Engemix, Inc., is a subsidiary of Votorantim Cementos, the tenth largest cement maker in the world, and the largest operator in its home base of Brazil. David Soyka gets into the mix.
Originally a family-owned business established in 1968, Engemix was acquired in 2002 by one of the largest cement makers in Brazil with a 40 percent market share, Votorantim Cementos. Worldwide, it boasts being the 10th largest cement producer; specific to North America, it is the largest cement maker in the Great Lakes region and is also a key player in Florida. Votorantim Cementos is itself a key division of conglomerate The Votoranium Group, a market leader in cement, pulp and papers, mining and metallurgical products.
Engemix recently opened what its news release describes as “the most modern concrete facility in Latin America.” Located in Jaguaré, which is in the western area of São Paulo, Engemix lays claim to operating “a model of environmental management” due to its extensive recycling of concrete and institution of processes to minimize waste throughout the production cycle. It is also at the forefront of installing technologies and practices to reduce carbon dioxide emissions believed to contribute to global warming trends. The 12,000-square-meter facility is capable of producing 30,000 cubic meters of concrete a month, roughly equivalent to 15 six floor buildings.
Jorge Wagner, superintendent, notes that Engemix was acquired as a means to enter the ready-mix market. “In Brazil, the majority of cement is sold to the retail construction material centers in the form of bags,” he says. In contrast, ready-mix, which is manufactured in a factory according to a set recipe, then delivered by truck equipped with a rotating drum to complete the mixture process as it travels, represents only about 15 percent of the cement market. In the U.S., however, the opposite situation occurs: about 80 percent of concrete is manufactured and sold in ready-mix form. According to the National Ready Mix Concrete Association (NRMCA), “The approximate annual ready mixed concrete production of 460 million cubic yards represents a $30 billion industry.”
“A strong economy here in Brazil is encouraging more residential and commercial development, which means a lot of potential market growth for ready mix cement,” Wagner says. “In addition, our long term objective is to continue as the leading ready mix cement throughout the world.”
In Brazil, currently, Engemix competes against a number of small regional companies, yet currently owns about 50 percent of the market share. Worldwide, it is pursuing a strategy of acquisition and partnership with established local ready mix operators. In both case, the right infrastructure is key to success.
QUALITY AND SERVICE
“Logistics are critical,” Wagner says. “The nature of the ready mix business dictates that your production facility has to be close to your customers, with easy access to major roadways. Equally important is for the trucks to arrive when they are needed and precisely at the point where the contents of the delivery are thoroughly mixed. You need to plan out the most expeditious delivery routes to ensure the highest levels of customer service and, in these days of high fuel costs, to minimize your delivery costs. Here in Brazil, in major cities such as São Paulo, we own and operate a fleet of 700 trucks, and each is equipped with a Global Positioning System (GPS). This helps us map the best route to customer locations as well as to enable us to know exactly where our vehicles are at any given time.”
Engemix operates 90 strategically located plants in Brazil and 130 pumps. It employs about 1,700 people and generates about $300 million (U.S.) in annual revenues. The company is the largest supplier to the São Paulo subway and for one of the largest industrial plants in Rio de Janeiro. “We also supplied concrete to the e-Tower, the tallest building in São Paulo and Brazil,” Wagner says. “This was particularly challenging as we had to work with the client to develop a concrete with compressed resistance that would allow us to pour into slim pillars but still bear the heavy weight loads, in order to free up space within the building.”
Because of its success with such high profile projects, in Brazil Engemix is largely recognized as the best and most prestigious ready mix cement operator. Waginer attributes this to two reasons. “You’ve got to mix the recipe. The customer demands that the concrete must be mixed to certain specifications. One advantage we have as the subsidiary of Votorantim Cementos is the cost-efficiencies we attain in having access to the highest quality raw materials and expertise available within the larger company. Equally vital is that concrete is delivered on-time. Nobody wants to be standing around waiting for the truck to arrive. So, to be a leader in this business, you have to be a leader in quality and service. Engemix bases its reputation on its proven ability to deliver both at the highest levels.”
This, of course, is key to success anywhere in the world. The one difference is that outside of Brazil, Engemix is building its reputation based on local brands. “Our strategy is to acquire companies that are already market leaders in their region and then build on that kind of solid base. For example, in the Toronto area, we bought the St. Mary’s Cement Group and in Florida we own a company called Suwannee American Cement (SAC). St. Mary’s manufacturing plants are located strategically to serve the Canadian and United States markets, with docking facilities in both countries to take advantage of efficient water transportation throughout the Great Lakes region. SAC is the first company within Votorantim Cement to win triple certifications for the highest standards for quality, safety and environmental responsibility. Within 18 months of coming into operation, the SAC production plant received ISO: 9001 and 14001 (environmental) certification, as well as OHSAS 18001 certification. It is located in Brandford, Fla., and is the third largest cement market in the U.S.
“While we have certain standardized processes we like to see followed, for the most part we’re well aware that sitting here in São Paulo is not the best vantage point to direct what is happening in Toronto or Brandford,” Wagener emphasizes. “Consequently, we emphasize local control. Wherever possible, we like to maintain local leadership and keep in place the people that have made the company successful and minimize any disruption that could follow a change in ownership. We’re partnering with successful companies, not trying to reinvent them.”
Waginer sees continued growth both locally and overseas. “”Here in Brazil, the economy is expanding rapidly, thanks in large part to the central bank reducing interest rates, which has led to more available credit to fund new construction. Historically, our industry has seen cyclical growth, but with a general trend of between 5 to 10 percent a year, but we’re seeing rates more on the 15 to 20 percent scale. In North America, things are a little soft due to the downturn in residential construction and the problems in the subprime mortgage markets. But we’re still in a growth mode as we acquire more companies, since we acquire more market share, even if the overall business is currently in a downturn.”
While local economic conditions are never written in concrete, Engemix is ready to get into the mix to provide the best quality and service to build on an already impressively firm foundation of success.