20/01/2020 Votorantim diz estar pronta para volta da demanda de cimento | Empresas | Valor Econômico Votorantim Says it is Ready for Cement Demand to Grown Again Last year, the Group’s cement company capitalized R$ 2 billion and approved an investment plan to modernize and increase the competitiveness of its operations. By Ivo Ribeiro — from São Paulo 20/01/2020 05h01 Votorantim Cimentos entered 2020 in better financial health and with increased optimism about Brazil’s economy. The projection for this year’s performance is to grow at least at the same rate as the market. But its CEO said he believes he can achieve better results. After facing a four-year crisis, with a 27% retraction in sales volume, the cement industry in the country is projecting a 3.6% increase in sales this year, the same rate as 2019. https://valor.globo.com/empresas/noticia/2020/01/20/votorantim-diz-estar-pronta-para-volta-da-demanda- de-cimento.ghtml 20/01/2020 Votorantim diz estar pronta para volta da demanda de cimento | Empresas | Valor Econômico Marcelo Castelli, who is celebrating his first anniversary as the head of the cement company this month, said that VC is prepared for the recovery of consumption in Brazil, based on a 2% to 2.5% GDP growth. “Our greatest ambition is to improve the profitability of our business; therefore, we are investing heavily to increase the competitiveness of our operations.” Castelli said that if the Brazilian economy reaches the level of growth projected by economists and the government, this would lead to an almost 4% increase in cement consumption in the country. However, he reflected that this is only the beginning—mainly financially— of the road to recovery for companies in this sector. “Cement prices in dollar fell sharply, at the same time that domestic demand collapsed. This has really hurt the sector and there hasn’t been any financial relief to most companies that produce here,” added Castelli, in an interview to Valor. According to Castelli, several factors are beneficial to the building materials industry—which includes not only cement, mortar, concrete, gravel, and paints to steel rebar and more. He mentioned the decrease in interest rates, higher employment, the recovery of the real estate sector—which has become attractive to investments— and the exchange rate—which currently benefits exporters, especially in this industry. “The current outlook is quite positive,” he said. Castelli noted, however, that privatizations must happen “to bring in more money from abroad” and that the infrastructure asset concessions program must take off. “There is a lot of money abroad ready to enter Brazil. First, money comes in as speculative capital. We must attract investments in productive capital.” In the area of infrastructure concessions, the CEO said that he is looking forward to the approval of the new rules for the sanitation sector. He highlighted that this will attract new concessionaires and investors, and many projects will be executed using private capital or through public-private partnerships. Sanitation and other infrastructure projects (highways, railways, airports, ports, etc.) are major consumers of cement. Little has been done in this area in the past five years. However, he pointed out that this will only reflect in the demand for cement and other construction materials starting in the second semester (to a lesser extent) and, more strongly, in 2021. These are long-maturation projects. Meanwhile, they are betting on real estate construction. Castelli (who was the Votorantim-appointed head of the cellulose manufacturer Fibria for many years) said that, together with its parent company, VC adopted fundamental measures to ensure the sustainability of the business. Last year, through Votorantim S.A., they made a capital investment to reduce the company’s financial leverage. From VSA alone, R$ 2 billion was allocated for the prepayment of debts. Leverage fell to less than three times as measured by the net debt-to-EBITDA (earnings before interest, taxes, depreciation and amortization) ratio. “Today, we can say that our team has been playing past the midfield line,” he said, in reference to a soccer match. At the same time, the company developed a R$ 2 billion, 5-year investment program for the modernization and increased competitiveness of its operations in Brazil. This amount may increase by a few hundred million reais if the regulation for the co- processing of industrial waste in the State of São Paulo is approved. In this case, the https://valor.globo.com/empresas/noticia/2020/01/20/votorantim-diz-estar-pronta-para-volta-da-demanda- de-cimento.ghtml 20/01/2020 Votorantim diz estar pronta para volta da demanda de cimento | Empresas | Valor Econômico company will have to make heavy investments in the Santa Helena and Salto plants to handle the significant volume of this type of waste that is produced in the state. In other states this is already allowed, and VC has set up facilities for that. To position itself across the country, VC has been investing in the expansion of plants to operate in certain markets and take advantage of the expected recovery of consumption. This is the case of the Pecém (CE) plant, which received R$ 200 million to increase its capacity by 800,000 tons by August. In 2019, VC purchased a mortar unit in Belém and expanded the one in Cuiabá. Also in Mato Grosso, it expanded the Nobres agricultural limestone line. “We are attentive to regional economy recoveries,” said Castelli. VC is the leader in the Brazilian cement market and has operations in other countries in Latin America, the United States and Canada, Europe (Spain) and in some countries in Africa. Its last consolidated net revenue, in 2018, was R$ 12.1 billion—R$ 6.61 billions from Brazil. In total, the company sold 31 million tons of cement, in addition to concrete, mortar, gravel and agricultural limestone. VC is the sixth largest cement manufacturer in the world in terms of installed capacity. According to Castelli, the North American operations have been doing well. “The US market is attractive, and the company remains attentive to new acquisitions in the country. But we are in no hurry,” he said. In Argentina, where VC has a partner who has a controlling interest in the business, an expansion investment was concluded in October. “In times of crisis, they invest in the so-called ‘ladrillos’, or real estate, as a security measure, and that benefits us.” In Spain, the economy is positive. Tunisia and Morocco are stable. In Turkey, the crisis has stabilized and a slow recovery is expected. https://valor.globo.com/empresas/noticia/2020/01/20/votorantim-diz-estar-pronta-para-volta-da-demanda- de-cimento.ghtml .