What is the secret of Weg, the ‘billionaire factory’?

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Of the 33 new Brazilian billionaires, according to the most recent list released by Forbes magazine, almost a third – ten – are linked to the Santa Catarina industrial giant Weg. The family business, founded by three German descendants in 1961, now has 13 heirs in the select billion club. This rise is related to the impressive appreciation of the company’s shares in the last 12 months, which exceeds the 240% mark and raised its market value to more than R $ 150 billion.

But what, after all, is Weg’s secret? The company has long been considered a safe investment, due to its solid and constant results, but in the past year the financial market has awakened once and for all to its predicates. Despite the new coronavirus pandemic, Weg’s role rose 120% this year, according to Economatica, leading the list of companies with the highest appreciation on the Ibovespa, B3’s main stock index, the São Paulo Stock Exchange.

The inclusion of the founders’ heirs in the list of billionaires is justified. Despite being listed on the Stock Exchange since 1971, almost two thirds of Weg continue to belong, directly and indirectly, to the family of Werner Ricardo Voigt, Eggon João da Silva and Geraldo Werninghaus (the three who have already died). Initially created as Jaraguá Electromotor – reference to Jaraguá do Sul, a city that still houses its headquarters -, a few years later the company received its current name, Weg, taking advantage of the initials of the founders’ names. Weg also means “way” in German.

Weg is constantly cited as an “oasis” of prosperity in the increasingly battered Brazilian industrial sector. In a recent interview with Estadão, the president of Itaúsa, Alfredo Setubal, classified the company as an “outlier” – a point outside the curve. Recognized in terms of organizational culture, human resources and innovation, Weg has benefited from a confluence of positive factors amid the turmoil of covid-19.

According to analyst Thais Cascello, from Itaú BBA, the company showed resilience to the crisis in the second quarter as it benefited from the performance of the international business, especially in “long cycle” products, such as engines for industries and power plants. With 61% of the revenue raised outside the country, the company saw its revenue in reais inflated by the recent surge in the dollar. Result: cash generation reached R $ 732 million, up 36% compared to the same period in 2019.

In a recent report, Itaú BBA redoubled its bet on this positive cycle for the results of the third quarter. The bank places Weg as a likely leader in earnings between July and September and mentions that the company may break records in the period. This is because other favorable factors are added to the situation of the previous quarter. “Sales of Weg’s short cycle products, such as engines for white goods and paints and varnishes for the construction sector, appear to have had a ‘V’ recovery,” explains Thais.

Trajectory

And to think that it all started with three old cars. The founders of Weg started the company with a capital equivalent to three Beetles – each entered a capital that, at the time, bought a unit of the most popular of automobiles in Brazil. The company has already started making engines – one of the flagships in its portfolio to this day – and, even in the midst of the Brazilian economic miracle, it started exporting in 1970.

The first steps were taken in neighboring Argentina and Paraguay. Gradually, the experience has spread to other regions, gaining speed since the 2000s. By the end of 2019, the company had 58% of its business outside the country. In addition to selling products manufactured here, the company opened industries in more of a dozen markets, with China and Mexico (responsible for serving the US market) as the most relevant. Today, Weg has 30,000 employees worldwide, 12,000 of which are in Brazil.

President of Weg for 12 years, Harry Schmelzer Júnior has worked at the company since 1980. The executive explains that the company owes much of what it is today to international operations: this bet has not only opened up new markets, but – more importantly – has given Weg access to knowledge and technologies that did not exist here.

“We knew that, in order to fight with our competitors, we needed to have a product of global quality”, says Schmelzer Júnior. He recalls that the company invests 2.5% of its annual net revenue in research and development.

Another characteristic of Weg, according to analysts, is the consistency of the operation. And this is reflected in a long-standing executive team that, like the current president, was created at home. In 59 years, the company had only three presidents: co-founder Eggon João da Silva, his son Décio da Silva and, now, Schmelzer Júnior. “Of all my international executives in the industrial area, in these 40 years of Weg, only one resigned to go to work elsewhere”, is proud Schmelzer.

And what keeps the team motivated? According to “your” Eggon, killed in 2015, are the opportunities. To generate challenges and innovate, he preached that the company could not be restricted – it should always seek to grow and open borders. “Innovation does not come from the machine, it comes from people”, he used to say. The information is from the newspaper “O Estado de S. Paulo”.

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