||€ 1 451 million
|€ 764 million
|Capital expenditures (PP&E):
||(*) € 24 million
||(*) € 582 million
(*) consolidated entities
Economic environment in 2015
Reduced government budgets and public spending, driven by the price declines for copper and other commodities, have led to a downturn in mining and public infrastructure markets across Latin America.
Falling oil prices added to the uncertainty in 2015. Several Latin American countries including e.g., Brazil, Venezuela and Ecuador, are highly dependent on oil revenues which account for export earnings and government income.
Other countries depend on mining activities, like Peru, Chile and Colombia, making them vulnerable to ta drop in commodity prices.
2015 was therefore characterized by a drastic economic deceleration in many economies across Latin America, with particularly disappointing performances in Brazil and Venezuela, where the depression persists. GDP growth contracted across the region and led to a regional downturn in demand from infrastructure markets.
In Latin America, Bekaert manufactures an extensive product portfolio to serve construction, mining, agriculture and a wide range of industrial and consumer markets across the region. Bekaert has wholly owned and majority owned subsidiaries in Costa Rica, Ecuador, Colombia, Venezuela, Peru, Chile and Brazil and also runs joint ventures in Brazil in a 45/55 partnership with ArcelorMittal.
Bekaert’s activities in Latin America go back to 1950. Today, they represent 33% of combined sales. At the end of 2015, Bekaert employed over 7800 people in the region.
Our activity performance
Bekaert’s consolidated sales in Latin America increased by +21% thanks to the significant impact from acquisitions and favorable currency effects. An improved price-mix fully offset the impact of the passed-on lower raw material prices.
We acquired the former Pirelli tire cord plant in Sumaré, Brazil and fully integrated the acquisitions of 2014 in Brazil and Costa Rica. The impact of acquisitions, an improved price-mix and the effects of cost savings drove up profitability and cash generation in the region.
REBIT and EBITDA increased by more than 75% in comparison with 2014. The EBITDA margin accelerated during the year, reaching 10% on sales in the second half of 2015.
We invested € 24 million in property, plant and equipment across the región and aligned our operations to the economic reality where needed.
Our combined sales growth was tempered due to the significant devaluation of the Brazilian real. Our joint ventures in Brazil, however, outperformed the markets in the country.
Notwithstanding the economic evolutions in Latin America, Bekaert expects to maintain the benefits from its strong market positions, sustained cost savings and improved business portfolio, also in the coming years. The profitability increase achieved in declining markets in 2015, is proving the capability of our teams to improve our competitiveness and portfolio in difficult economic circomstances.
Growing our business through M&A
The integration of the steel cord entity acquired from Pirelli in Sumaré, Brazil has been added to Bekaert’s financial statements as of 1 January 2015.
At the end of 2015 Bekaert and Ontario Teachers’ Pension Plan announced the intended merger of the global ropes and advanced cords businesses of Bekaert and Bridon, through the establishment of a new joint venture: Bridon Bekaert Ropes Group. The merger is subject to customary closing conditions including regulatory approvals. In Latin America, Bekaert will, upon closing, enter the advanced cords businesses of Bekaert in Brazil (Cimaf), Chile (Prodinsa) and Peru (Procables). Ontario Teachers’ will then contribute its entire ownership interest in Bridon to the new group. Their Latin American sales and services organization is located in Brazil.
Risk and risk mitigation in Venezuela
Based on prudence principles, Bekaert impaired its Venezuelan assets already in 2010 and has applied inflation accounting and valuation at the corresponding economic exchange rate since 2013 onwards. As a result, the valuation risk of our activities is relatively limited.
We have, however, been forced to shut down operations in February 2016 due to raw material shortage. Bekaert ensures continuity of operations whenever possible but remains cautious as to the sustainability of the business environment in the country. Our customers and our dedicated team of employees in Venezuela are receiving as much support as we are capable to offer.