Brazil’s Duratex announces R$2.5 billion in investments, changes name to DexCo

RIO DE JANEIRO, BRAZIL – Duratex building materials manufacturer, owner of traditional brands such as Deca, Hydra, Portinari and Durafloor, on Thursday, July 15, announced a major R$2.5 billion (US$490 million) investment plan for the 2021-2025 period, aimed at expanding its production capacity of wood panels, ceramic tiles, bathroom fixtures and fittings.

Most of the resources will be invested in the Deca Division (vitreous china and metal fittings), which will be allocated R$1.1 billion. Next in line are the Ceramics division, with R$620 million, and Wood, with R$500 million.

Another R$100 million will be spent with the acquisition of a minority stake in building materials retailer ABC da Construção, a transaction disclosed to the market yesterday. The plan also provides another R$100 million for the creation of a fund to acquire startups.

“We are preparing for a new investment cycle. The goal is to always grow,” says Duratex’s CEO Antonio Joaquim de Oliveira. “All our plants, in all our divisions, are operating at full capacity. This is the most evident sign that we need to increase capacity,” he explains.

The executive further said that he is optimistic with the construction, architecture and decoration sectors in the next two to three years at least. “There is a set of favorable factors for these businesses.”

Oliveira highlights that the low interest rate scenario, despite the escalation of the SELIC rate, will continue to favor purchase, building, and renovation loans. There is also a large number of construction sites to be opened as a result of the residential building launch boom.

Finally, people have been valuing their own homes more since the pandemic hit, and are more inclined to renovate and redecorate as they spend more time indoors. “Housing appreciation is a global phenomenon,” the CEO points out.

Distribution of funds

The vast majority of investments will be allocated to expanding capacity by modernizing plants and overcoming bottlenecks. The plan includes the construction of a single new plant for the production of ceramics, in Botucatu (SP). The new unit will cost R$600 million and will represent a 35% increase in capacity, equivalent to 42 million m2 in floor and wall tiles.

The city was chosen for its closeness to São Paulo, Brazil’s largest materials consumer market, as well as for its easy access to raw materials and natural gas sources. The ceramics segment will also be allocated R$20 million to upgrade the other four plants located in Santa Catarina.

In turn, the Deca Division will increase its metal production capacity by 35% by 2024, with an investment of about R$600 million, while the ceramics line will increase by 30% during the period, through an investment of approximately R$550 million. The funds will be used to purchase equipment, process automation and to enlarge the warehouses in the São Paulo and Jundiaí plants.

Some R$90 million will be invested in the Wood Division to increase panel production capacity by 10% until 2023; and R$180 million in three new panel coating lines, increasing capacity in coated products by 45%, with a higher margin.

The largest portion of the Wood Division’s investment, R$240 million, will be used to expand Duratex’s forestry base in the Northeast Region, from the current 12,000 to 40,000 hectares by 2026. “These planted forests can be used in the future to build a new panel factory, feed an energy project, export wood chips or increase our future production of soluble cellulose. Investment in forests is virtually an option purchase,” Oliveira says.

As part of its investment plan, Duratex also announced the purchase of a minority stake (the percentage has not been disclosed) in retailer ABC da Construção for R$100 million. The company sells building materials both online and in physical stores – there are 93 units in Minas Gerais, São Paulo and Rio de Janeiro, with 15 distribution centers and services to 350 cities, with deliveries within 48 hours.

Duratex was already a part owner of ABC, according to Oliveira. The investment will allow the group to closely understand the digitalization of retail materials. Duratex will have a seat on ABC’s board of directors, but will not take part in its daily management.

Finally, the plan also includes the creation of a R$100 million fund to buy stakes in startups. The goal is to invest in innovative businesses that can help the group identify opportunities for gains in revenue, productivity and eventual deeper disruptions in its activities.

New image

The company also announced a major change in its identity. Henceforth, it will be called DexCo. The aim is to create a name that reflects the conglomerate the company has become, with operations in various segments. The name Duratex has been used since the company was founded, 70 years ago, and was confused with its wood product line.

With the new name, the ticker of the shares traded on the Stock Exchange will also change. As of August 19, it will be DXCO3 instead of DTEX3.

Source: Exame

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