Q-1: First of all, I would like to let our readers know about the history of Cementos Avellaneda from the year 1980 until the time the Avellaneda Group was formed.
A-1: In the year 1980, two Spanish companies- Cementos Molins and Cementos Uniland- bought the 51% of the company that at that time was called Calera Avellaneda. The company had only one factory in Olavarria. Nowadays, those enterprises have 100% of the company. We still own that factory at Olavarria but now it is much bigger and modern. We also have an important plant in the province of San Luis where we produce almost 500,000 tones of cement. We will be able to produce 2 million tones of cement and 300,000 tones of hydraulic and hydrated lime by the end of this year. Cementos Avellaneda is leading the production of hydraulic and hydrated lime. On the other hand, we own another small factory in Uruguay, which belonged to an American company. This one was an antique factory that had an excellent quarry but a very old construction. We have invested almost 100 million dollars in Uruguay. That is why we have a new and modern plant in Minas, that is located 100 kilometres away of Montevideo. We produce clinker there and we transfer it by train. Then, we have another cement milling in Montevideo, which supplies the 50% of the Uruguayan market. I have been working in this company for 35 years. Our productivity has increased in 50 times since that moment until now. That is why our strategy is to continue investing. We have invested more than 200 million dollars in Argentina. The company has passed through very difficult moments. The eighties had been a very hard time for all the construction industry but we always had profits. We have entered into the concrete industry last year and the company currently has a share of 15% of this market. We also have the 50% of the Uruguayan market.
Q-2: Can you tell us about your last years profits? What percentage do you plan to reinvest in Argentina?
A-2: We have done a reinvestment plan for 5 years that represents around 150 million dollars. The most important investment is the one we are doing now in Olavarria because we want to duplicate the plant capacity. We are investing 80 million dollars. The company is going to build a new oven to produce 1 million tones of clinker, a plant to mill raw materials and also a new cement plant. We are also developing an Electronic Engineer Division since 1980 because the cement industrial plants work from a central machine that resume and compose all the processes of production and also take the leading decisions. That is why we decided to develop an engineering group to attend this sector. All the building, electricity and commanding parts of the projects are done by our people. On the other hand, we have a very modern technology and a red of LPC (Red of Logic Programmed Controls). So we are not depending on any particular producer. This group had also work for our competence. We are very proud of it because this means that we are also able to work in this segment and not only with cements.
Q-3: How do you finance these investments? With your own capital or do you depend on Spanish capital sources?
A-3: We have our own capital. European investment banks have financed our most important investments. We also offer important guarantees with our operations in Argentina. That is why we have a very reasonable interest rate because we are financing nearly the 8%.
Q-4: That means that you have a great advantage because the interest rates are very high in Argentina.
A-4: Yes, those interest rates are a consequence of years of hard work and a conscious commitment with all our suppliers and our finances.
Q-5: Are you considering the possibility of going public in Argentina?
A-5: We are waiting for the country’s financial recovery. When the Spanish group came to Argentina in the eighties, we were selling 7,5 million tones of cement. The figures of the cement industry have been decreasing since the ´80s. In the year 1985, our selling figures decreased to 4,5 million tones. Then, the numbers increased in the years 1986 and 1987. Afterwards, the decreasing figures continued. In 1990 we sold 3,5 million tones of cement. This number represent 40% less of what we had sold ten years before. From 1990 to 1998, the cement consumption increased and at the end of that period we almost reached 8 million tons. Last year we hardly sold 6,1 million tons. Anyway, we have to make money in this business. That is why we have to be very careful with our investments. Costs are our obsession. We are all day thinking about the fuel substitution because there are some cheaper alternatives in the market. There is also a very strict control about the electric energy consumption. If we want to survive in this market, we will have to take care of every cost detail. On the other hand, if we take into account that the Argentinean product per capita is around the 8,000 dollars, we would have to consume between 350 to 400 kilos per yer and inhabitant and we hardly reach 100 kilos. There is everything to be done in this country. There is an enormous need of infrastructure. This would be very necessary to lower the production costs because infrastructure is a production tool. It is also necessary to build highways in Argentina because this is a huge country. Our production does not have enough aggregate values. We will also lower our transport costs if we build cheap highways without tolls.
A-6: What are your expectations about the Infrastructure Plan?
Q-6: La Nación published an advertisement last Monday to inform about a new bid for public works. On the other hand, there is a current law that creates a rate for the road infrastructure. This rate would be charged to the fuel consumption. It is also tax because it will be recovered from customers once the work is finished. That is how they would guarantee their investments. This idea came from the minister of Economy. It is necessary to implement it. This new regimen would also be important to finance important projects that are now underway but need investments to be finished. The country needs them to lower the costs of production and also to employ people. It is very expensive for us to transfer cement from Olavarría.
| Q-7: Are you considering the possibility of exporting your goods to other countries as Brazil or extra Mercosur like Chile?
A-7: It is very cheap to produce a ton of this product but it is very expensive for us to transfer it from one country to another. Talking about the concrete, we could bring sand and stones from Uruguay but it is difficult to cross the Río de la Plata. That is why the costs are not the best ones.
Q-8: This industry was one of the first to suffer the consequences of an economic depression. Did you feel any positive effects since Cavallo took over as the Minister of Economy?
A-8: Yes, I think so. We are very anxious to see the results every month and every week. We are not taking into account some matters that would affect these results like the rain, for example. It rained 350 millimetres in March when the usual figure is 90 millimetres. The newspapers do not consider this. They are talking about a crisis but this crisis become worst with meteorological factors. The State has always been an important consumer of our products and nowadays is not buying anything. There is a problem of expectation. The public companies are cutting costs and personnel. On the other hand, the electric energy is cheap in Argentina but fuel is expensive. We are now doing important investments in Argentina and Uruguay in order to substitute natural gas for petrol and another alternative fuels. That is how the businessmen have to find the most logical way to reduce costs and increase competitiveness. We have done an important campaign to increase the productivity and reduce its impact on the working people. Bastos, the actual minister of Infrastructure, has done a very important job with the electric energy. We are now paying near 0,028 dollars per kilowatt. The other maintenance costs are also being reduced.
Q-9: Can you tell us who are your Argentinean clients?
A-9: We have different types of clients. Most of them are big suppliers and distributors of construction materials. They are nearly 2,500. We try to give them good quality products and a very good service too. On the other hand, we try to keep in touch with them. The selling force and the level of our customer service is also important to us. We have industrial clients that use cement as a raw material to produce concrete plants, for example. There are also customers that produce pipes and pre mould houses. Then, we are suppliers for public works. Our market share has tripled in the last years.
Q-10: What does this mean regarding your position on the local market?
A-10: Our Olavarría plant is positioned for the zone of Capital Federal and Great Buenos Aires. We have another plant that covers the area of the provinces of San Luis, the South of Cordoba and a part of Mendoza. The country is very big and it is also difficult to travel to its different regions. We do not have factories to cover all the territory. We also have glue for ceramics. This product is distributed to all the country. We are very important in this market. Our lime also reaches most of the country. All the Uruguayan territory is covered with this product.
Q-11: Where do you see Cementos Avellaneda in two or three years from now? What are your most important projects?
A-11: The most important projects are now in course. We are duplicating the capacity of our Olavarría plant. We are fighting to gain a better position in this market. The good quality of our products is very important for us. We have a very big project in San Luis that is aims to improve the quality of our products and the better exploitation of our quarries. We have bought quarries in the province of San Luis. You cannot have a cement factory if you do not have the quarries. The cement industry is a mining industry. If you do not have a mining field, you cannot have a cement factory. We have been the owners of the San Luis plant for 10 years. During those ten years, we had been investing in quarries. We have now a great quarry and a great field. We can increase the production of this plant. On the other hand, 60% of the province budget is dedicated to build new public works. They are now building an airport at Merlo, that is a very important and tourist city. They are also doing a bid for a highway that will probably be build in concrete and that will replace the 7 one. The province has done 3 or 4 routes like the 127 and the 38. On the other hand, the Calafate airport was recently inaugurated. We have the technology that is needed to do good quality and lasting projects. We need positive expectations about the future of our country and this company. If we did not have good expectations in this country, we could not have done this investment plan. These are the values of our group that is also present in Spain, Africa and Mexico.
Q-12: As you know our readers are top executives and businessmen. What is your final message to them?
A-12: Argentina has a great potential. This is a country that does not have racial, energetic or fuel problems. The Argentinean people are very well qualified. We need people with an important know how and management knowledge. I was working in this company when the Spanish group bough it. They brought the know how with them. They knew how to work with costs and technology. They had very good results. There are two subjects that the Argentineans need to work on: Justice and security for the investors and the tax matter.
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