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Argentina's Madersol scales up on growth

Madersol looks to expand market share as Argentine economy shows signs of recovery.

By Charles W. Thurston

Published December 3, 2009
Fledgling paint and coatings manufacturer Madersol S.A., which already claims to hold six percent of the Argentine architectural segment, plans to invest $4 million to quadruple its current 500,000 liters per month capacity. The investment includes the recent purchase of a plant that can produce two million liters per day, according to Mauricio Pugliese, director of Madersol. The acquired plant is the third largest in the country.

Sales by the company, operated by brothers Cristián and Mauricio Pugliese are projected to hit $22 million this year, buoyed by the recovering Argentine economy. Exports to Uruguay added to sales this year, and initial exports to Chile and Peru are expected to begin next year. The company hopes that exports can grow to reach 50% of all sales, which will offer protection against foreign exchange pressures, according to Pugliese.

Among leading brands that Madersol markets are: Polacrin, a premium architectural line; Acurel, a professional architectural line; Maderin, a wood finishes line; and Sintecrin for acrylic and other synthetic formulations. The company also markets adhesives and paint-related chemicals.

Madersol hopes to move up from its rank as eighth largest in the architectural segment to compete with the largest players in the market over the next five years, Pugliese said.

Madersol relies heavily on advertising within entertainment venues, including soccer games and car racing. Maderin is one of the many lines carried by El Ferretero, the hardware retailer. Madersol also markets its products through direct Internet sales.

Growth opportunities in the Argentine paint and coatings market should rise in 2010 with expected economic expansion of 2.2%, compared with the contraction of 2.3% which has taken place this year, according to a consensus forecast by Latin Focus, which relies on projections by leading banks that follow the market.

One of the greatest limits to real growth in Argentina remains inflation, however, and the consensus for 2010 is an increase to 8.4% inflation from 6.6% this year. Pricing of products, costs of imported raw materials and foreign exchange variations with export markets will provide a challenge to Madersol. The dollar-peso exchange rate has moved to 4.0 pesos to one dollar from 4.2 pesos this year, according to Orland J. Ferreres & Associates.

While the Brazilian real has slid in value against the Argentine peso, the two countries are engaging in a foreign trade tiff. Argentina has restricted imports overall, and Argentine trucks have been blocked at the Brazilian border recently.

A restructuring of sovereign debt by the Argentine government now underway could help loosen the credit market for industrial borrowers in the country. The 2001 default by the Argentine government on $95 billion in bonds has frozen the country's ability to borrow abroad, in turn, limiting the potential for domestic lending.

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