Volume 16 | Issue 2 | Year 2013

Enjoying boisterous economic growth – and poised to host the 2014 FIFA World Cup and 2016 Olympics – Brazil has heavily invested in infrastructure. Despite recent reports by the IBGE (Brazilian Institute of Geography and Statistics) that this BRIC nation faces stagnation, its construction industry prospers.
Considerable government focus on developing areas such as housing, logistics and energy has brought to light the need for more investment. Estaf Equipamentos benefits from the efforts. The company – established in 1976 (scaffolding rental provided the start) – now leases aerial access solutions to several industries. Customers reside in the construction, cement, chemical and energy sectors. As such, revenues have substantially increased – to the tune of nearly 35 percent beyond the previous year.

Innovation and Investment
CEO Gustavos Passos Lima describes the economic environment. Need for effective equipment is desperate. In the United States, access to aerial equipment is readily available for lease. Not so in Brazil; that is why Estaf heavily invests in its own interests. Market demand requires that companies such as Estaf Equipamentos grow.

And this company is well poised: extensive experience in the rental of scaffolding to local businesses provided know-how and tradition (which translates into extensive experience) that differentiated the company from competitors and placed it in good stead for further development in its market.

Indeed, it has a good track record of moving in the right direction. In 1999, Estaf established a positive partnership with Genie Industries, a North American construction equipment and aerial platform specialist. As such, the company pioneered access platforms in its region. You’re looking at the modern version of scaffolding, indicates Lima. “The investment was a logical progression,” he comments.

Currently, aerial platforms account for nearly more than half of Estaf’s equipment rentals. And this added to its legacy – which includes efficiency and solutions far less labor intensive.

Ongoing Narrative
Lima indicates how the company transitioned into the new century: “Starting around 2000, we began investing in subsidiaries in other states, to facilitate access to our national client base.”

Today, Estaf has facilities in São Paulo, Rio de Janeiro, Minas Gerais and Bahia as well as Pernambuco.

Accelerated demand requires accelerated investment. Elements that task a small company – the opening of subsidiaries in four states, the high-cost purchase of international machinery, and national operations expansion – are glaring for one with limited resources. But Estaf implemented an effective strategy: “We were among the first to seek financing from investment funds,” reports Lima. Subsequently, the company increased investments.

Investors had faith; conviction paid off. Estaf flourishes. Increased capital from private equity provided funds enabled the company to increase its equipment fleet and, in turn, its profitability. Now, each facility has 1,200 pieces of machinery available for hire.

Cycle Generation
Estaf doesn’t manufacture machinery; it buys from renowned suppliers such as Genie Industries and JLG Industries Inc. (the world’s leading designer, manufacturer and marketer of access equipment including aerial work platforms and telehandlers). While 55 percent of business is generated by work platforms, 45 percent is made up of scaffolding rentals.

In 2010, to provide a more complete service menu – and to make its presence felt in all stages of the construction process – Estaf purchased power generators, forming a new division that now accounts for five percent of revenue.

Lima clarifies his company’s business realities: “A project is typically four months, and scaffolding and aerial platforms are only needed for a comparatively short period. Breaking into the generator rental market is a way of being present in the full cycle of construction and offering more to our clients.”

Estaf invests 20 percent of resources in developing its business. “We intend to make the service we provide to clients to most efficient and complete,” says Lima.

Addition of generators to Estaf’s equipment is part of the company’s diversification strategy in the move from becoming a regional scaffolding rental enterprise to a nationally recognized name. “We work with lifting construction professionals. As such, our equipment adheres to rigorous international standards,” says Lima. “It is also manufactured to industry-defined regulations. We differentiate through our customer service and our constant effort to provide more in terms of access solutions, generators, maintenance and support. The customer has been our focus for more than 35 years.”

Breaking Down Barriers
Estaf employs 250 people – 70 percent of whom are based in Pernambuco. The reason for the apparent imbalance is the fact that the facility in the northeast works predominantly with scaffolds – a much more labor intensive product. “Scaffolding requires a larger staff to assemble and dissemble the structures,” says Lima. “The new facilities do not rent scaffolding and therefore need fewer employees.”

Transition to aerial platforms brought Estaf to its industry forefront. Before 1995, such equipment was uncommon even in an industrial capital (São Paulo). Taking the platforms to new states brought innovation to a broader client base. Strategically planned subsidiaries allow what Lima refers to as “cross-sales patterns”: contracts that facilitate clients in São Paulo (southeast), for example, to operate “locally” in Bahia (northeast).

“As well as each plant having its own equipment, all of our machinery is mobile, and can be moved between our locations, if necessary,” he says.

Pie Chart Slices
Lima divides investment into the following proportions: 20 percent is destined for generators, 10 percent for scaffolding, and 70 percent for aerial platforms. “The exact investment strategy depends on the market, but our aim is to make things easier for our customers and maintain solid growth despite obstacles,” he says.

Estaf’s closeness to customers and excellent technical assistance has helped the company achieve its goals. Securing a steady 35 percent annual growth rate in recent years and a projected 25 percent (YoY for the next five years), Estaf is an over-achiever. “We envision annual revenue of $24 million in 2012.”

That’s exceptional for an industrial rental equipment company.

“Our overheads in maintaining state-of-the- art machinery require huge amounts of capital and investment, which is where investment funds have stepped in and supported us,” explains Lima.

Investing in the Future
Estaf is a smart investor. Concentrating on platforms, the company focuses on one of Brazil’s fastest growing sectors in construction equipment. With premolded concrete and metallic structures becoming increasingly popular and a more economical choice for construction companies, aerial platforms are a readymade solution that avoids extensive man-hours.

Though modest about this, Estaf has professionalized rental of aerial construction equipment in Brazil. Competition is tough, and regional boundaries present challenges, but the company proved that strategic planning and an innovative approach to investment are key to successful growth. “Only three or four companies in the field are funded by private equity. Estaf is one of them. We are pioneers in this type of investment,” adds Lima.

The approval of investors testifies to Estaf’s professional approach.

Improving access for aerial maintenance and construction in diverse fields, Estaf also affords its clients access to more equipment and more national locations. Professional strategies and firm client focus have lifted revenue, visibility and growth figures.

As Estaf looks to a positive future, the sky is the limit.

Previous articlePressed for Success
Next articleAcoustically Sound