andrade gutierrez s.a. swot analysis & company profile

Andrade Gutierrez S.A.: SWOT Analysis & Company Profile Published April 2010

© World Market Intelligence. This report is a licensed product and is not to be photocopied

Andrade Gutierrez S.A.: SWOT Analysis

& Company Profile

Reference Code: WMCN0144CP

Published Date: APR-2010

www.worldmarketintelligence.com

World Market Intelligence

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London EC4Y 0BS

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Fax: +44 (0) 20 7336 6813



1 COMPANY OVERVIEW ....................................................................................................... 4

2 BUSINESS DESCRIPTION ................................................................................................. 5

2.1 Key Employees ............................................................................................................................................... 7

2.2 Locations & Subsidiaries ................................................................................................................................ 8

3 SWOT ANALYSIS ............................................................................................................... 9

3.1 Overview ......................................................................................................................................................... 9

3.2 Strengths ......................................................................................................................................................... 9

3.3 Weaknesses ................................................................................................................................................. 11

3.4 Opportunities................................................................................................................................................. 11

3.5 Threats ......................................................................................................................................................... 12

4 FINANCIAL DEALS ........................................................................................................... 13

4.1 5-Year Deal Analysis .................................................................................................................................... 13

4.2 Company History .......................................................................................................................................... 14

5 APPENDIX ......................................................................................................................... 15

5.1 Research Methodology ................................................................................................................................. 15

5.2 Additional Notes ............................................................................................................................................ 15

5.3 About World Market Intelligence ................................................................................................................... 16



List of Tables

Table 1:Andrade Gutierrez S.A. Key Facts ................................................................................................................ 4

Table 2:Andrade Gutierrez S.A. Key Employees ....................................................................................................... 7

Table 3:Andrade Gutierrez S.A. Locations and Subsidiaries..................................................................................... 8

Table 4: Andrade Gutierrez S.A. SWOT Analysis ..................................................................................................... 9

Table 5: Financial Deals........................................................................................................................................... 13

Table 6: Andrade Gutierrez S.A. History .................................................................................................................. 14



1 COMPANY OVERVIEW

Table 1:Andrade Gutierrez S.A. Key Facts

Corporate Address Av. do Contorno, 8123,

Cidade Jardim, Belo

Horizonte MG, Minas

Gerais, 30110 910, Brazil

Telephone +55 31 3290 6699 No. of Employees 134,996

Fiscal Year End December

URL www.agsa.com.br Revenue (in USD Million)

6,601.12

Industry Construction & Real

Estate Revenue (in BRL Million)

11,750

Locations Algeria, Angola, Argentina, Brazil, Cameroon, Costa Rica, Democratic Republic of

the Congo, Ecuador, Equatorial Guinea, Guinea, Mexico, Poland, Puerto Rico,

Republic of the Congo, Spain, United Arab Emirates, Venezuela

Source: Annual Report, Company Website, Primary and Secondary Research / © World Market Intelligence



2 BUSINESS DESCRIPTION

Andrade Gutierrez S.A. (Andrade) is a diversified company operating in telecommunications, construction and

engineering, power, and public concessions sectors. Besides, the company manufactures and sells machines,

equipment, and materials for industrial and building installations. It has a major presence in Brazil, and select

markets in Latin America, Asia and the Europe.

The company mainly operates across three major segments, namely, Engineering and Construction, Concessions

and Telecommunications.

In the Engineering and Construction segment, the company is engaged in the construction of hydropower and

thermoelectric power plants, petrochemical plants and oil refineries, highways, airports, tunnels, overpasses, steel

mills, nuclear and industrial plants, sanitation and urbanization projects, ports and related works. It also offers

integrated engineering, financial structuring, process, product, and environmental quality solutions. The company is

also involved in the sale and manufacturing of machines, equipment and materials for industrial and building

installations. Andrade has expertise in the construction of large urban sanitation systems, civil works, and the

execution of integrated irrigation projects. The segment caters to both public and private clients. The principal

operating subsidiaries are Construtora Andrade Gutierrez and Zagope that operate across Brazil and the other

Latin American markets. Zagope, a Portuguese construction company acquired in 1987, handles operations across

Europe, Africa and Asia. For the fiscal year ended 2008, the Engineering and Construction segment accounted for

36.92% of the total company’s revenues.

In the Concessions segment, the company principally operates through Andrade Gutierrez Concessoes S.A. (AGC)

which is active in highway, energy, sanitation and airport management segments. AGC is also engaged in sewage

collection and treatment. In addition, AGC acquired 40% stake in Renovias Concessionaria S.A. which operates

346 km of highways across Sao Paulo. In 2008, AGC acquired the remaining 15% of Water Port. Waterport is

engaged in developing, building, operating and maintaining the water and sewage system across on the Sao Paulo

coast for a five year period. In addition, AGC holds 45.5% stake in Corporacion Quiport S.A. which is engaged in

the construction and operation of the Quito International Airport in Ecuador. The new airport will be managed by

concession for a 30-year period.

Light, a subsidiary of AGC, is the holding company that controls and administers other operating companies such

as Light Serviços de Eletricidade S.A. (Light SESA), Light Energia S.A. and Light Esco Ltda. These companies

operate in the electricity generation, distribution, and commercialization segments. Andrade also holds 16.84%

capital stake in Companhia de Concessoes Rodoviarias (CCR) that was awarded the Sao Paulo State

government’s concession contract for a 30-year period to manage the West Belt of the Mario Covas Beltway in

2008. The Concessions segment accounts for 23.82% of the total revenues.



In the Telecommunication segment, Andrade operates through Andrade Gutierrez Telecomunicaçoes Ltda (AGT).

AGT is engaged in offering local voice, mobility, broadband, national and international long-distance, and data

communications and Internet services. The Telecommunication segment also provides data processing and credit

card processing services. In April 2008, its subsidiary Oi acquired Brasil Telecom (BrT) which is engaged in local

and long-distance fixed telephony concessionaire in the Federal District, and nine states in the southern, mid-

western and northern Regions of Brazil. The acquisition of BrT created the largest telecommunications company in

Brazil. The segment accounts for 38.87% of the total company’s revenues.

The other businesses include managing investment funds such as equity investment and operating as a closed

mutual fund for generating long-term return on invested capital. The activities are carried out through the subsidiary

AG Angra, which manages the AG Angra Infrastructure Fund (AGIF). AGIF plans to invest BRL 697.5 million in a

five year period in transportation and logistics, oil and gas, sanitation, renewable energy, and industrial

infrastructural segments. As of January of 2009, BRL 200 million has been invested in two ventures.

The construction of a Quito's airport (Ecuador), which is being executed by the company’s construction subsidiary

and Aecon venture, is expected to be completed in October 2010.

Recently, Companhia Energetica de Minas Gerais (CEMIG) entered into an agreement with Andrade Gutierrez

Concessoes and Fundo de Investimentos em Participacoes to acquire 39% interest in Light. CEMIG is also

planning to increase its stake in Rio Minas Energia Participacoes Sa.



2.1 Key Employees

Table 2:Andrade Gutierrez S.A. Key Employees

Name Job Title Board Level Since Age

Sergio Lins Andrade Chairman, Director, President Non Executive Board

Alvaro Furtado de

Andrade Director Non Executive Board 2006

Angela Gutierrez Director Non Executive Board

Cristiana Gutierrez Director Non Executive Board

Eduardo Borges de

Andrade Director Non Executive Board

Joao Pedro Amado


Laura Furtado de


Marcos Amado


Rodrigo Werneck

Gutierrez Director Non Executive Board

Otavio Marques de

Azevedo Chief Executive Officer Senior Management

Flavio Gomes

Machado Filho Institutional Relations Officer Senior Management

Lucio Otavio Ferreira Investment Officer Senior Management

Luiz Otavio Mourao Legal Officer Senior Management

Marcio Magalhaes

Duarte Pinto Development Officer Senior Management

Ricardo Henrique

Lanza Campolina Corporate Finance Officer Senior Management

Rogerio Nora de Sa Chief Executive Officer, CONSTRUTOA

ANDRADE GUTIERREZ S.A. Senior Management

Leandro de Aguiar Chief Executive Officer, ZAGOPE –

CONSTRUCOES E ENGENHARIA S.A. Senior Management

Ricardo Coutinho de

Sena Chief Executive Officer, AG CONCESSOES Senior Management

Source: Annual Report, Company Website, Primary and Secondary Research / © World Market Intelligence



2.2 Locations & Subsidiaries

Table 3:Andrade Gutierrez S.A. Locations and Subsidiaries

Rio de Janeiro Bureau

Praia de Botafogo

300 4th floor Botafogo Rio de Janeiro RJ

Rio de Janeiro

Zip: 22250 040

Brazil

Tel: +55 21 2211 8000

Brasilia Bureau

SCN Quadra II Bloco A

EEdifício Corporate Financial Center - Suite 201

Brasilia DF

Zip: 70712 000

Brazil

Tel: +55 61 3424 3300

Construtora Andrade Gutierrez

R. Dr. Geraldo Campos Moreira

375 Brooklin Novo

Sao Paulo

Zip: 04571 020

Brazil

Tel: +55 11 5502 2000

Andrade Gutierrez Concessoes

Av. do Contorno

8123 Cidade Jardim

Belo Horizonte MG

Zip: 30110 910

Brazil

Tel: +55 31 3290 6778

Andrade Gutierrez Telecomunicacoes

R. Dr. Geraldo Campos Moreira

375 Brooklin Novo

Sao Paulo

Zip: 04571 020

Brazil

Tel: +55 11 5502 2340

KitMed

Av.Jaguare

818 Galpao 21/22/23

Sao Paulo

Brazil

Tel: +55 11 31272500

Construtora Zagope

Av.Frei Miguel Contreiras

54 Lisboa

Lisboa

Zip: 1749083

Portugal

Tel: +351 21 843 2500

Companhia de Concessoes Rodoviarias

Av. Chedid Jaffet, 222 Bloco

Sao Paulo

Zip: 04511 065

Brazil

Tel: +55 11 30485921

Fax: +55 11 30485911

Url: www.grupoccr.com.br

Source: Annual Report, Company Website, Primary and Secondary Research / / © World Market Intelligence



3 SWOT ANALYSIS

Table 4: Andrade Gutierrez S.A. SWOT Analysis

Strengths

Weaknesses

Strong Performance of E&C Business

Geographic Presence

Awards & Certifications

Diversified Services Portfolio

Reliance on Government Contracts

Rising Debt Obligation

Opportunities

Threats

Big Budget Projects Launched by EU

Infrastructure Spending in Brazil

Growth in Construction Spending in Asia-Pacific

Competitive Bidding

Environmental Regulations

Declining Growth across Western Hemisphere


3.1 Overview

Andrade Gutierrez S.A. (Andrade) is active in engineering and construction, concessions and telecommunications

segments. Diversified business portfolio and the ability to offer comprehensive solutions to specific industries have

given the company a definitive competitive advantage. However, competitive bidding, global economic slowdown

and environmental regulations could pose challenges for the company.

3.2 Strengths

Strong Performance of E&C Business

The Engineering and Construction segment reported gross operating revenue (GOR) growth of 69% in 2008 over

2007. The strong performance can be attributed to a large number of contracts executed in Brazil that has

accounted for 75% of the GOR. The construction contract portfolio also rose to BRL 21.97 billion, an increase of

132% over previous year. Brazil and Latin American regions accounted for almost 75% of the contract portfolio.

The increase in order backlog in home markets signifies the strengthening market position of the company in the

segment. The segment’s EBITDA increased to BRL 425 million in 2008 as against BRL 173 million in 2007.

Moreover, EBITDA margin (EBITDA /GOR) improved to 9.77% as compared to 6.78% indicating improved cost

control strategies.



Geographic Presence

Andrade is the leading infrastructure company with over 134,996 employees and operations across 20 countries

worldwide. It has a stable presence across a number of countries in Europe, Latin America, Asia, and Africa. In

Latin America, the company operates across Peru, Ecuador, Argentina, Venezuela, Mexico, the Dominican

Republic, and Antigua and Barbuda. It maintains an executive board for Latin America which has enabled the

company to consolidate contracts and operations in this region.

In addition, Andrade has also handled various projects across the US, Chile, Bolivia, China, Greece, and Iran. This

consistent presence and expansion of business to new geographies has enabled the company to increase its

revenues base over the years. The company recorded revenues of BRL 11,757 million for the fiscal year ended

December 2008, an increase of almost 49% over 2007. The revenue growth rate in the year 2007 was about

25.73%.

Awards & Certifications

Andrade has won appreciation for its services over the years in the form of various awards and recognitions. AG

Engenharia and AG Concessoes received awards in various categories including heavy construction, corporate

governance, sanitation management, quality and safety, among others. Besides excellence awards, the company

also received many management system certifications signifying continuous improvement in various policies and

processes across the organization. In 2007, the company was awarded re-certification of ISO 9001, ISO 14001 and

OH SAS 18001 standards to incorporate environmental recovery and urban restoration of bodies of water,

degraded urban areas and buildings, including complex facilities and assembling. Andrade also was re-certified in

SA 8000 and extension of the scope of SGI for port and pipeline works in 2008. These certifications over the years

have created a strong brand image for the company.

Diversified Services Portfolio

Andrade is a diversified company active in engineering and construction, concessions and telecommunications

segments. It provides a wide range of services across the segments it operates. In the Engineering and

Construction segment, the company provides engineering, construction, management and project financing related

services. It provides construction services for diverse projects such as dams, thermoelectric plants, hydro plants,

nuclear power plants, petrochemical complexes, oil refineries infrastructure, industrial construction, mining,

irrigation and sanitation. In addition, Andrade manages airports and highways through concessions. It is also into

managing investment funds such as equity investment, besides operating a closed mutual fund. Moreover, the

company through its subsidiaries offers services such as local voice, mobility, broadband, national and international

long-distance, and data communications and internet services. It is also active in power generation and distribution,

operates and maintains water and sewage systems. Diversified services portfolio helps expand the revenue base

of the company and mitigate risks related to overdepency on a single segment and market.



3.3 Weaknesses

Reliance on Government Contracts

The company’s financial performance is heavily dependent on the funding by various government agencies. The

Engineering and Construction and Concessions segments together accounted for almost 76% of the total revenues

generated in 2008. These segments are heavily dependent on various government contracts worldwide to generate

a significant portion of revenues. Besides, the competition for government contracts has also intensified as a result

of lower private sector spending due to the global economic downturn.

Rising Debt Obligation

The company has leveraged more towards debt over the years. During 2003-08, the debt component increased at

a compound annual growth rate (CAGR) of 23.93%. For the year ended December 2008, its net debt stood at BRL

3,809 million, an increase of almost 132% over the previous fiscal year. Being highly leveraged towards debt

obligation is a risky preposition for the company as slight changes in the existing interest rate scenario could have

considerable impact on the bottom line of the company.

3.4 Opportunities

Big Budget Projects Launched by EU

The large investment projects announced by the EU provide significant opportunity for the company. In 2009, the

European Commission called for proposals for the Trans-European Network transport (TEN-T) schemes. The

funds available for the project include EUR 500 million from the European Economic Recovery Plan. The

commission also plans to further, invest EUR 140 million through its Annual Work Program. In addition, the

commission has plans to invest EUR 240 million for rail signaling projects, EUR 30 million for maritime schemes

and almost EUR 100 million for Intelligent Transport Systems (ITS) roads projects. Andrade being a civil

engineering and industrial construction company can explore the available opportunity and enhance its growth

prospects.

Infrastructure Spending in Brazil

The company could take advantage of Brazil's construction market as demand for infrastructure investments is

expected to remain steady. The Brazilian government has announced BRL 34 billion (USD 15.2 billion) programs to

finance low income residential constructions. The program aims to build up to 1 million homes for low-income

families. Additionally, it is now easier for private companies to build and operate concessions in Brazil after the

presidential decree. As with Brazil, much of this growth is being led by investment in infrastructure. In addition, the

World Bank plans to increase its financial support to developing countries during 2009-12.



Growth in Construction Spending in Asia-Pacific

The company can take advantage of growth in the Asia Pacific region by establishing its presence. Construction

spending growth, though expected to slow down in 2009, will still be higher than any other region in the world. The

non-residential category accounts for about 40% of construction spending. The rest of the market is divided almost

equally between the residential and infrastructure sectors. Most investment is expected to go into infrastructure

market. This market is likely to remain stable as many projects are financed through the use of development bank

funds throughout the region. Countries like India and Thailand offer tremendous opportunities as compared to

China and Japan whose construction spending is expected to slow down.

3.5 Threats

Competitive Bidding

Increasing competition for infrastructure projects could pose problems for the company. This is primarily because

commercial and residential real estate markets have become less attractive. The economic stimulus packages to

restore the economic growth give major importance to infrastructure development projects like civil engineering,

transportation, power and water utilities, and energy projects. The government grants these projects through

tenders with the lowest bidder granted the project. Many companies could lower tender prices to secure projects,

which could affect operating and profitability margins. With increasing construction costs there is a further

possibility for a decrease in liquidity and uncertainty in the long term sustenance of the business.

Environmental Regulations

The diversity of offering in terms of the number of service and sectors involved are subject to changing laws,

regulations and standards relating to quality, safety and environment. The company has to ensure that it meets

customer requirements, controls costs and minimizes business impact while complying with the regulations.

Concern for the environment has led to constant changes in the regulations governing the construction processes

and material utilization. Any non compliance in the process or materials used could result in huge penalties and

fines that could affect the revenues and goodwill of the company.

Declining Growth across Western Hemisphere

The slowdown in economic growth across countries in the Western hemisphere could seriously impact the

operations of the company. The Western Hemisphere, which includes the South American, Central American and

Caribbean countries along with Mexico, has witnessed a collective growth rate of 5.7% in the year 2007. It has

registered a GDP growth of 4.2% in the year 2008 and is slated to register a negative growth of 2.5%. According to

International Monetary Fund, the Brazilian economy grew at 5.7% in 2007 and further slowed down to 5.1% in

2008. The real GDP is expected to be -0.7% for the year 2009. Similarly, the GDP of Mexico fell from 3.3% in 2007

to 1.3% in 2008. It is further expected to witness a percentage decline of 7.3 over 2008 in 2009. Tightening of

global financial conditions coupled with increased external financing costs and reduced capital inflows have also

affected major corporations and governments across these regions. Since the company has significant operations

in this region and heavily dependent on various government contracts to generate a significant portion revenues, it

could pose problems for the company.



4 FINANCIAL DEALS

4.1 5-Year Deal Analysis

Table 5: Financial Deals

Announc

ed Date

Complet

ed Date Headline

Deal

Type

Deal

Status

Deal

Value

Acquirer/In

vestor

Target/Part

ner/Issuer

21-Oct-

2009

Cia de Concessoes Rodoviarias

prices equity offering of $631

million

Equit

y

Offeri

ngs Pricing

630.96

Companhia

de

Concessoes

Rodoviarias

Source: Annual Report, Company Website, Primary and Secondary Research © World Market Intelligence



4.2 Company History

Table 6: Andrade Gutierrez S.A. History

Year Event type Description

2008 Corporate Awards The company was awarded Petrobras QSMS Award. In addition,

it was also re-certified in SA 8000 and got an extension for the

scope of SGI for port and pipeline works.

2008 Acquisitions/Mergers/Takeovers Oi, a subsidiary for the company, acquired control of Brasil

Telecom in April 2008.

2007 Acquisitions/Mergers/Takeovers The company was awarded re-certification of ISO 9001, ISO

14001 and OH SAS 18001 standards to incorporate

environmental recovery and urban restoration of bodies of water,

degraded urban areas and buildings, including complex facilities

and assembling.

2007 Acquisitions/Mergers/Takeovers Andrade Gutierrez Participaçoes, a subsidiary, acquired 12.4%

stake in the consortium Santo Antonio Energia S.A. that was

awarded the Santo Antonio Hydropower Plant concession in

December 2007.

2006 Corporate Awards The company was certified by the American Society of

Mechanical Engineers (ASME) for the assembly of boilers and

pressurized piping (ASME A and PP seals).

2006 New Products/Services The company entered into the electric power industry.

2005 Corporate Awards Andrade was accredited with the Social Responsibility certification

based on the SA 8000 standard to become one of the first

Brazilian construction companies to earn this certification.

2003 Corporate Awards Andrade became the first Brazilian construction company to

obtain to ISO 9001, ISO 14001 and OHSAS 18001 integrated

management system certifications.

2001 Corporate Awards Andrade was awarded the ISO 9001 certification for industrial

works.

2001 Acquisitions/Mergers/Takeovers Part of AG Concessoes was acquired by the World Bank.

2000 Incorporation/Establishment The company’s holding company was established.

1999 Corporate Awards Andrade was awarded the first ISO 9001 certification for

construction works.

1993 Incorporation/Establishment The company established AG telecommunications division.

1985 Acquisitions/Mergers/Takeovers The company acquired Zagope.

1948 Incorporation/Establishment The company was founded in Belo Horizonte, Brazil.




5 APPENDIX

5.1 Research Methodology

World Market Intelligence’s “SWOT Analysis & Company Profile” reports utilize a wide range of primary and

secondary sources, which are analyzed and presented in a consistent and easily accessible format. We strictly

follow a standardized research methodology to ensure high levels of data quality:

Our company profiles are based on a core set of research techniques, which ensure the best possible level of

quality and accuracy of data. The key sources used include:

1. Company Websites

2. Company Annual Reports

3. SEC Filings

4. Press Releases

5. Proprietary Databases

Data Consolidation – Our analysts benchmark data from internal and external sources to verify historical market

data and to ensure that latest year data is fully supported by external opinion.

Quality Control – We rigorously conduct checks on our data and processes throughout the production of every

company profile, to ensure that the highest levels of data quality are maintained across our portfolio.

5.2 Additional Notes

Figures in tables and charts throughout this report may not add up to totals due to rounding.

Any currency calculations used in the generation of data within this report have been calculated using constant

2008 annual average exchange rates.

Financial information for the company is taken from the most recently published annual reports or SEC filings

The financial and operational data reported for the company is as per the industry defined standards

Where required, turnover is converted to US$ using the average annual conversion rate as of fiscal year end



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