Chemical distributor Anastacio eyes Latin America growth

Following 15 years of expansion in its domestic Brazilian market, chemical distributor Industria Quimica Anastacio now aims to expand further afield in the Latin American region, according to CEO Jan Felix Krueder.

Anastacio’s move from producer to distributor in 2002 has paid off, with sales quintupling in the last 10 years despite the economic crisis in Brazil, which has taken GDP to 2010 levels. The Brazilian chemical distributor ranks as the 9th largest in Latin America, as featured in the ICIS Top 100 Chemical Distributors, with 2016 sales of $274m. Globally, Anastacio ranked as the 50th largest distributor.

Adjusted for exchange rates, the company’s CEO said sales had more than quintupled since 2007, when the total revenue figure stood at $50m.

“In 2002 we moved from production of glycerine and fatty acids to distribution, and currently we have more than 800 products on our portfolio. We started in distribution from scratch, but we had a very good name and quality reputation which facilitated the transition,” said Krueder, who has owned 100% of the company shares since 2005.

The company has now three main divisions – Industries Processes, which accounts for 50% of sales, Beauty and Health accounting for 35% of revenue and Human and Animal Nutrition, with the remaining 15% of sales. “In each division, we have both commodity-type chemicals and specialties, and we are trying to be strong in both areas. On one hand, commodity chemicals allow us to have nice volumes, which makes us very competitive in terms of scale and logistics,” said Krueder.

“But margins are low in commodities, and that’s why specialties is also important. Although we need much more technical support from our partners (chemical producers) and work closely with them by receiving training, it is important for us to have a team focused on specialties. Here we have better margins and it makes a nice mix of operations.”

Krueder has been Anastacio’s CEO since 1997, although the company’s history spans back to 1941, when Krueder’s grandfather, a German immigrant, founded the at-the-time chemical producer.

EXPANDING THE NETWORK

Since 2002, the company has expanded its distribution network along Brazil’s most populous eastern, coastal states with a total of five warehouses – three of them in the Sao Paolo region – and 315 employees.

The company also operates a warehouse in Argentina’s capital, Buenos Aires – opened in January this year – and a trading office in China’s Shanghai, the CEO said. “We are also selling to other south American countries through our trading company, Anastacio Overseas. The next step is to move the company forward to grow outside Brazil and expand in the rest of South America after the opening of our Buenos Aires warehouse,” said Krueder. “The big challenge for us is to repeat the good results we have had in Brazil over the last 10 years.”

The economic and political woes afflicting Brazil in the last five years, with the country only leaving behind the largest recession in decades this year and a president impeached in 2016, were not an impediment for Anastacio to expand, said its CEO.

POLICY CONSIDERATIONS

Krueder said he hopes for better times under the new government led by Michel Temer, although the politician is currently also under investigation for links with a corruption network implicating business and political leaders.

“Unfortunately, we are seeing that a (large) amount of politicians [were] being brought inside these (corrupt business networks). This is something Brazil is fighting (through the courts) and we strongly hope that this will now change – maybe not as fast as we would like, but Brazil has to move forward,” he said.

He went on to say that Temer, despite all, comes across as a more business-friendly politician than his predecessor, and the reforms he is implementing would be good for gaining back the confidence of global investors.

The government wants to liberalise labour laws and put a cap on public spending as well as reform the social security system – reforms which Krueder said may be “difficult but necessary” to put the economy back on track.

“What would be good news is that the current government works towards important reforms in Brazil. These reforms are important for Brazil to be a trustable country for investors. There are investors who once invested in Brazil who are now waiting for signs of stability.” Despite leaving behind the worst of its economic crisis, Brazil’s job creation pace is slow, admitted Krueder. However, he remains convinced the country had reached bottom and observes encouraging signs such as the appreciation of the real against other major currencies, and decreasing interest rates. The main benchmark rate is at 9%, down in less than a year from 14%.

“The trend for interest rates is that they will be close to 7% by the end of the year. Together with the real appreciation, these are signs of bigger confidence in the Brazilian economy and the ongoing reforms,” said Krueder.

While the chemical distribution industry is heading towards consolidation – at least in Europe, according to analysts – Krueder said Anastacio would not want to be either an acquirer or an acquisition target, although he conceded the consolidation trends are unstoppable.

“We understand the consolidation trend. In this industry, you need scale and big structures to be able to reach all the big customers as well as the needs of our suppliers. However, we have been able to grow at double-digit figures every year and we have our own working capital. Anastacio is very solid financially – we don’t have any debt,” said Krueder.

“We believe it wouldn’t bring any additional value to acquire or to be acquired at the moment,” he added.