmental upheaval – are being supplanted by numerous small plants that rely on modest waterfalls to supply energy. Since the water’s natural force is minimal, the need for multiple generators driven by reductor-enhanced hydraulic turbines is much greater.
“Not only is this solution environmentally friendly, but it is also more economically viable,” points out Ramminger. “Because of their size – they don’t require large equipment – these small plants can be located closer to cities. In the last three years, this new hydroelectric segment has really begun to take off and we intend to participate strongly in its continuing expansion. Today, energy represents between 10 and 15 percent of our business, but our goal is to have it account for 30 percent. Whether or not this happens depends on Brazil’s economy. If the country grows by 5 percent this year, there will be a great demand for energy.”
Meanwhile, in its pursuit of diversification, Renk Zanini is also planning to focus less on production and more on services.
Placing more emphasis on services helps offset the fact that diversifying production to meet the unique specifications of an increased number of market segments results in reduced factory capacity (as opposed to focusing on one segment that allows for increased production of identical units on a large scale). “Depending on the market, some of our competition is direct, while in others it’s indirect,” says Ramminger, when asked how the company ranks in terms of market share. “Aside from the market, however, it really depends on the parts. We supply all types of special reducers, and some of the pieces we make are exclusive. Overall, we are one of the largest companies in terms of revenue capacity. We’re definitely an industry leader.”
No matter what market it’s competing in, Renk Zanini definitely has some trump cards. The fact that the company is highly verticalized means it can develop and manufacture all types of products without relying on external technology or outsourcing. Due to its long history with Renk, Zanini boasts some of the industry’s most cutting-edge technology, which allows the company to meet clients’ more complex demands and even branch out further into exports (which currently account for 10 percent of sales). Superior-quality products mean more security and fewer repairs for clients, resulting not only in lower costs, but in greater long-term loyalty as well.
“If I had to sum up our corporate philosophy, it would come down the importance of quality products and personalized services,” declares Ramminger. “We work hard to meet all the specific necessities of our clients. We won’t rest until we’ve created the best alternative for them.”