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In Brazil, the Swiss-based Sulzer Pumps has thrived by adapting well to the unique specificities of the domestic market. President Mauricio Bannwart talks to Michael Sommers about how the company’s recent investments in the oil, hydro, and ethanol industries have pumped up its sales volumes.

Founded in Switzerland in 1834, the Sulzer Corporation has been making industrial machines and equipment for close to two centuries. Among its most important divisions is Sulzer Pumps, one of the biggest global producers of centrifugal pumps, which has quite a longstanding history in the Brazil market. In fact, Sulzer opened up its first São Paulo plant in the 1950s, as a result of Brazil’s rapidly expanding, but notoriously closed, economy.
Recalls the company’s new president, Mauricio Bannwart: “For a long time, Brazil’s economy was very protectionist. There were very rigid restrictions on imports, and if there was a type of product that was already being made here, then its foreign equivalents could not enter. It was for this reason that Sulzer came to Brazil. We began making pumps before expanding into other products. Then, more recently, we went back to focusing on pumps again. In fact, today, around 90 percent of our business consists of centrifugal pumps of which we are one of the principal manufacturers in the country.”

Playing to Brazil’s Strong Suits
Globally, Sulzer Pumps designs and manufactures products for a wide variety of industries including oil, gas and hydrocarbon processing industries, contractors and operators of pulp and paper mills and power generation plants, as well as clients from the water treatment and distribution, food, metal, and fertilizer sectors. Here in Brazil, however, Sulzer has a much narrower – though no less lucrative – focus, which reflects the specific strong suits of the Brazilian economy. In fact, its number one client, which alone accounts for the majority of its business, is none other than Brazil’s national petroleum giant, Petrobras.

Says Mauricio Bannwart: “Petrobras invests enormously in Brazil and they really drive the national market. We meet many of their requirements, and then we try to adapt them to other smaller clients. However, Petrobras makes up close to 60 percent of our sales volume and everything we develop is really centered around their necessities. They have many exclusive technologies, such as equipment for the exploration of petroleum in deep waters, for which they need specially-designed pumps. So we meet and talk to them, and adapt our technologies to theirs. Depending on their applications, we can create all kinds of solutions for them.”

Indeed, the solutions that Sulzer is currently most excited about are a result of Petrobras’ pioneering efforts to enhance the possibilities of deep water drilling. According to Bannwart, one of the sector’s biggest trends, globally, revolves around the capacity of going deeper and deeper in terms of harvesting offshore oil. “Along with perhaps the Norwegians, Petrobras is the biggest company in the world in terms of offshore exploration,” declares Bannwart. “They are really in the vanguard.”

New Trends
Equally desirous of being in the vanguard, Sulzer is thus investing heavily in the development of high-tech pumps that would operate below sea-level instead of upon the surface as is currently the norm. Bannwart feels that this new advance is imminent: “The technology exists. All we need now is a company that is willing to invest in it: to take the risk and help us develop this project. Such a partnership could be with Petrobras or with any other leading global oil corporation.”

In the meantime, the company is also focusing on other future trends and promising markets. Two in particular are Brazil’s thriving hydro and ethanol sectors. In terms of water, Sulzer has enjoyed strong sales in this area, and with dire predictions of global water shortages in the future, this is a sector that the company is prepared to invest in. “In five or 10 years, this can be a major segment for us,” concedes Bannwart. “Not in terms of small pumps for houses and apartments, but in terms of gigantic ones for major hydro-electric projects.” Moreover, the decision of the Brazilian government to divert waters from the Rio São Francisco – Brazil’s largest national river, which cuts through the otherwise poor and arid Northeastern Interior – for irrigation purposes, promises to provide a major opportunity for Sulzer, whose chances of being involved in this project are apparently quite strong.

As for ethanol, Sulzer boasts a marked presence in this expanding sector, although presently less so in Brazil than in other international markets such as the U.S. “We’re trying to go after the ethanol market here,” confesses Bannwart. “However, while in the United States corporations prioritize reliable plants at all costs. In Brazil, a different mentality is still very prevalent: one summed up by the idea that the less money you invest in your plant, the better off you are. For this reason, many in the industry are willing to buy the cheapest equipment possible, even if it means having to change equipment every six months. Fortunately, however, this attitude is already starting to change. First of all, sugar cane (the source of Brazil’s ethanol), must be processed immediately. You can’t store it. So if your equipment breaks down, you’ve lost your whole crop. Secondly, a lot of foreign companies have been investing in Brazil, and because they invest in the best equipment, this creates a lot of competition that local interests can only react to by investing in better machinery themselves.”

Competitive Edge
With respect to its main rivals in the field, in Brazil, Sulzer Pumps finds itself up against the same duo of world leaders – Flowserve and KSB – with whom it competes internationally. According to Bannwart, they are all about in the same position. And in terms of competitive edges, he admits that the struggle for market share is pretty fierce. “Every time a big project is announced, we all go to war,” he jokes.

But it’s clear that whoever gets to the client first and proves they have the know-how and technology has the advantage. “We don’t manufacture pumps in series, on an assembly line. They are individually engineered according to a project’s specific requirements,” explains Bannwart. “So it’s really up to us to prove that we’re the only ones who can meet a client’s needs. The real trick is to get in on the ground floor. If you are able to participate at the outset of a project, you’ll likely continue supplying clients’ future needs for that project, as well as be considered for entirely new endeavors.”

In recent years, Sulzer’s agility and stamina has served it well. The company has been enjoying growth rates of 20 percent a year, which it expects to maintain. “Although it depends a lot on what our clients are prepared to invest,” points out Bannwart. “Everything indicates that the market will continue to grow.” Indeed, the healthy domestic market has fortunately offset the export market, which in the last couple of years has shriveled up due to the combined effects of a plunging U.S. dollar and a thriving Brazilian real: the latter, the result of Brazil’s high interest rates combined with considerable gains in investor credibility. Although the company continues to export pumps, sales volumes are nowhere near as high as they were several years ago.

Meanwhile, at home, the company continues to expand. In fact, it just recently finished work on its newly enlarged 161,000-square-foot plant in Jundiai, São Paulo, where it employs 450 people. Says Bannwart: “Prior to this investment, we made components here and then assembled them in São Bernardo (a São Paulo suburb). By bringing the two plants together, we hope to create a new synergy. As a result we’ll not only be able to produce more, but to deliver more quickly and offer better costs for our clients so that they’ll keep coming back to us.”

Volume:
11
Issue:
1
Year:
2008


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