Grupo IMSA, S.A. de C.V.

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Grupo IMSA, S.A. de C.V.

Avenida Batallon de San Patricio 111
San Pedro, Garza Garcia, Nuevo Leon 66269
Mexico
Telephone: (528) 153-8433
Web site: http://www.grupoimsa.com

Public Company
Incorporated: 1936 as Industrias Monterrey, S.A. de C.V.
Employees: 14,504
Sales: 21.21 billion pesos ($2.21 billion) (2000)
Stock Exchanges: Mexico City; New York (for American Depositary Receipts)
Ticker Symbols: IMSA; IMY
NAIC: 331111 Iron & Steel Mills; 331316 Aluminum Extruded Products; 332312 Fabricated Structural Metal Manufacturing; 332321 Metal Window & Door Manufacturing; 32614 Polystyrene Foam Product Manufacturing; 32615 Urethane & Other Foam Product Manufacturing; 33251 Hardware Manufacturing; 335911 Storage Battery Manufacturing; 444190 Other Building Materials Dealers; 551112 Offices of Other Holding Companies

Grupo IMSA, S.A. de C.V. is a Mexican-based holding company whose four subsidiary holding companies are engaged in diversified manufacturing in the United States and several Latin American countries besides Mexico. It is Mexico’s largest intermediate steel processor in terms of sales volume. The company also is the largest automotive starting, lighting, and ignition battery producer in Mexico, the largest producer of fabricated aluminum products in Mexico, and one of the largest producers of prefabricated steel and foam-insulated panels in North America. Extensive operations in the United States, Argentina, Brazil, Chile, and Venezuela have enabled Grupo IMSA to prosper despite the erratic performance of the Mexican economy.

Diversified Manufacturer: 1936-91

The company was founded as Industrias Monterrey, S.A. in 1936 and became known by its acronym (IMSA). A closely held company run by members of the Canales, Clairond, and Reyes families, it interacted with others in Monterrey, the dynamic center of privately owned manufacturing operations in Mexico. IMSA grew significantly as a steel processor during World War II and in subsequent years.

In 1972 Grupo IMSA began manufacturing sophisticated insulated polyurethane and steel sandwich panels for the Multypanel system of modular wall and roof components being used to meet many of Mexico’s building needs. Three years later, the company acquired Stabilit, S.A. de C.V., a company producing fiberglass-reinforced plastic panels. Beginning in this decade, the steel and plastic construction-products segment of IMSA—which included value-added steel-processing products such as culverts, guardrails, and steel strapping manufactured by the company since the 1950s—was separated from the steel-processing products segment and established as a separate business within the corporate structure. In 1978, the steel- and plastic-strapping business was incorporated into IMSA Signode, S.A. de C.V., a joint venture between IMSA and the Signode Division of Illinois Tool Works, Inc. Forjas Metalicas, S.A. de C.V. (Formet), a manufacturer of galvanized-steel products mainly for the construction of highways, was established in 1983.

The steel-processing division of IMSA began, in 1986, to produce Galvalume: zinc-aluminum coated sheets made under license from Bethlehem International Engineering Corp., becoming the first in Latin America to manufacture this product. In 1991 IMSA acquired Aceros Planos, the flat-steel division of Fundidora Monterrey, S.A., a company dating back to 1900. Fundidora Monterrey limited itself to making steel bars, rods, rails, wire, and structural profiles until 1956, when it opened Aceros Planos, which quickly became the mainstay of its production. The company fell deeply into debt in the 1970s, however, and was nationalized in 1982. IMSA purchased the Aceros Planos segment of this company with help from Duferco, a Swiss-owned service-center company, and Grupo Villacero, establishing a subsidiary named APM, S.A. de C.V. to operate the facility. The acquisition was especially important because it enabled IMSA to assure the availability, and control the quality, of hot- and cold-rolled flat-steel feedstock, the principal raw material for its galvanizing operations, at a reasonable cost.

Grupo IMSA entered the business of automotive batteries and related products in 1987, with the acquisition of Acumuladores Mexicanos, S.A. de C.V. (ACUMEX) and Acumuladores del Centro, S.A. de C.V. EBS de Mexico, S.A. de C.V., a producer of industrial batteries, was acquired the following year. In 1989 IMSA entered the aluminum extrusions business through the acquisition of Cuprum, S.A. de C.V. Through subsequent acquisitions and the establishment of new product lines, Cuprum became a leading manufacturer of fabricated aluminum products. In 1991 Cuprum acquired Davidson Ladders, Inc. and Davidson Manufacturing Corp., manufacturers of wooden ladders and distributors of all types of ladders in the United States, as well as part of the assets of Stapleton Ladders, a manufacturer of wooden attic stairways.

Further Growth in the 1990s and 2000

With the creation of the North America Free Trade Agreement imminent, Grupo IMSA began acquiring more U.S. companies. In 1993, it purchased Advantage Battery Corp., a U.S. distributor of automotive batteries, and also bought controlling interests in manufacturers of automotive and industrial batteries in Argentina, Brazil, and Venezuela. The following year it established Battery Master, a Mexican chain of retail outlets selling all kinds of batteries. At the end of 1994, IMSA acquired full control of Metl-Span Corp., a leading U.S. manufacturer of insulated steel panels for refrigeration chambers in which IMSA had taken a minority interest in 1986. The Metl-Span acquisition, together with the Multypanel subsidiary, brought IMSA into the global market for commercial referigeration equipment. And in 1995, the company acquired Tiendas Alutodo, S.A. de C.V., a Mexican chain of outlets selling aluminum products.

The peso devaluation of late 1994 led to a recession in 1995 that cut into Grupo IMSA’s profits. In 1996, however, revenues grew by 12 percent and net income rose more than fourfold, to a record 2.79 billion pesos (about $365 million). The company made its initial public offering on the New York Stock Exchange, raising $142 million in order to reduce dollar-denominated debt and make more acquisitions. Some of this money was also used to buy the remaining shares held by Duferco. By this time Grupo IMSA held 85 percent of the Mexican auto-battery market and was selling 5 million generic batteries a year in the United States, compared to 1.5 million in 1993.

During 1997, Grupo IMSA spent $12.1 million to buy Guatemala-based Industria Galvanizadora, S.A. (Ingasa), the largest producer of galvanized steel in the fast-growing Central American market. It also, through Stabilit, purchased, for $9 million, Glasteel, Inc., a Memphis-based subsidiary of Alpha Corp. that was producing fiberglass-reinforced plastic panels and steel strip. This acquisition completed a set of seven continuous coated-steel lines in Mexico and the United States, enabling the company to sell in markets throughout Latin America. Also that year, Grupo IMSA raised its interest in Empresas Ipac, S.A., a Chilean steel processor and manufacturer of prefabricated steel and foam-insulated panels, to 50 percent. The remainder of the company was acquired in 1999.

In 1998, IMSA Varco Pruden, S.A. de C.V. was established as a joint venture with Vareo Pruden International, Inc., (an indirect subsidiary of The LTV Corp.) for the design and fabrication of low-height metallic buildings for industrial and commercial applications in the Mexican, Central American, and southern U.S. markets. And three joint ventures, with Johnson Controls, Inc. and Varta, AG, were established to produce and distribute batteries throughout the Western Hemisphere. The production capacity of these joint ventures was the largest in Latin America for batteries. Also in 1998, Grupo IMSA and Emerson Electric Co. merged their ladder businesses, establishing a new company, Louisville Ladder Group. Interviewed for Chief Executive that year, Eugenio Clariond Reyes, IMSA’s CEO, declared, “We have been able to build our foreign sales and develop operations outside Mexico, which has been the most dynamic part of our growth in the last few years.” He added, “We are the largest producer of batteries in Argentina. We are the largest producer of insulated steel and polyurethane panels in the U.S. And we are the second-largest marketer of ladders in the U.S. and Canada.”

Empresas Ipac, the Chilean subsidiary, acquired a Chilean company producing insulated steel panels in 1999. In 2000, Stabilit formed a joint venture with Bayer AG to produce, distribute, and market polycarbonate plastic sheets, a product not manufactured in Mexico before. A new Formet plant in Monterrey began producing metal poles as a joint venture with Valmont Industries. Construction began of a new Industrias Monterrey coated-steel plant that was to include a continuous painting line and a coated-steel processing center.

Company Perspectives:

Grupo IMSA’s mission is to consistently meet the needs of its customers, offering products and services with the best quality, service, and price for the processing, construction, automotive and commercial industries, with the support of highly-qualified human resources and leading-edge technology, contributing to a sustainable development, the promotion of human values in business activities, and involvement with the communities where its subsidiaries operate.

During 2000, Grupo IMSA made a bid to purchase troubled Altos Hornos de Mexico, S.A. de C.V. (AHMSA), Mexico’s largest integrated steel producer. IMSA, which was AHMSA’s second-largest customer, offered to buy 60 percent of the company, but the terms were not acceptable to AHMSA. In 1999, AHMSA had sold a galvanizing and painting steel plant to IMSA for $105 million. Later in 2000, IMSA paid $355 million for the U.S. West Coast steel-processing operations of Australian conglomerate Broken Hill Proprietary Co. Ltd. These operations, which became Steelscape, Inc. and IMSA Building Products, consisted of Galvalume, galvanized steel, hot- and cold-rolled steel, pre-painted steel, and seven centers for processing galvanized and pre-painted steel sheeting.

Grupo IMSA in 2000

IMSA ACERO, Grupo IMSA’s holding company for steel-processing products, was, in 2000, Mexico’s largest producer of galvanized rolled flat steel and cold-rolled flat steel in Mexico. This company was manufacturing and processing steel in three Mexican facilities: Monclava, Monterrey, and San Nicolas de los Garza. The three other production facilities belonged to Ingasa in Guatemala City and Steelscape in Kalama, Washington, and Rancho Cucamonga, California.

IMSA Varco Pruden had a plant in Cienega de Flores, Mexico. Output of steel-processing products came to 1.8 million metric tons. These products included galvanized and pre-painted flat-steel products, galvanized steel shapes, cold-rolled flat steel, hot-rolled coils, and pickled and oiled hot-rolled steel. Coated and non-coated steel each accounted for about the same volume of production.

ENERMEX, the holding company for automotive batteries and related products, was believed to be the lowest-cost manufacturer of automotive starting, lighting, and ignition batteries in Mexico and the only automotive-battery producer in Mexico with recycling operations. Its products included the LTH brand, which had been in production since 1928 and was the best-selling brand of automotive batteries in Mexico. Its Mexican joint venture with Johnson Controls was operating six plants. In all, ENERMEX’s production came to 18.83 million batteries, of which 7.2 million were exported. The joint venture with Johnson Controls and Varta was operating a plant in Brazil. GES America was the name of the distribution network established by ENERMEX and Johnson Controls to serve medium and small clients in the United States and Canada.

IMSALUM was the holding company for aluminum and other related products. Its Cuprum subsidiary had three plants in San Nicolas de los Garza, Mexico, and one each in San Pedro, Garza Garcia, and Tlalnepantla. The Louisville Ladder Group had two plants in Kentucky and one each in Arkansas and Tennessee.

IMSATEC was the holding company for steel and plastic construction products for use in the construction and other industries. It was the largest producer of prefabricated steel and foam-insulated panels in Mexico. Other manufactures were translucent and opaque fiberglass-reinforced plastic (FRP) panels, galvanized steel products for the construction industry, steel packaging products, and plastic strapping. Inside Mexico, IMSATEC’s Formet subsidiary had plants in Ecatepec and San Nicolas de los Garza, while the Multypanel subsidiary had a plant in Cienega de Flores. Stabil America Inc. had a Tennessee facility, Metl Span had three plants in Texas and Virginia, and Grupo IMSA Chile had three: two in Santiago and one in Talcahuano. The Tiendas Alutodo chain had 23 retail outlets in Mexico.

Grupo IMSA’s net sales came to 21.21 billion pesos ($2.21 billion) in 2000, of which IMSA ACERO accounted for 54 percent, ENERMEX, 18 percent; IMSATEC, 14 percent; and IMSALUM, 14 percent. Foreign sales accounted for 34 percent of IMSA ACERO’s sales volume, 52 percent of ENERMEX’s, 54 percent of INSALUM’s, and 56 percent of IMSATEC’s. Grupo IMSA expected 50 percent of its total sales volume to come from non-Mexico markets in 2001.

Grupo IMSA’s net income was 1.56 billion pesos ($162 million) in 2000. The long-term debt came to 7 billion pesos ($729 million) at the end of the year. The Canales Clariond family group held 14.3 percent of IMSA’s capital stock in April 2001. The Clariond Reyes family group held 12 percent. Eugenio Clariond Reyes had been IMSA’s chief executive since 1976.

Principal Subsidiaries

ENERMEX, S.A. de C.V.; IMSA ACERO, S.A. de C.V.; APM, S.A. de C.V.; Industria Galvanizadora, S.A. (Guatemala); IMSA Building Products (U.S.); Industrias Monterrey, S.A. de C.V.; Steelscape, Inc. (U.S.); IMSALUM, S.A. de C.V.; Cuprum, S.A. de C.V.; Tiendas Alutodo, S.A. de C.V.; IMSATEC, S.A. de C.V.; Empresas Stabilit, S.A. de C.V.; Forjas Metalicas, S.A. de C.V.; Grupo IMSA Chile; Multypanel, S.A.; Metl-Span Corp. (U.S.); Bayer IMSA (50%); Enertec Argentina (50%); Enertec Brasil (50%); Enertec Mexico (51%); Enertec Venezuela (50%); GES America (50&); IMSA ITW (50.01 %); IMSA Varco Pruden (51%); Louisville Ladder Group (51%); Valmont Formet, S. de R.L. de C.V. (51%).

Principal Competitors

Altos Hornos de Mexico, S.A. de C.V.; Cale de Tlaxcala, S.A. de C.V.; Consorcio Industria Valsa, S.A. de C.V.; Gonher de Mexico, S.A. de C.V.; Hylsamex, S.A. de C.V.; Indalun, S.A. de C.V.; Productos Nacobre, S.A. de C.V.

Key Dates

1936:: Founding of Industrias Monterrey, S.A. (IMSA).
1972:: IMSA adds steel and plastic construction panels to its line of products.
1987:: The company begins making automotive batteries.
1989:: IMSA adds fabrication of aluminum products to its line.
1991:: The company begins producing flat steel for the first time.
1996:: IMSA makes its initial public offering on the New York Stock Exchange.
2000:: IMSA acquires U.S. West Coast steel-processing operations.