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Company Strategy and Competitive Advantages

Strategy and Competitive Advantages

Competitive Advantages

Lupatech competitive advantages include:

Technologies. Lupatech has an own research and development centre (CPDL), with high experienced professionals and methodologies to assure outstanding results from the process and services improvement. In parallel to the internal development of new technologies, methodologies and industrial techniques, the Company has integrated new technologies as a result of acquisitions of new business and through joint ventures with companies with complementary business to Lupatechs.

Operations. In order to prepare the Company’s manufacturing capacity due to the new perspectives of demand for equipment for the oil & Gas Industrial Valves markets, Lupatech has invested in production capacity expansion and in productivity of its industrial plants, therefore the Company has today almost all plants in the state of the art. Lupatech’ industrial operations are supplied essentially buy suppliers of raw material and inputs produced in Brazil, which results in a higher percentage of Local Content for the Company’s products.

Experienced and qualified management and Retention Plan. Lupatech staff is highly experienced in the segments where the Company is in and is formed by a team of professionals that have been working together for an average of 25 years. This team has been strengthened by talented professionals kept from the acquired companies, allowing the acquired business to be run continuously and to keep the knowledge in the Company, assuring the acquired business value. A new management generation joined the more experienced ones and this process is part of the management succession plan. An important component of the Company executives’ compensation is tied to its growth and profitability through a profit sharing program and a stock option plan that aligns its executives’ interests with those of Lupatech shareholders.

Capital Structure. The Company has a capital structure comprised essentially by sources from the Capital Market, such as Debentures, Perpetual bonuses, besides the sources from the IPO in 2006, which were invested essentially in assets in order to finance the expansion plan. The Company’s current capital structure provides it financial flexibility, long term maturity, which reduces financial risks and also provides attractive capital cost to finance the Lupatech’ operations.

Unique and competitive positioning to benefit from Petrobras’ high level of investment in the oil and gas industry. Lupatech is in a highly favorable position to benefit from the planned increased investments by Petrobras in the oil and gas industry because of: (i) its leading position in the market; (ii) the high quality and technological advances of its products; (iii) its sales structure; (iv) the small number of Brazilian manufacturers capable of making the capital investments required to compete in the industry; and (v) the Brazilian government’s policy of promoting products manufactured domestically.

Recognized track record of successfully integrating acquired companies. The Company has a successful track record of consummating acquisitions and integrating the acquired companies. In addition to the synergies and economies of scale resulting from our acquisitions, has implemented an efficient management model, which enables the acquired companies to quickly produce and commercialize products with the same quality, productivity and profitability standards adopted by the other businesses.

Market leadership and established core products. Lupatech is the leading Mercosul company in the manufacture of industrial valves, anchoring ropes and other products used in platforms, pipelines and industrial plants of large industrial groups, under the brands “Lupatech CSL”, “Lupatech MNA”, “Lupatech Tecval”, “Lupatech Esferomatic”, "Lupatech Oilfield Services",“Lupatech Oil Tools”, “Lupatech Oil & Gas Services”, “Lupatech Tubular Services”, “Lupatech Fiberware”, “Lupatech Monitoring Systems”, “Norpatagonica”, “Aspro” and “Sinergás”. The Company has a significant market share and a wide network of suppliers and resellers throughout Mercosul. Recently, with the acquisition process, has expanded its market presence, bringing to Lupatech businesses with interesting technologies, in most of the cases, developed in Brazil, consolidating a strict relationship with its clients, creating a competitive advantage among its competitors to better enjoy the market opportunities.

High quality products and superior maintenance services. Petrobras has certified Lupatech as a level “A” supplier due to the quality of its products and excellence of its manufacturing processes, and its products are also certified by international institutions.  Its products incorporate state-of-the-art technology developed by its research center together with customers.  In addition, unlike its international competitors, its local presence in Brazil and Argentina ensures proximity to its customers and fast, efficient delivery of maintenance services, which the Company believes strengthens its relationships.  Lupatech believes those factors constitute significant competitive advantages over other competitors in the segments in which operate.

Well-organized and skilled business structure in Brazil and abroad. Lupatech believes that is one of a small number of Mercosul suppliers capable of meeting the needs of customers in multiple regions throughout Brazil and Argentina due to sales and technical support staff and highly skilled, accredited suppliers and resellers.  In addition, it exports products to approximately 40 countries and has independent representatives in the United States, Europe, Asia and elsewhere in Latin America.  Due to the critical application of its products and services, believes the agility and effectiveness increase its appeal while consolidating its leading position.

Effective corporate governance practices.  Lupatech is listed on the Novo Mercado segment of the São Paulo Stock Exchange (Bolsa de Valores de São Paulo), or the BM&FBOVESPA.  The rules governing the Novo Mercado require high standards of corporate governance.  Prior to its listing, Lupatech had a history of private equity investors in its shareholder base, such as Bozano Simonsen Advent—Fundo Mútuo de Investimentos em Empresas Emergentes, CRP Caderi Capital de Risco S.A., GP Investimentos and the Natexis Mercosul Fund.  In addition, BNDES Participações S.A., or BNDESPAR, the investment company of the BNDES (Banco Nacional de Desenvolvimento Econômico e Social), is currently one of the shareholders.  Lupatech believes its relationships with these investors established a culture of transparency that focused on the creation of shareholder value, and facilitated its adoption of effective corporate governance practices that were consistent with the practices required of publicly-held companies.

Limited Exposure to Oil Price Volatility.  Lupatech’ business is related to the capital expenditure programs of its customers.  Although its revenues from the oil industry customers are directly affected by the volatility of international oil prices, the capital expenditure programs of these customers are not generally based on the price of oil.  Rather, the investments that these oil companies make in their infrastructure are driven by their maintenance and expansion needs.  In addition, the Company believes that certain of its customers have developed long-term strategies focused more on maintaining Brazil’s oil self-sufficiency over maximizing profit.  The fact that its activities are, therefore, linked to the more stable needs of its customers tends to limit its exposure to oil price volatility, which may affect other companies in the oil and gas industry.

Market Positioning

Lupatech has market leadership in most segments where is present:

  • In the manufacturing of valves in Mercosul for industrial applications, mainly oil and gas;
  • In the synthetic fiber ropes (polyester) for platforms anchoring;
  • Unique  Brazilian company in the oil and gas exploration tools sector;
  • Services supplier to the oil and gas sector;
  • In the production and global commercialization of VNG compressors;
  • Leading supplier in investment casting and powder injection molding for sophisticated clients, mainly automotive companies.
  • Tube Coating through the use of anticorrosion materials in tubes and equipments for oil & gas applications.

Lupatech is proud of the quality of its projects technological development, always anticipating tendencies and market demands. It is also proud of its sales team, that has built in the last 29 years strong relationships in Brazil and other countries, collaborating or the creation of strong brands in the market as “Lupatech MNA", “Lupatech CSL”, “Lupatech Tecval”, “Lupatech Oil Tools”, “Lupatech Esferomatic”, "Lupatech Oilfield Services",“Lupatech Oil & Gas Services”, “Lupatech Tubular Services”, “Lupatech Monitoring Systems”, “Aspro”, “Sinergás” and “Norpatagonica”. 
 
It is an innovative company that has its own center of research and development (CPDL). This initiative allows developing innovative products that created international patents, as the powder injection technology, where it was the first Company to develop this technology in Latin America.
 
Its quality control high standard levels in all units guaranties certifications from international agencies for its products and services. It is one of the few suppliers of valves for the Oil & Gas, rated as “Level A” by Petrobras (highest level), and was awarded in 2007 by General Motors as the “Worldwide Supplier of the Year”. 
 
Lupatech is well known by its clients, since it offers customized solutions in partnership with clients including assistance services in field, with high quality and important international certifications. The Company believes that its products are recognized by its high customization level, technological innovation and quality. It is a leader in Mercosul, in the production of industrial valves and equipments for fluid control and automation, mainly for the Brazilian oil and gas sector, and it is also a global leader in the production of polyester anchoring ropes. It is one of the few Brazilian companies supplying products and services for the Brazilian industry of oil and gas development and production. In the Energy Products Segment, for example, the polyester anchoring rope using the brand UltraSeven® and produced by Lupatech is the unique Brazilian brand in the market.
 

Strategy

Lupatech believes that the global oil and gas industry will continue to grow significantly over the coming years due to new energy-related investments announced by the major Oil and Gas companies, as well as by the need for industry participants to maintain their existing infrastructure to support the planned oil and gas production growth and to repair and revamp oil platforms and refineries. The main objective of the Company is to take advantage of opportunities associated with these investments in new reservoirs development and in replacement of equipment in the production phase. Moreover, the Company will try to consolidate the Latin American market of industrial valves, as well as to take advantage of other opportunities to grow and invest in complementary businesses and products. To accomplish these goals the Company plans to:

Consolidate the leadership position in the market through strategic acquisitions.  Participants in the segments in which operates in Latin America consist mainly of small and mid-sized, family-owned companies.  The Company believes this fragmentation represents an important opportunity for considerable growth through acquisitions.  It intends to continue transferring its technological and industrial know-how to the companies it acquires so that they can manufacture and market products at its same level of quality, productivity and profitability.  When opportunities arise in the market, it also intends to selectively acquire companies whose technology and/or products can be integrated into its production chain to position itself as a solution provider.

Enhance productive capacity through prudent investment. In line with its history, it is prudently investing in the expansion of its plants to increase capacity, productivity and ability to achieve economies of scale to enable it to respond to increased demand for its products.

Expand the product portfolio by developing new technologies and products. The Company is committed in maintaining its market leading position and to further penetrating its target markets by offering an increasingly comprehensive line of products and services, based on the new technologies and new products that develop to meet its customers’ evolving requirements.

Continued investments in operating efficiency and cost reduction.  The Company will continue to invest in the optimization and automation of its production processes and in new technologies that allow its costs to remain low relative to its net revenues and allow the Company to be competitive in international markets.


 

Last Update: February 14, 2011
 

 

 
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