July 26, 2016 The Big Mix

Volume 10 | Issue 4

One of Brazil's biggest private industries, Termomecanica is also the country's leading manufacturer of semi-finished and finished products

Termomecanica’s founder was into metal well before he hit his double-digits. Growing up in São Paulo in the 1920s, Salvador Arena spent much of his time in the workshop where his father ran a scrap metal processing business. After earning an engineering degree, Arena went to work at the state electric company. At the time, whenever a machine broke down, the company had to import an expensive replacement part. To get around this costly and time-consuming process, Arena began sketching and projecting parts that could be cast in Brazil. Often his designs were better than the original models.

Armed with this combination of know-how and enterprising spirit, in 1942 Arena decided to start his own manufacturing company. With 200 dollars start-up capital, he opened up a small plant in São Paulo, called Termomecanica, which specialized in producing ovens for bakeries. From ovens, the company branched out into stress-relieving furnaces, cast furnaces, presses, and other machines for industrial use. By the mid-1950s, a second plant with a foundry was constructed in the adjacent city of São Bernardo do Campo for the manufacture of products made from copper, copper alloys and aluminum. As the foundry prospered, processing metals became the company’s main focus. With the base materials as well as technology at its disposal, the company was not only able to supply parts and equipment to an increasingly wide diversity of industries, but it also achieved self-sufficiency by manufacturing all its own machinery as well.

Technological Edge
From the beginning, Termomecanica was always at the cutting edge of its sector. When Arena saw that Brazil’s rapidly growing industries were in need of bushings, for example, he acquired induction furnaces for making bronze from the U.S. in order to produce a special line of bronze components for attrition mills, particularly well suited to Brazil’s sugar cane and alcohol mills. Over the years, as the company invested in new top-of-the-line foreign-made and national equipment, other products were gradually added to the mix. It wasn’t long before Termomecanica could claim fame to having the widest assortment of copper and copper alloy products on the Brazilian market including tubes, bars, rods, sections, wires, ingots, rolled products, and granulated metals and bars.

“Today, we are the leading manufacturer in the copper transformation segment,” confesses Antonio Luiz Monteforte, Termomecanica’s Manager in charge of new business. “We control around 55 percent of the Brazilian market. And although we have competitors in a few areas, nobody else comes close to having either our scope or our quality. After all, we are pioneers in this sector. This tradition translates into a great deal of know-how that allows us to have the mix we do.”

Not one to rest on its laurels however, over the last decade in particular, Termomecanica has strived to stay ahead of the pack by developing a new generation of products, many of which are exclusive. For example, the acquisition of equipment from Japan’s Mori led to the development of special inner grooved copper tubes that are ideal for Brazil’s constantly expanding air conditioning and refrigeration industries. Recent investments in equipment from leading German suppliers such as Schumag and Niehoff have led to the production of new sizes and varieties of rods, wires, cables and tubes, which have allowed the company to keep pace with Brazil’s booming civil construction sector.

New Opportunities.
“Traditionally, we were more focused on the industrial engineering sector. But the market demand has caused us to consider the sectors related to civil construction as well, which resulted in a significant increase in production,” says Monteforte. “We’ve found new uses for our alloys: making tubes, sheets, strips and bars used for the manufacture of sanitary metals and for the conduction of cold/hot water and gas, for example, as well as for heating, venting and air-conditioning.”Indeed, the HVAC industry in Brazil is growing exponentially. Says Monteforte: “Is it increased global warming? Who knows? But what is certain is that air conditioning is suddenly more accessible to a larger percentage of the population.” Meanwhile, another big growth opportunity Termomecanica is focusing upon is the ethanol and biodiesel energy industry, in which Brazil has positioned itself as a global leader. Since the company already has a long tradition of making technical parts for the heavy machinery used in this segment – often so specialized that few other manufacturers are equipped to make them – it possesses a major competitive advantage.

With so many opportunities on the horizon, Termomecanica has always made heavy investments with a view to increasing its production capacity. In São Bernardo do Campo, the company already boasts two plants with a total constructed area of 1,367,000 square feet, where – already at maximum capacity – where the company manufactures between 12,000 and 15,000 tons of foundry products each month. However, construction of a third 753,000-square-foot plant is well underway and is scheduled for completion by 2008. When it begins operation, the company will be able to increase production of tubes and bars by between 50 and 60 percent. With this goal in mind, the company has already invested heavily in special German machinery for laminating tubes.

Moreover, having attained higher production levels, Termomecanica will also be able to increase its presence on the international market. Admits Monteforte: “Today, only 3 to 5 percent of our total production is exports, for the most part to Latin American countries. However, after 2008, we will be able to increase our global market share significantly – hopefully to 15 percent. Aside from consolidating our presence in the USA, South and Central America, we want to expand into Europe.”

Added Value
And there is no reason the company won’t succeed. Apart from its years of experience and impressive mix, Termomecanica is capable of making differentiated products that its competitors can’t. “The special alloys that we develop have a lot more added value,” explains Monteforte. “We can design and produce custom-made parts for individual clients using specific alloys that only a few can produce. After accompanying clients throughout the entire production process – from conception to delivery – we then become their official supplier for that specific part. In fact, at our plant, we have a few specialized departments that devote themselves entirely to such projects.”

While the ability to provide such services implies a highly trained work force, a less visible but equally important factor in Termomecanica’s success is the motivation displayed by more than 2,000 men and women that work for the company. Indeed, as Sales Supervisor Paulo Cesar Martins Pereira points out, Salvador Arena was ahead of his time in the treatment of his employees and his commitment to social issues – both on the plant and off. From the beginning, Arena provided benefits such as food and medical assistance, transport, as well as low-interest loans and education – (believing education, in particular, is key to growth, Arena opened an Educational Complex in São Bernardo do Campo, where students from preschool to college receive high quality and free education) – to employees and their families. Moreover, aside from offering numerous bonuses and premiums for productivity, he was the first Brazilian enterpreneur to launch a profit-sharing policy, decades before this became the norm.

Says Pereira: “Salvador Arena’s management style was very atypical. And even though he passed away nine years ago, the company has maintained this valorization of the people who work here. It´s for this reason that we have such a high profit sharing, much higher than the market average.”

Monteforte agrees with his colleague. “Termomecanica is highly capitalized, earns strong profits and follows a solid reinvestment policy. Yet what really sets us apart are the people involved, or what Salvador Arena referred to as ‘our precious human capital.´”

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