SAO PAULO, BRAZIL — Guiding a company to survive and grow in a country where the economic scenario constantly is being redefined requires know-how.
At Schemco Industria de Plasticos Ltda., a small Sao Paulo injection molder, business is doing all right in spite of bad omens from the faltering economy.
The 6-year-old, 45-employee firm serves customers in sectors that have been hurt badly by Brazil's currency devaluation, such as automotive, electronic goods and industrial equipment. Nonetheless, its sales increased 25 percent to a total of $4.5 million in 1998, concluding a 240 percent growth cycle in four years.
``Had it not been for the last quarter, when sales fell 20 percent, the result would have been much better,'' said Christian Schweikert, superintendent director.
For the present year, Schweikert forecasts a 5 percent growth rate. He said the positive prognosis is the result of the business strategy the company implemented in mid-1998.
``We are being quite aggressive with nonplastics materials. We expanded our product development from an average of six projects per year in early 1998, to 12 by year-end and 60 presently,'' he said.
Other steps include continuously training its work force, reinvesting 100 percent of profit in the firm and limiting the amount of business in the automotive area, which it considers barely profitable.
Currently, all high-performance materials used by Schemco — polycarbonate, nylon and others — are billed in U.S. dollars and most of them are imported. With the currency devaluation, Schweikert said, raw materials now represent 90 percent of production costs, vs. 55 percent before the Brazilian currency plunge.
Like several other molders in the market, Schemco has negotiated with a few of its suppliers for a lower dollar-exchange rate. That has allowed it to raise prices 5-25 percent — less than the 35 percent currency devaluation.
``We are caught in the middle of a sandwich. We purchase raw materials from multinationals who simply follow the dollar and sell parts to multinationals that don't admit price increases,'' Schweikert said.
In practice, Schemco adjusts its prices as much as possible, absorbing a few losses, consuming raw materials inventories, feeling the volume of sales go down and waiting for the currency to stabilize.
``Unfortunately, in the medium term, we will see domestic companies being acquired for petty cash, for they will generate unsustainable liabilities,'' he said.
``Experiencing crises is not anything really new for Brazilian businessmen, whereby they have considerable experience in this.
``However, since a healthy economy cannot exist when based on speculation, the only way out is through a policy that supports a country's most prized possession — its industry,'' he said, suggesting a focus on product quality, easy access to credit and a less-burdensome tax load.