SANTIAGO, Chile Global
copper fabricator Luvata has lowered its expectations for 2013
sales but remains uncertain how the rest of the year will play
out, given signs of optimism from the United States and China,
president and chief executive officer John Peter Leesi
The company routinely compiles a
"market drivers" assessment from various data and customer
conversations, weighted by the 40-percent exposure Luvata has
to Asia, plus 30 percent to each of Europe and the United
States, Leesi told AMM in an interview.
"We saw our addressed market and
customer businesses could grow 3.5 percent in 2013, but we have
since taken that number down due to developments at the end of
2012 and in 2013," he said.
"China hasnt recovered as
expected and there is no improvement in Europe. The U.S. is
actually better than expected, but on balance, weve taken
down our expectation to 2.5 percent. Our first quarter sales
are roughly flat compared with last year, but our order book is
coming in reasonably well, so we dont know where
well end the yearthe jury is out."
Leesi said he remains "quite
positive and optimistic around the U.S., negative around Europe
and cautiously optimistic around China."
He said the disappointing market
in 2012 had taken the company by surprise following an average
annual growth in sales of 19 percent.
"What surprised us in 2012 is
that China was weak on the demand side and Europe didnt
improve at all, even if the U.S. was stronger than expected,"
The bright spot in the United
States is mainly residential construction but commercial
construction has picked up recently too, he noted.
Leesi pointed to strength in the
architectural billing index (ABI) for both commercial and
residential construction, a bellwether for the sector. In
China, Leesi said the "positive signs are there" as well for
copper demand growth to improve after slowing somewhat last
"The biggest surprise to us in
2012 was that shipments of air conditioners in China fell
around 15 percent. Weve never seen negative numbers like
that. How can you have GDP of 7.5 percent when air conditioning
drops 15 percent?" he said.
"We have some strength in
construction, auto manufacturing and infrastructure projects,
but were still waiting to see this translated into orders
of air conditioning equipment. That is not happening yet, which
is a bit worrying, and why we are cautiously optimistic," he
"Were a little bit
disappointed that we dont have the order levels we want
to have in China yet, but its going to get better. We
dont see the growth, but anecdotal evidence suggests
its coming," he added.
Its a completely different
situation in Europe, where Luvata services mainly the
Scandinavian markets in the north and the financial crisis-hit
markets like Spain and Italy in the south.
Even here there is a huge
polarization: Italy has a lack of credit, which makes it
difficult for small and medium-size companies to secure
financing, while Spain is trying to deleverage and has no
demand for credit, he said.
"Our business levels in Spain
and Italy are significantly lower than pre-crisis. It has
stabilized on a lower level, and we dont see any
improvement," he added.
Luvata has always sought to
invest in niche products in emerging markets, boosting its
exposure to Asia from 18 percent to the 40 percent seen today,
To this end, the company
recently added new production facilities in China and acquired
a business in Brazil.
According to Leesi, in order to
live through the problems in Europe, the company is seeking to
cut costs and expand its markets.
"We believe Europe will come back, but its going to
take some time," he said.