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Interview

with Marcelo Alves, General Manager, Flowserve Brazil

22.07.2010 / Energyboardroom

What was Latin America is a growing market for Flowserve; to what degree is Brazil driving this growth and how important is the market?

Currently, one of more important markets for Flowserve is Latin America. Brazil is one of the key markets in our strategy to expand our footprint in Latin America and our investments here as well as in Argentina and Mexico will support our goal to become a leader in the market. We want to be a leader for an equipment and service provider t in the region and all over the world. In Brazil also we will expand our offshore presence producing locally new products , providing aftermarket and using our strong portifolio and engineering capacity to improve our presence in offshoe market.

Considering the ongoing developments in Brazil as well as our history with Petrobras there is a large opportunity for growth in this market. We’re investing heavily in a new manufacturing site here in Rio de Janeiro to bring in more business and be able to build more products locally.

Globally, the oil & gas industry accounts for approximately 40% of Flowserve’s revenues; does it drive the business more so in Brazil?

Actually, in Brazil it accounts for 70% of all such as equipments, spare parts and services. Looking at Petrobras’ installed base, we represent more than 6,000 pumps installed in all refeniries/ terminals/ sites over the country. This large instaleed base supports our business now and for the future.

If you combine all of competitors they have less than half of Flowserve’s installed based in Petrobras.

How do you maintain this relationship with Petrobras as more competitors enter the market?

We’ve been in Brazil since 1941, before Petrobras even existed, our relationship is solid and has been improved thought the years. We have a very experienced sales force that have been working with them for last 35 years. Our relationship with Petrobras has been built around the engineering knowhow and understanding of their requirements right from where the projects begin.

Petrobras demands high local content and has strict quality requirements. We have also the expertise to meet this demand.

Many companies have noted the distinct difference between Petrobras’ engineering and sales divisions and what they’re looking for in a bid. How do you reconcile this issue?

We have a strong understanding of all Petrobras demands and requirements. Flowserve is prepared to serve Petrobras in domestic bids ( taking advantage of our local presence) and international bids ( taking advantage of our strong portifolio and worldwide engineering/manufacturing capacity)

The investments in Brazil’s gas infrastructure have increased steadily during the Lula Administration. With $70 billion set aside through 2014 by Petrobras for refining and transport, how much opportunity is there for Flowserve?

Part of our plans for the future are based on these opportunities, particularly in gas transportation. This past year, Petrobras expanded terminals in both Vitoria and here in Rio de Janeiro as part of the Plangas initiative to improve the refining and transport of gas. This was the first big investment in this segment and Flowserve has sold a whole system to Petrobras includeing 33 engineered vertical pumps .

Petrobras recognizes that we are the specialists for vertical pumps for some applications in gas production and for sure Flowserve will capture more jobs in the near future

What kind of capacity are you aiming to have in the new facility?

The plan is to triple our capacity in the new facility. We wil improve our manufacturing capacity using tecnology, improve our efficiency and we will build a testd stand capable to run high energy pumps at full speed.

Flowserve runs on a hub-and-spoke system so is this plant just to serve Brazil or all of Latin America?

The first step is to serve the domestic market but importantly its not only for Oil & gas market or off shore market, but for all markets. Our history in Brazil has been serving all markets including water, sewage, power and chemicals. We have 15,000 pumps in other markets than Oil and Gas. For instance, if you go to water stations in the major cities of Brazil such as Sao Paulo and Rio de Janeiro you will find our pumps.

The second step for our new site will be serving as a hub for Latin America for certain products.

Tripling capacity and adding on more shifts will also require a lot of human resources which is the hottest issue in Brazil at the moment due to the large increases in activity. How do you plan to retain the individuals you already have and then find more talent?

Over the last two years we have been increasing our headcount even through the crisis.

Now our focus is retention of our engineers and talents and we have been sucessful so far . We have one of the lowest turnorver in the company world wide and compared to Brazilian hot market . For the transition we have developed a separate strategy/plan. Our plan we will require to increase our workforce in 30-40%. This is a huge challenge bur our Corporate/ region and local HR are focused on this strategy.

How do you maintain safety and quality levels in the face of this growth?

Safety is a priority for Flowserve which is why the company has a very strong program that isn’t just on paper. We invest heavily in this initiative in all countries. The new site has been designed to meet all Flowserve and local safety requirements/laws.

Quality is also a very important issue . Our Quality system is very mature and we have qualfied people in all disciplines required by csutomers

How different would you say the Brazilian operations are to other Flowserve operations?

The business model is the same for engineered products wherever you go. The one thing that is different, in regard to the oil and gas market is that Brazilian oil & Gas market has a lot of different requirements which are very unusual and sets Brazil apart from other countries. We are the experts and now we are teaching and qualifying others Flowserves site to meet local requirements and at the same time understanding aborad customers demands

What do you think the rest of Flowserve can learn from these Brazilian operations?

In fact we are qualifying other Flowserves site to understand and produce according our local quality requirements mainly in Latin America. Brazil became a reference for this specially bids involving Oil & Gas market.

Currently, where does most of you business come from; upstream or downstream? Where do you see the potential in the future?

Today, downstream is our key market as Petrobras is investing heavily in new refinery , upgrades and expansions . And we are capturing a lot of business.

The upstream market looks promising and bas we have domestic and international bids so we are making a strategy to serve this market using both our domestic and international capabilities. We have product and the the next year a new site with much more capacity to invest on offshore market. Our plan includes new products and expand service capacity

As a manager that has been with the company for a number of years, what is a dream project that you would like to achieve?

Currently, my dream project is the new plant for two reasons. First, this is the most important greenfield investment for Flowserve internationally. Secondly Flowserve in Brazil has a nice opportunity to growth and allow the local team to play a very important role in the company and brazilian market. We will serve better the local market by bringing new product lines to Brazil and expanding our presence. This opportunity is unique.

What is the impression you would like to leave on these Brazilian operations and what do you want to accomplish?

We want increase our role as a key player in brazilian market as a leading equipments, parts and service provider. Our long and sucessful history of the last 70 years in Brazil deserves a bright future. Our people here are excited to see Flowserve growing more and they want to write the second part of our history in Brazil.

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