Mexico City — Rotoplas SAB de CV has agreed to sell its water storage production operation in Brazil for 42 million Brazilian reals ($7.74 million) saying the unit's financial performance "is below the company's target."
The buyer is Avanplas Polímeros da Amazônia Ltda. of Manaus. The transaction will become effective May 1 through a business unit transfer agreement, signed April 29, Mexico City-based Rotoplas said April 30. Avanplas makes thermoplastic compounds.
Rotoplas will maintain a presence in Brazil but will concentrate on developing its service platform through water treatment and recycling plants, a business it started in 2019, it said in a news release.
CEO Carlos Rojas Aboumrad said the deal will contribute to "improving Rotoplas' return on invested capital."
On April 22 Rotoplas, which operates in the Americas only, said its net first-quarter sales for 2020 sales were up 2.2 percent vs. those of the corresponding quarter in 2019, reaching 1.98 billion pesos ($83 million).
"This was driven by double-digit growth in the United States, Central America and Mexico, offsetting lower revenues in Argentina, Peru and Brazil," the company said.
Product sales, which represent 93 percent of total sales, grew by 1.5 percent in the quarter, driven by the storage category. The company's products include water tanks, filters, purifiers, pipes, heaters and drinking fountains.
Gross profit increased by 5.1 percent and the gross margin showed an expansion, due to lower raw material costs and "efficiencies achieved in manufacturing processes."
According to Rojas, Rotoplas operations in Mexico, the U.S. and Brazil have continued uninterrupted during the COVID-19 pandemic. He described operations in Argentina and Central America as "intermittent" and irregular and said they had been suspended in Peru since March 16.
"As a 100 percent client-oriented water solutions company, Rotoplas has played and will continue to play a key role in tackling this [COVID-19] crisis," Rojas said. "Ensuring the availability and quality of water is paramount, now more than ever."
In most of the locations where Rotoplas operates, the authorities "have authorized us to continue or resume operations as our activity has been recognized as essential," Rojas added.