SUSTAINABLE BUSINESS

Portugal 2019 | ECONOMY | INTERVIEW

Semapa seeks to strengthen its core businesses as well as diversify as a group.

João Castello Branco
BIOGRAPHY
João Castello Branco has been CEO of Semapa since 2015 and Chairman of the Board of Directors of the Navigator Company and Secil – Companhia Geral de Cal e Cimento since 2018. Earlier, he was a Director at McKinsey & Company in the Iberian office, which he joined in 1991. Prior to this, he worked at Renault’s engine development center in France. He is an engineer by training from Lisbon’s IST and has an MBA from INSEAD.

What have been the main achievements of Semapa since its founding?

We are an industrial group with three main businesses: pulp and paper, cement, and environment. The group acquired Secil, the cement company, in 1994 and Navigator, the pulp and paper business, in 2004. In the meantime, the group also became one of the first players in renewable energy in Portugal, which was subsequently sold to Babcock & Brown. The environmental business (ETSA) was acquired in 2008 in the context of Secil's incineration strategy and subsequently followed an independent path. Currently, Navigator is our main business, with EUR1.6 billion in revenue, and Secil is number two, with around EUR500 million in revenue. Throughout the years, we have been one of the most significant industrial investors in Portugal. At Navigator, we have invested in some of the bigger and more efficient paper plants in the world, and we have built an international portfolio that allows us to benefit from diversification effects. Since the rebirth of the group in the 90s, our shareholders' returns have been in the range of 19% per year, which is significant.

What have been the main challenges of doing business in Portugal?

We are an international, export-oriented group, and our challenge as a business is to maintain our competitiveness in this context. Although most of Navigator's assets and operations are based here, the company exports more than 90% of the pulp and paper it produces. We are the leading office paper producer in Europe and also export to the US, Africa, and the Middle East. Our main raw material is wood, where we compete with pulp players from the southern hemisphere. Keeping enough wood supply in Portugal is of the utmost importance to us and to an industry that represents one of the biggest and higher value-added export industries of the country. We are actively engaged with all our wood suppliers to ensure the sustainability of their forestry practices, and currently more than 60% are already certified. This number is increasing every year. We need, therefore, to make sure the government and regulatory authorities recognize this and do not introduce unnecessary restrictions. Navigator is also expanding into the tissue market as a growth option. Energy competitiveness, among others, will be a key ingredient of success. In cement, most of our production is outside of Portugal, though we still have a sizable operation here, exporting a significant part of its output. Again, energy competitiveness is key and is not evolving as it should. Another critical factor is the evolution of the CO2 Emission Trading Scheme in Europe to ensure a level playing field vis-à-vis non-compliant countries.

What future developments are in the pipeline for Navigator at the international level?

We have a distinctive global leadership position in office paper. We will continue to grow this business by constantly improving our throughput. Beyond that, we have been exploring two routes. One is to invest further in pulp-producing capacities by modernizing and increasing the capacity of our plants. We recently finished an investment in our Figueira plant of about EUR80 million to increase output by 70,000 tons. We are also exploring the tissue route. It is a growing market, which uses our hardwood pulp, and we aim to replicate the successful integration strategy pursued in office paper. In 2015, we acquired a company in this space and recently concluded a EUR-120 million investment in the construction of an integrated factory in Cacia. The view is that we will be able to develop a particularly competitive position to serve some markets. Value creation needs to take precedence from growth for the sake of it. We also have a long-term, forest-based bet in Mozambique.