For CEO of WEG, Brazil will be an investment destination – 09/29/2024 – Market

Brazil is in a good moment, especially to receive investments that meet the demands for energy transition, says Alberto Kuba, CEO of WEG, a Brazilian electrical equipment multinational that has become one of the most successful national industries on the global stage.

“Given the renewable energy matrix, it is an excellent player for attracting investments. And there is also this new movement that is artificial intelligence, demanding more and more energy. Brazil is far ahead, with very little dependence on thermal plants”, he states the 44-year-old executive, who started as an intern 23 years ago and took over the conglomerate in April this year.

To take advantage of the green transition wave, the company outlines four priority fronts: energy efficiency, electric mobility, renewable energy and operational efficiency.

Founded 63 years ago in Jaraguá do Sul, in the interior of Santa Catarina, WEG currently operates in 135 countries and employs 40 thousand people, growth that Kuba attributes to the competitiveness generated by radical verticalization: the company even manufactures the yarns and dyes used on your machines.

With impressive financial performance — revenue of R$9.2 billion in the second quarter of this year and Ebitda (earnings before interest, taxes, amortization and depreciation) of R$2.1 billion, 15.7% higher than in the same period Last year, the group also became known for the number of billionaire heiresses: 19 descendants appear on the Forbes magazine list.

WEG announced R$670 million in Brazil and Mexico. What does the company expect from this investment?
We try to be as vertical as possible, producing everything in-house. In Mexico, the only thing missing was a wire drawing machine. Let’s make wire for our electric motor and transformer businesses.

The transformer business is growing a lot around the world. And then we start to have difficulty climbing, [há] a concern whether suppliers can keep up with growth.

Is there a concern about stopping due to lack of supply?
WEG is a company founded in 1961, in Santa Catarina, in the interior. The supply of raw materials was complicated. The founders focused a lot on verticalization.

They started making cast iron, wire drawing. On this journey, we began to manufacture our own paint, our own varnish. We have wood plantations, forests to use wood to make packaging.

Until the 2000s, WEG only had factories in Brazil. In Mexico, [no início] It was a small factory and we sent a lot of components from Brazil. Today it is our largest operation outside Brazil and we lacked a yarn factory.

Verticalization is expensive, you have to invest a lot of capex [despesa de capital]. When volumes reach a certain amount, it is worth investing. And this is the moment, WEG México has grown a lot, it is serving North America.

In the energy generation, transmission and distribution segment, the United States is demanding a lot of energy, whether due to the need to renew the industrial park or due to the energy transition.

And we have two more investments [nos R$ 670 milhões]. One is also the expansion of our wire unit in Itajaí (SC), precisely to keep up with the increase in capacity for transformers, one of the fastest growing markets. Our cable and wire production capacity has reached its limit.

[O investimento inclui também a ampliação da fundição em Guaramirim, Santa Catarina, e a modernização de maquinário, estimados em R$ 135 milhões.]

Brazil is often cited as risky to invest in. Mexico is experiencing an energy crisis. What is the scenario seen by WEG for these markets?
When we look at it from an energy perspective, Mexico is many years behind Brazil. There is no free market, the government has limited renewable energy. Although it has all this difficulty, it is much more competitive. Placing a plant in the United States is very expensive.

To sell in the United States, Mexico is now the largest exporter to the American market. It is very strategic to place a factory in Mexico. This business of transformers and large equipment requires a lot of labor, they are large equipment and cannot be automated.

But WEG always invests in Brazil. In 2022, it invested R$1.180 billion, of which R$600 million was in Brazil. This year, we budgeted to invest R$1.9 billion, R$1.1 billion in Brazil.

In 2001, 70% of WEG’s revenue was in the country. Last year, it had revenues of R$32.5 billion.

Brazil has a lot of water, spectacular sunshine in many regions, no earthquakes, no typhoons. And we have wind. Given the renewable energy matrix, it is an excellent player for attracting investments that require a lot of energy.

And there is still this new movement that is artificial intelligence, demanding more and more energy. Brazil is far ahead, with very little dependence on thermal plants. We believe, at WEG, that Brazil will increasingly become a destination for international investments.

Around the world, there is a lot of talk about opportunities linked the transition energy and decarbonization. How does this fit into the company’s strategy?
We see four fronts. The first is energy efficiency. WEG has been positioning itself to be a reference in higher efficiency products.

Another front is electric mobility, we are both involved in charging stations, but also manufacturing engines, speed controllers, transmissions and battery packs for buses and trucks.

The third is related to renewable energy. WEG has been working very hard to provide solar energy, hydraulic energy, wind energy and biomass solutions. We are doing very well in all these businesses.

The fourth and final development we call operational efficiency. For example, I have a gas oven here and I’m going to electrify it. When you do this, you can also digitize, put in place control systems to know when you are using, when you are wasting energy, manage that asset. WEG takes these two paths, helping with electrification and digitalization.

WEG purchased Volt, in Türkiye, which manufactures electric motors. Last year, it purchased a Regal Rexnord unit [negócio de US$ 400 milhões]the largest the company has ever made, both linked to engines.
Volt is super strategic because it brings access to the Turkish market, one of the largest exporters to Europe, at a competitive cost.

The Regal Rexnord industrial division brought something else to us, which was spectacular, which is the alternator, or it can also be called a generator.

Today, everyone talks about data centers and AI [inteligência artificial] generative. A search made on Google versus a search made on Copilot or ChatGPT uses 15 to 20 times more energy.

The data center market is not yet for AI, it is for data, storage, even servers. By 2030, data centers for AI will be larger than those for storage. And then the demand for energy will be enormous.

And how does the alternator factor into this?
When you have servers, the power can never go out. But for a data center it is [necessária] a lot of energy. The system will hold for a few hours, but it won’t last long, because it requires a lot of energy. And then you have our generators, alternators connected to the diesel engine.

If the electricity grid goes down, the battery holds for a while and the diesel generator comes in, which can run for hours to ensure that there will be no problem with the grid. With the growth of the artificial intelligence and data center business, having this backup power is mandatory.

This alternator, generator, is a core business for WEG.

What, in Brazil, do you think still needs to mature to receive more foreign investment?
In recent years, Brazil has experienced deindustrialization. We need to look for technology to gain productivity.

Much is said about the cost of Brazil, the difficulties, the high taxes, but if this is resolved, will Brazil be a power, will it beat China? It won’t.

The world is trying to reorganize itself and this will bring many opportunities for the industry in Brazil, a country that has no problems in relationships with others. And this attracts investment.

And Brazil apparently is in a good moment. I like looking at the number. WEG created 2,100 jobs this year in Brazil alone.

We see good short cycle deals, air conditioning, washing machines. Consumer goods, in general, are doing well. I think the world is excited, and Brazil is benefiting from this.

When your name was announced, the announcements highlighted the fact that you were an intern. Is this something important for WEG?
WEG has very beautiful capture methods. Our school, what we called a small school, with classes that start at 16 years old, is a program that attracts a lot of direct labor, we are hiring more than 850 students.

Among the executives, we were all interns. Harry [Schmelzer Jr]former CEO, was an intern. Decius [da Silva]now chairman of the board, who was CEO, went to school.

X-RAY | Alberto Yoshikazu Kuba, 44

Electrical engineer from Unesp (Universidade Estadual Paulista), he joined WEG in 2002, was an intern and trainee. In 2010, he went to China, where he worked in marketing and sales and became managing director. He returned to Brazil in 2020 as superintendent director of industrial engines. In 2024, he assumed the presidency of the WEG group.