Vidrala S.A.

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Vidrala S.A.

Barrio Munegazo 22
Llodio
E-01400
Spain
Telephone: +34 94 671 97 10
Fax: +34 94 671 97 17
Web site: http://www.vidrala.com

Public Company
Incorporated: 1965 as Vidrieras de Alava S.A.
Employees: 642
Sales: EUR 147.17 million ($157.5 million) (2003)
Stock Exchanges: Bolsa de Madrid
Ticker Symbol: VID.MC
NAIC: 327213 Glass Container Manufacturing; 423840 Industrial Supplies Merchant Wholesalers

Vidrala S.A. is the second largest producer of hollow glass containers in Spain and Portugal, and is the largest independent producer in those markets. Based in Spain's Basque regions—where the company is close to the main wine-making regions of Spain and France—Vidrala produces some 600 different products spanning the wine and fruit juice sectors, as well as the soft drink, beer, other alcoholic beverages, preserves, vinegar, and related market segments. The company is also Spain's leading manufacturer of bottles for olive oil. Part of Vidrala's success has been a longstanding commitment to investment. In an industry where market share and sales growth are directly related to capacity, Vidrala has made steady increases in its production capacity since the mid-1980s. The company now operates a total of five furnaces in Spain, including three at the main Vidrala headquarters site in Llodio, the state of Alava, and two at subsidiary Crisnova's plant Caudete, in Albacete. Together, these plants give Vidrala production levels of more than 450,000 tons per year in Spain alone. Since 2003, Vidrala also has extended its operations to Portugal, where it acquired glassmaker Ricardo Gallo, in Marinha Grande. That acquisition boosted Vidrala's total production past 600,000 tons per year. The addition of Gallo also raised Vidrala's profile in the Iberian market, giving it a 20 percent share of the hollow glass market. Vidrala is listed on the Bolsa de Madrid and is controlled by the Delclaux family. In 2003, the company posted sales of EUR 147 million ($157 million).

Making Glass in the 1960s

Originally from the village of Galgan, in France's Pyrenées mountains, the Delclaux family had been involved in Spain's glassmaking industry for more than 100 years prior to the founding of Vidrala in 1965. The founder of the family's Spanish branch was Louis Delclaux, who, at the age of 20, immigrated to Spain in 1840. Delclaux settled in the town of Llodio, in the Alava region, and became one of the first to use the region's peat deposits to fuel a high-temperature furnace. Delclaux quickly became one of the region's most prominent industrialists.

The family's introduction to the glassmaking industry came through Delclaux's son, Isidoro Delclaux Ibarzabal, born in 1858, who made use of the family's furnaces to extend its production from metals to glass. Delclaux interests in particular went toward the production of flat glass for the growing photographic market. Delclaux also established La Verdad, a distributor of the family's and others glass and metal products. The next generation of Delclaux, Isidoro Delclaux Aróstegui, born in 1894, continued to build up the family's business.

By the second half of the 20th century, the Delclaux family's holdings encompassed a variety of glass and related companies, such as Vidrieras de Arte, Vidrieras de Llodio, Valca, Argón (later known as Praxair), Delta Eléctrica, Financiera Española, Tuvos Reunidos, and others. Another of the family's holdings was Vidrieras de Alava, under which was grouped the company's flat glass operations.

Founded in Llodio in 1965, Vidrieras de Alava brought the family into the production of glass bottles. The new company built its first furnace, and launched production in 1966. Total annual output at the new plant stood at just 25,000 tons per year.

The company quickly expanded its range of bottle types from an initial set of 12 as its production increased to meet the strong demand for bottles in the period. Vidrieras de Alava also turned early to the foreign market, launching exports in 1967. The French wine industry became a particularly important market for the company, and Vidrieras de Alava supported its international growth with the construction of a second furnace at the Llodio site.

The company's proximity to France's wine growers helped its own growth over the next decade. This was particularly true given the relatively high costs and complexities of shipping glass bottles, and glass in general. Profits depended strongly on reducing the costs of transporting bottles, which in turn encouraged the development of a predominantly local, fragmented glass industry in Spain and throughout much of Europe.

In 1977, however, the company introduced a new range of bottles based on its development of lightweight glass. This technological development enabled Vidrieras de Alava to emerge as one of Spain's top bottle makers, and the company's sales expanded nationwide. The company continued to invest in developing new technologies and in 1981 began converting its furnaces with new energy savings technology. This enabled the company to slash its operating costs by some 50 percent. In that year, as well, the company changed its name to Vidrala.

Continued investment in improving and expanding its production capacity enabled Vidrala to gain an increasing share of the Spanish bottle market during the 1980s. In 1985, Vidrala went public, listing its shares on the Bolsa de Madrid and Bilbao stock exchange. The Delclaux family, which had sold its flat glass manufacturing operations to the United States' Guardian Industries that year, nonetheless retained control of Vidrala.

The public offering enabled the company to invest in its first expansion beyond the Basque region, with the creation of a subsidiary, Crisnova, in Albacete in Spain's southeast central region. Construction began on the new company's facility, with a state-of-the-art furnace. When production began in 1989, the Albacete plant featured among Europe's most modern glassmaking facilities. The Crisnova site added production capacity of 95,000 tons per year to Vidrala's Llodio plant's 130,000 tons per year.

By the early 1990s, Vidrala had claimed the number three spot among Spain's glass bottle manufacturers with a 14 percent market share. It was also the only glass bottle maker in the Basque region, giving it leadership status at home. While the overall glass industry grew only slowly during the economic difficulties at the beginning of the 1990s, Vidrala's technology investments and proximity to key markets enabled it to outpace its competitors. After a drop in sales in 1992, the company rebounded, with revenues nearing ESP 10 billion in 1993.

Investing in Leadership for the 2000s

Vidrala continued to gain despite the lingering recession into the mid-1990s, in part by leveraging its location in the Basque region to step up its exports to France. By then, France represented nearly 25 percent of Vidrala's sales. The company's plants also were operating at full capacity as the European market experienced a shortage in hollow glass.

Vidrala quickly recognized the potential for rapid market share gains to be had through an increase in its production. This led the company to construct a third kiln at the Llodio plant in 1995. Production at the new kiln was underway by the end of that year, adding full production potential of 110,000 tons per year. This brought the company's total production capacity to 340,000 tons per year. The boost in production enabled the company to post strong increases in its sales—in Spain, its sales rose by 18 percent by 1996, while in France, Vidrala marked a sales increase of 51 percent. The company ramped up to full production at the new kiln in 1997.

By then, the company had begun plans to expand its capacity again, this time through its Crisnova subsidiary. In 1998, the company launched construction of a second kiln at the Albacete site. Designed to add another 110,000 tons per year to the group's total output, the new kiln was brought online by mid-1999. The increase in production, to 450,000 tons per year, enabled the company to post strong revenue gains, with sales topping EUR 114 million in 1999, and rising to EUR 126 million by 2001.

Company Perspectives:

OUR ADVANTAGES: Excellent location with quick and flexible supplies. Adaptability to the demands of our markets. Leading Spanish independent glass-manufacturing group. Quick response and personalised attention. Creation of standard and personalised models via our Department of Design and R&D&I.

Key Dates:

1965:: Vidrieras de Alava is created by the Delclaux family in Llodio, Spain, in order to produce glass bottles; the family's flat glass manufacturing operations also are incorporated.
1966:: Production begins at the first kiln.
1967:: The company first exports sales to France.
1977:: Lightweight glass bottles are launched.
1981:: The company changes its name to Vidrala.
1985:: Vidrala lists on the Bolsa de Madrid and Bilbao stock exchange; the flat glass operations are sold to Guardian Industries; a new subsidiary, Crisnova, is created in Albacette.
1989:: The first Crisnova kiln begins production.
1995:: The company installs the third kiln at the Llodio plant.
1999:: The company launches production at its second Crisnova plant.
2003:: The company acquires Ricardo Gallo of Portugal, increasing production capacity to 600,000 tons per year.
2004:: A EUR 25 million investment program is launched in order to expand capacity in Spain and build a new central warehouse in Portugal.

The European glass market remained highly fragmented into the 2000s. Yet the first signs of a consolidation of the market—similar to that of the United States, which resulted in the creation of just three dominant groups in the 1980s—had begun to appear. Although a major player in the Spanish market, Vidrala remained tiny in the overall European market. The company was forced to seek means of gaining critical mass in order to protect its domestic position. As it moved toward the mid-1990s, the company began considering its options, such as extending its reach beyond Europe and into the Latin American or North African markets. The company also had the option of allowing itself to be acquired by a larger group.

Yet Vidrala's first external expansion effort kept it close to home. In 2003, the company reached an agreement to acquire leading Portuguese-based bottle maker Ricardo Gallo. Based in Marinha Grande, Gallo had been founded in 1899, and, with two kilns of its own, had built up an annual production capacity of 150,000 tons. Gallo also operated five warehouses located throughout Portugal. The merger of Gallo's operations into Vidrala gave the Spanish company control of 20 percent of the Iberian Peninsula's glass bottle market, and the second place position in Spain itself.

In 2004, the company launched a EUR 25 million investment program. Approximately EUR 15 million was earmarked for improvements at the Llodio plant, particularly in expanding the third kiln's production capacity by 10 percent in order to meet rising demand. Vidrala also began construction of a new, centralized warehouse in Portugal in order to replace Gallo's previous warehouse network. Vidrala, which had earned a reputation as the most efficient glass bottle maker in Europe—and one of the most efficient in the world—remained true to its longstanding commitment to investing in its growth.

Principal Subsidiaries

Crisnova S.A.

Principal Competitors

Ball Plastic Container Div.; Groupe Danone; Schott Glas; Owens-Illinois Inc.; OSRAM GmbH; Saint-Gobain Container Inc.; El Nasr Glass and Crystal Co.; Saint-Gobain Cristaleria S.A.; Rexam Beverage Packaging AB; Arc International.