What factors have contributed to growth over the past few years?
Growth has always been a priority for Rotoplas, a company focused on the water market. Today, water demand is outpacing supply for several reasons including the demographics of urbanization, climate change, and food production. Processing a pound of beef, for example, requires about 400 gallons of water. Additionally, although governments have resources allocated to water in their budgets, often this is not enough to meet demand. All of this gives us the opportunity to provide our value added water solutions for every problem. At Rotoplas we have been able to capture growth for different reasons, among them our top-notch management team, who have years of experience in the water industry, and our strong focus on innovation. We differentiate ourselves based on the special characteristics of the quality products we offer, where 42% of our sales in 2014 were generated by R&D initiatives. We are leaders in every one of the markets in which we operate, with strong brand recognition and our unique platform being at the cornerstone of our success. When we enter a country we do not just sell products; we sell solutions to serious problems. We currently have 23 factories across Latin America and one in the US, and a strategic distribution network through which we reach close to 7,000 clients across the whole continent. Additionally, all our businesses are run on the SAP platform. These, in a nutshell, are the key elements behind our substantial growth rate.
2014 was a strong year for Rotoplas. You launched your IPO and were able to raise Ps4.2 billion. How will this increase your presence?
The revenue generated by our IPO will primordially be channeled to designing and implementing solutions to key water-related issues in the Americas, which we believe will contribute to ensuring that the company remains active and on a growth trajectory. We are seeing many opportunities in various areas, including the US market, which is currently experiencing a tough drought. We believe we are uniquely positioned to help them face this problem successfully, backed by our expertise in this area. In order to consolidate our business and to increase our market share, we are planning to build six or seven new plants in the US over the next two years. In Mexico, we will center our attention on building integrated water solutions for people who require urgent solutions to their water needs. Rainwater harvesting, sanitation, and water treatment—and more specifically water purification— have all become key issues in our country, and we offer integrated water solutions to counter them. For example, the government is going to allocate part of the income resulting from the recently imposed taxes on sugary carbonated drinks to installing drinking water fountains at schools in an effort to try to win the battle against childhood diabetes and obesity. Mexico today sadly ranks number one in terms of children affected by diabetes, essentially due to poor nutrition, and we are very proud to be able to be part of the solution. And finally, although Brazil has been successful in the past with its water initiatives, today both rural and urban areas are facing serious water problems that we intend to address. We will use the net proceeds of the IPO to fund our working capital and capital expenditure for all these projects.
What are your plans for expansion and the challenges you face entering the US market?
There are challenges to overcome in any business, but I am a firm believer that if you have the right processes and people, they are easier to face. In every country where we are present, we operate in what we like to call the Rotoplas way. The Rotoplas way is the common platform that focuses on reducing operating expenses and standardizing processes to support our strategic growth plan and profitability. This platform is based on robust processes, state-of-the-art systems, and extraordinary people. Also, above all, we invest our time and resources in developing leadership and teamwork through effective collaboration. It was by applying the Rotoplas way that we were able to have nine plants in operation in Brazil in just 18 months and to deliver integrated solutions to our clients in record time, all of which contributed to making us the current leaders in this category. We are also implementing the Rotoplas way in our operations in the US, a new market for us where we have the added advantage of having a local management team with local knowledge of the business and of the existing needs. The Rotoplas way, our local experienced team, and the quality of our solutions will all help us boost expansion in this country.
Besides the US and Brazil, what other countries in Latin America hold commercial potential?
We are always looking for growth opportunities that add value. Right now we are focused on all of the Americas. Colombia is the only market where we have no presence to date, but we certainly have it on our radar.
You mentioned that demand exceeds supply in Mexico. How can reforms support your business in that market?
I believe that the reforms will prove supportive not only for us but for all industries in Mexico, and this will translate into economic growth, greater investments, less unemployment, and a better distribution of income. The energy reform, for example, will bring new players and new processes to Mexico, and the upcoming growth will demand vast amounts of water. Another clear example of the potential benefits is the recently imposed tax on sugary carbonated drinks that will be used in part to install drinking fountains at schools, as I mentioned before. At the same time, demographic evidence of rising disposable income will also benefit business growth consumers. In summary, there are plenty of opportunities for Rotoplas that will be supported by the reforms.
© The Business Year - March 2015