Innovation for Mexichem emerged a decade ago from a mine in the central state of San Luis Potosi, where the Mexican chemical concern had the world's largest reserves of fluorite. The fluorite's quality was high, but it had some impurities. "We said, 'If we find a way to remove the impurities, we're going to see a great growth opportunity," Mexichem chairman Juan Pablo del Valle recalls.
A team of engineers went to work to solve "a question that seemed impossible because big chemical companies in the United States couldn't do it." But Mexichem engineers did find a solution, and their innovation cut Mexichem's costs by 90 percent, "detonated" growth and transformed the company." We were a company in fluorite that used to sell rocks," del Valle says. But "upon defining a strategy of vertical integration and synergies, we began to compete with our customer and ... become a supplier of value-added products."
That was the first step to becoming the successful multilatin Mexichem is today. Over the past decade, the company consolidated its position in the chemical industry in Latin America and emerged as a global player.
Sometimes, it's gone against the grain, such as its 2007 purchase of Colombian PVC pipe-maker Amanco. At the time, few Latin American companies were buying other companies in the region, and in effect, Mexichem paid a premium for growth potential in an emerging market. But Mexichem's bet paid off, and it has not been drawn into a bad deal, or allowed its balance sheet to be blemished.
The company has found ways to carve out profits from it core products of vinyl chloride and fluorine by lowering costs and adding value. Outlining a corporate vision and staying the course has helped too. "We have two (lines of business) that are easy to understand," del Valle says. "We don't move from these businesses."
Investors have understood the approach, or at least the company's record of stellar results: Mexichem's stock price has surged 400 percent over the past five years. A September bond offering raised $1.15 billion and was 16 times oversubscribed. "It's recognition of the company's track record, of which we're very proud," del Valle says.
Growth has characterized Mexichem since Antonio del Valle, Juan Pablo's father, became the controlling shareholder in 2002. More...