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Weekly UpdatesMexican glass giant Vitro is getting back to basics. The Monterrey company, founded in 1909 to supply bottles for Mexico's beer industry, is shedding subsidiaries to focus on glass products, from cutting-edge wine bottles to construction, as it pays down more than US$1 billion dollars in debt.
In the past two years, Vitro has sold its interests in electric appliance, plastic and glass-fiber businesses. Simultaneously, it has taken on new glass projects around the globe and pumped up glass exports by 15% in the first quarter of 2004.
"Vitro is one of the world's best glass companies. That is what we do best," says Vitro CEO Federico Sada. "That is why we have divested assets in non-core businesses and focus our attention and resources into making flat glass, glass containers and glassware of the highest quality at competitive prices." Vitro's divestments improve its financial profile, Sada says.
Vitro's subsidiaries have operations in Mexico, the United States, Guatemala, Costa Rica, Bolivia, Colombia, Spain and Portugal. The Iberian subsidiaries, where Sada sees the most growth, focus on the construction industry. Recent projects with Vitro include the Universal Culture Forum in Barcelona and the expansion of the Reina Sofia National Art Museum in Madrid. "We are confident that we can continue to leave our mark in world architecture icons," Sada says.
As Vitro sets its global glass ambitions, the sell-off of its other businesses continues apace. Vitro in April sold its 60% interest in the fiberglass company Vitro Fibras to U.S. fiberglass manufacturer Owens Corning for $71.5 million. Owens Corning already owned the other 40% of the company.
In 2003, it sold Envases Cuautitlan, a plastic container manufacturer, for $18 million to Phoenix Capital of the United States. Phoenix--controlled by Midway Capital, Citicorp International Finance and Santander Central Hispano Bank & Trust--makes rind packaging and disposable products in Latin America for Nestle, Parmalat, Kraft, Unilever and others.
Vitro is also looking to sell plastics maker Bosco and aluminum-can producer Vancan. These businesses are profitable, so the company won't sell unless it gets a good offer, says Antonio Ocaranza, Vitro's director of institutional relations and communication.
The company, which had a debt of $1.4 billion at the end of 2003, has battled a sluggish economy and slow sales. It has also faced tough times with the weather. Sales for the glassware division declined 8% in 2003, due in part to a longer-than-usual rainy season in Mexico. "When it's cold and rainy, people don't drink as much beer," Ocaranza says.
To extend and reduce debt, the company in April secured a $75 million syndicated loan, led by The Bank of Montreal and Mexico's Banamex. "This transaction is evidence of the financial initiatives we're committed to, and will continue to pursue as part of our ongoing efforts to improve Vitro's capital structure," Vitro CFO Alvaro Rodriguez said in a statement.
New growth. So far, 2004 is looking positive for Vitro, thanks to recovering U.S. and Mexican economies. The company marked its first growth in two years in the first quarter. Consolidated net sales in the period rose 4.2% from the same quarter in 2003 to $547 million, Vitro said. Net income in the first quarter of 2004 was $32 million.
Vitro units make everything from car windshields to perfume bottles, and the glassmaker is one of the major suppliers of bottles for Mexico's beer and tequila industries. "I think that what [Vitro] is doing is the same as other companies at its level--returning to the basics and refocusing on what is without doubt its greatest strength," says Miguel Cedeno, plant director for Mexican tequila maker Casa Herradura.
Vitro recently expanded its relationship with Casa Herradura, which for decades has counted on the glass company to make bottles for its brands. The new deal gives Vitro label-making and filling responsibilities in addition to crafting the bottles.
Vitro's flat glass division provides car windshields for car makers such as Ford and General Motors, both of which extended contracts with Vitro last year. Vitro in 2003 signed a five-year contract to make wide-mouth jars for Fort Worth pickle company Best Maid Products, which also makes dressings, mustards and sauces.
Glass products pop up all over, to Vitro's advantage. When Napa, California cork-maker Gardner Technologies came out with a wine cork last year that doesn't require a corkscrew, it hired Vitro to design the bottle.
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