Can you explain how Química Anastacio’s strategy during the pandemic has helped the company as demand for chemical products has increased?

The non-durable market represent approximately 60% of Química Anastacio’s sales, where we supply to the beauty and cosmetics, homecare, pharmaceutical, food, animal health and nutrition, and agricultural segments. These segments continued to be strong throughout the pandemic, especially homecare care as people were investing more in cleaning products. On the other hand, the durable market (including paints, rubbers, plastics, and lubricants) dropped by approximately 70% when the pandemic started in 2020. Due to less sales and more inventory on hand, we had to rent extra warehouse space.

At the same time, commodity prices decreased. If commodity prices go down, you need to get rid of stock quickly and buy back at a cheaper price. Although we could not get rid of all our inventory at the time, Química Anastacio took the decision to go to market and start buying at the lower commodity prices. By August 2020, the economy had already started rebounding, which benefited us as we had a large inventory and could supply the increased demand where others could not. As a result, we increased our market share in 2020 and came into 2021 very strong.

Which countries and markets in Latam have performed well in 2020 and 2021 for Anastacio Overseas?

Anastacio Overseas has been increasing its presence throughout Latin America in recent years, and today we are selling to almost all countries in Latin America. The country which has seen the highest increase in sales is Mexico, as we entered this market in 2016 and started investing more in this country in 2020 by establishing a local team. Colombia is a market we are also looking closely at with a view to further expansion.

In terms of market segments, sales for paint and polyurethanes markets have been particularly strong.

How has the company dealt with supply chain disruptions and increasing logistics costs?

I believe that no one expected the chaotic logistics scenario we are currently facing, and most in the industry thought that it would be normalized by now. Currently there is an increased demand for products, but a limited availability of freights. A strong differential of Anastacio is that we have a very strong freight transport department. Previously, we were buying one third of our products FOB (Free on Board), but we now buy two thirds FOB. We are using our strong structures within our transport department and leveraging on our longstanding relationships with shipping companies to keep to a punctual schedule of shipments and deliveries.

Do you think the challenges faced by the industry could lead to more consolidation in the chemical distribution space?

Smaller companies are struggling due to a lack of warehousing or liquidity, which creates the opportunity for bigger players to increase their presence in the market or team up with other players to continue successful business. Consolidation was already becoming a reality due to capital for scaling, negotiation power when purchasing, and offering complete solutions to the customer, but supply chain disruptions and logistical challenges have made consolidation now even more appealing and necessary.

What are the main similarities you see between operating in Brazil and the other Latam countries?

In 2021, Química Anastacio is celebrating an 80 year presence in Brazil, so it is the country we know best. Anastacio Overseas was established in 2016 and we established a presence in Argentina in 2018. The Latin American countries we operate, including Brazil, all of them have unstable economic environments, complex tax regimes, and great fluctuation of exchange rates. On the other hand, they all place a lot of value on personal relationships. What differentiates Brazil is that the country has a very modern banking system compared to other countries in the region.

Have governmental reforms in Brazil started to improve the business climate in the country?

Since 2017, some important reforms have been made in terms of labor, government expenditure and administrative spending limits, but in a much slower rhythm than expected. Currently we are seeing to different scenarios: one very positive, with economy recovering, strong improvement in Covid indexes and historical record of IPOs; and one negative due to political instability and strong opposition to the government, reinforced by the polarization expected to the 2022 elections.