U.S. Building Boom Has Brazilian Group Looking to Cement Deals
(Bloomberg) -- Brazilian conglomerate Votorantim SA is eying further expansion in U.S. cement and real-estate markets to tap a rebounding economy that may get an additional jolt from a massive infrastructure overhaul.
Votorantim hasn’t lost its appetite for growth after forming a joint venture late last year with McInnis Cement Inc., a deal that also brought in institutional investor Caisse de depot et placement du Quebec as a partner.
“This combination is a tremendous lever for our growth and more efficiency in the region,” Chief Executive Officer Joao Schmidt said in an interview.
The closely held group, with operations ranging from mining to orange juice, is also looking to expand in other segments such as real estate, the executive said. The U.S. economy will expand 5.8% this year and 4% next year, according to analysts tracked by Bloomberg, as one of the world’s most successful vaccination programs opens up business and industry.
A $2.25 trillion infrastructure spend proposed by U.S. President Joe Biden would further spur demand. “If it becomes effective, it will add earnings to existing expectations of U.S. growth this year,” Schmidt said.
Last year, Votorantim posted a 43% jump in earnings before items from its cement segment, which accounts for more than half of the group’s operating profit. Its U.S. business was flat in dollar terms, while the weak real boosted the company’s result in Brazilian currency, Chief Financial Officer Sergio Malacrida said in the same interview.
Even in Brazil, where the economic recovery is being slowed by an escalation of Covid-19 cases, a rebound in construction that began mid-2020 is continuing, Malacrida said. Lower interest rates have pushed up property investments while lockdowns have boosted demand for larger apartments and houses, the CFO said.
Votorantim has resumed a plan to diversify its commodities-heavy portfolio into less cyclical assets. The group has announced a 2 billion-real ($356 million) wind energy investment and has started a Brazilian real-estate initiative. While energy and sanitation are the drivers of diversification, Votorantim also sees opportunities in health, Schmidt said.
Across the board, the investment grade-rated group is planning to boost capital expenditure by 34% this year after bringing down leverage to the lowest since 2008.
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