Recently you acquired two companies in Colombia. What is motivating this level of investment?
Our company is a German company that operates in the Latin American region, with investments in Argentina, Brazil, and a commercial office in Chile. There was a gap in the northern part of South America, as well as Central America and in Mexico in terms of Knauf products. The company has a presence in North America with Knauf Insulation, which is the glass wool that is used to insulate against weather or even fire. Most of the plants for business are in the US; therefore, we began the analysis of potential investment destinations and Colombia was designated as a good opportunity north of Argentina. There are three plants in Colombia that produce this product, two of which we now own. One of the attractions is that the economic environment is better tailored to companies that want to invest and get returns. For example, the market in Ecuador is smaller, while Peru could present a good opportunity if it was not for the fact that we have a plan to start quarrying gypsum in Chile further down the line, and producing there. That was why we chose Colombia.
Why did you decide to come to Latin America at this time?
The company momentum is targeting Latin America. In March 2016, we bought a gypsum plant in Honduras. We now have three plants in the region and will continue investing. These two companies were producing three of the main gypsum board types, namely standard, the type used in more humid environments, with the other being for passive fire protection. The final product was joint compound plaster to cover drywall. The difference with Knauf is that we build and sell systems, rather than just offering basic products. We also look into ventures with locals, and are potentially setting up new production facilities. We will establish a joint compound plaster production facility in July in Bogotá to mitigate the high transportation costs in Colombia. The government has made a great deal of effort to improve the transport networks, but much remains to be done.
What kind of construction does the system suit best?
The biggest market is housing, which is a little harder than the commercial segment, as businesses will never complain as long as we can get their office ready quickly. In Colombia, the biggest area for sales at the moment is in ceilings. The internal drywall market is just opening up. At the moment, builders place bricks and then a board on either side, and instead of using cement, this is a much cleaner and faster method. Our main drivers are currently malls and hotels, because they need their jobs done quickly and the flexibility of our system is attractive to them.
Are you exporting from Colombia?
This is a major driver for our business. We currently export around 30% of our production, and we aim to reach around 50%. The natural market for us is the Andean region, Central America, and the Caribbean, which is where we are focusing. We are planning to control this expansion into northern Latin America from Colombia. We set up in Honduras but are looking into other markets like Mexico. In Colombia we are on the coast, which is useful. We do not yet have a plant in Bogotá because there are no gypsum quarries in the area.
What are your views on the construction industry in Colombia?
There was a 6% increase in license approvals in 2015 compared to 2014, meaning there are projects coming. The government was investing a great deal in housing for lower-income people, but as you know the state budget has been reduced because of oil prices, so that could be a challenge.