gasworld explores the changing Central American gases market with Martin Minondo, General Manager of Guatemala’s Fabrigas.

What began in 1925 as a post-WW1 family-run business has developed far beyond its humble beginnings. For Guatemala-based Fabrigas, the future has perhaps never looked brighter as a leading player in the Central America gases market.

Even in the face of the worst global financial crisis of recent years. Rewind six months and the vision of the Latin American industrial gas market looked positively picturesque, with the promise for further progression equally enthusiastic.

The effects of ‘Black October’ undoubtedly shook the foundations of both global industry and the economy, with a dark cloud of doom and gloom currently hanging over companies all around the world.

This is not the case for Fabrigas, however. As arguably one of the leading industrial gas companies in Central America, Fabrigas is well placed to understand the dynamics of the gas business in the region.

The company sees ever-robust demand and furthermore, General Manager Martin Minondo believes that while the immediate effects of an ailing economy are to be felt, ‘healthy growth’ is to be expected soon after.

So just what is the state of the Central America gases business?

Better prepared
Until recently, the outlook for the Latin America market appeared strong, buoyed by economic and industrial gas growth.

The Central American economy, just like the world economy, is currently enduring a slump due to the global conditions we are all now too familiar with, Minondo suggests. He also believes though, that the region is ‘better prepared’ to cope with such challenging circumstances and clearly remains optimistic about business in future.

“The Central American market is developing at a fast rate, or at least it was a few months ago. Now we are seeing adjustments to face the challenges of the global economic crisis, but as a region we are better prepared than before to seize the opportunities this economic setback will bring,” he explained.

“Fabrigas has either ASU or transfill operations in Guatemala, Nicaragua, Belize and Costa Rica. Furthermore, in El Salvador and Honduras we have stores that retail electrodes and welding equipment using the Fabrigas brand name. We also have a presence in the CO2 market throughout all the countries of Central America,” Minondo said confidently and added, “Fabrigas expects a healthy growth after the economic slowdown passes.”

The region is thought to be suffering something of a setback at present, but Minondo appears confident that an upward trend could soon be on the horizon again. Perhaps more significantly during this interview, he seems secure in the knowledge that Fabrigas will perform favourably in the future and rise to the challenges accordingly.

Challenging Quarter
The nature of such challenges is likely to be revealed as 2009 unfolds, a key year for the company as it more than triples its production capacity for oxygen, nitrogen and argon. Over the course of the next 12 months the full effects of the economic pandemonium are likely to be felt, though Minondo suggests more imminent indications could develop during the next quarter.

This quarter could prove to be a notable period for the Central American gases market, as Minondo described, “It is likely to recover, but how soon is still to be determined. We believe that in the following quarter we will be able to forecast the impact of the crisis and the recovery of the industrial gas business in the region.”

“The global financial crisis has definitely hit business in the region. For now, it’s a slump, but I believe the next quarter will bring enough information to measure the full effects on the regional economy. They say that when the US sneezes, Central America catches a cold. Hopefully it won’t turn into pneumonia.”

If the coughing and spluttering of the US economy does infect the Central America market, it’s perhaps fair to suggest that Fabrigas has developed a healthy immunity system over the years.

The company has no doubt witnessed and survived a number of fluctuating economic trends during its more than 80 years of business, a rich history that has seen Fabrigas evolve and embark on a number of fruitful ventures.

Family ties…
Such endeavours have seen the company partner with industrial gas majors such as the Messer Group and INFRA/Air Products, while the alliance with fellow Central American gas company INFRA/Air Products has proved particularly valuable, for all parties.

This JV has seen the company spread its wings throughout the Central America region and establish a presence as a leading player in the region – a far cry from its origins in 1925, a history that arguably began with the purchase of a used oxygen plant in Europe.

Quite literally a family affair, Fabrigas was founded by Minondo’s grandfather Manuel S. Ayau with the purchase of a used, Superior Air Products oxygen plant (a US Army surplus plant) in post-World War One Europe.

Though Ayau would later pass on in 1931, his wife María Cristina Cordón de Ayau and her son Manuel Ayau Cordón continued to run the company, which sold gases in Guatemala and El Salvador. The family interest continued down the years as relatives came and went, occupying varying positions of management within the company and opting to diversify into different industries.

Indeed in 1997, Fabrigas established a joint venture with the Messer Group which saw two family members separate themselves from the gas business and devote their energies to the ceramic tiles business. At the same time, Minondo himself became General Manger of Messer de Centroamerica, while a year later the company would go on to expand its operations in Nicaragua and Belize.

With a growing enterprise spanning various industries, applications and countries, gasworld asked whether the industrial gas business is still as integral to Fabrigas as it had been all those years ago.

Clearly enthusiastic about the industry, Minondo replied, “Yes, Fabrigas’ core business is still the industrial gases supply, ranging from packaged, microbulk, bulk and on-site supply.”

“But the hard-goods business, including welding electrodes, machines, safety equipment, medical equipment and services have all been growing and are now an important part of the company revenue.”

Revenue that has been increasing at a rapid rate in recent years. A dedication to customer service, steady growth, and flexibility has paid dividends as rising revenues reflect the company’s ever-strengthening network in the region.

Minondo proudly describes the company’s achievements, as he discusses the path of development that Fabrigas has marched down during its recent history. This includes the launch of cryogenic air separation operations at El Jocote site in Guatemala in 1991, a business that has taken huge strides and is set for a further leap forward in 2009.

“Performances over the last five years have delivered double digit growth, largely driven by our outstanding relationship with customers and our flexible supply scheme. In the last five years we have built and installed an on-site oxygen generating VSA 80 tpd, two 50 tpd CO2 plants, and we are currently building a new 180 tpd ASU plant.”

“In 1997, we ramped-up our liquid oxygen, nitrogen and argon production capacity from 14 tpd to 90 tpd. In 2009, we will commission a new 180 tpd ASU that will more than triple that capacity. All of our plants process and operations are ISO 9000:2000 certified, and the CO2 plants have the certification of the most important bottling companies worldwide.”

“But we also have other operations we are proud of,” Minondo adds. “Productos del Aire de Guatemala was the first company in the region, including Mexico, to start using the barcode cylinder control system, monitoring by serial number each cylinder. We can trace each cylinder from the plant to the customer and back to us – we also control the maintenance and safety programme of each cylinder, the client’s consumption and supply requirements so that they can be programmed and delivered according to pre-scheduled delivery routes, and we invoice on delivery of the cylinders at the client’s site.”

“Productos del Aire de Guatemala is also well advanced in Microbulk delivery, called CryoFast®, for beverage dispensing carbon dioxide, and oxygen for cutting & welding and for hospitals. The CryoFast® system includes (in a long- term contract) liquid cylinder, piping, a telemetry system for customer inventory levels and GPS control for all vehicles. This allows us to pre-schedule the delivery route of our trucks, and in the case of an unscheduled customer request, to have the nearest supply truck detour to make the delivery.”

“It is also one of the most important initiatives for Fabrigas in the last 10 years and is allowing us to strengthen our leading position in these markets. CryoFast® was modelled and developed with a close collaboration with Cryoservice, an Air Products company in the United Kingdom.”

In the case of the healthcare sector, Minondo is keen to point out, Productos del Aire de Guatemala installs, maintains and owns both the oxygen and other gas supply piping networks in government and private hospitals.

This state-of-the-art piping network supply scheme, provides customers with a reliable gas supply.

The piping systems include cryogenic tanks, telemetry and online master alarm control systems for intensive care units, operating and emergency rooms, while Productos del Aire also has a strong home care oxygen programme, OXIDOM, which has grown consistently.

Productos del Aire also operates a hydrogen generating plant, an acetylene plant, and a specialty gas filling plant for gas mixtures and high purity gases. In addition, the company runs a cylinder maintenance facility and cryogenic maintenance facilities, where it is able to repair liquid cylinders, vacuum isolated piping, and even cryogenic tankers.

Added business lines such as these demonstrate the thorough range of services that Fabrigas is able to offer customers, while also alluding to the strength in depth derived from partnerships with Infra/Air Products.

…and friends
Just as important to the company as its widening network and strong family heritage, is its healthy partnership with fellow friends in the industrial gas community.

The company enjoyed a short-lived joint venture (JV) with Messer from 1997 to 2003, from which Fabrigas learned a great deal and is still reaping rewards in its operations.

“Messer’s, and Air Products’, intense focus on efficiency, safety and standards is something we keep stamped in our operations,” Minondo says.

The business relationship with Messer was curtailed however, as the German group’s interest in its ‘core markets’ of Europe and Asia drove it to sell its share in the joint venture by 2003. Infra/Air Products showed interest and was quick to take advantage of the opportunity, heralding the start of Productos del Aire de Guatemala.

“The JV with the Infra/Air Products was born after Messer defined their ‘core markets’ as Europe and Asia decided to sell their share in all Central American joint ventures,” Minondo explains. “Infra/Air Products is a company that shares our vision and interests, so the performances of the JV with the group have been very successful.”

“Infra/Air Products became Fabrigas’ partner in Guatemala, Nicaragua, Costa Rica and Belize. It is important to note that Messer had JV’s in El Salvador and Honduras with different partners, and when they sold their shares in all Central America interests, Infra/Air Products seized the opportunity to access the markets in El Salvador and Honduras.”

As the interview progresses, it becomes apparent just how significant the partnership is between Fabrigas and Infra/Air Products as the companies share not only ‘visions and interests’ but also JVs throughout the region.

In Guatemala they operate Productos del Aire de Guatemala, in Nicaragua the alliance forms Productos del Aire de Nicaragua, in Belize there exists Fabrigas Belize Ltd, and in Costa Rica the companies operate as Infra GI de Costa Rica.

The CO2 business is explored through Carbox, which supplies its customers all through Central America. Additionally to the gas business, ECAElectrodos was formed with Electrodos Infra as partners, selling throughout Central America.

Minondo comments, “All of them are thriving companies that leverage the deep knowledge and strong relationships with customers, as much as the global expertise and know how of companies such as Infra and Air Products.”

Future focus
So what of Fabrigas in 2009 and the Central America gases market in the future? As described earlier, the outlook for the year ahead is yet to become clear and Minondo believes the next quarter should provide more of a clue.

One thing is clear though – the company will continue to build further on its strong foundations.

Minondo explained, “2009 will be a year of economic uncertainties, but Fabrigas is prepared to grow at a double digit rate; healthy foundations, lean operations and a strong focus on efficiency will allow us to reach growth rates above our competitors in the region.”

“Fabrigas will focus on consolidating its existing JV’s with Infra/Air Products, including Productos del Aire de Guatemala, Productos del Aire de Nicaragua, Infra Costa Rica, Fabrigas Belize and the operations of Carbox throughout Central America.”

“Fabrigas,” he added, “to overcome the current conditions, is developing new customers to help make up for other customers’ slowdown in activities.”

Overcoming the current challenges faced both around the world and for Fabrigas locally is something the company appears ready to accomplish. So what will it take to succeed in Central America in future?

“There is a wealth of opportunity indeed, but only the companies that embrace safety, efficiency and standards are to be survivors.”

“Also, many of our customers have to improve their technology and upgrade their processes, and in some cases we help them to achieve this goal. Only through an aligned development and progress in all the supply chains, will the region be able to achieve sustained growth and of course, the industrial gas companies will be there to supply the required, or even indispensable, gases.”

Technology is evidently a fundamental factor for the development of the gases industry in the region, just as it is with many other emerging markets around the world.

“In Central America, technology has driven an important part of the regional growth along with the raw material and manufacturing, for the countries as a whole and also for the industrial gas market. Examples of these are the steel and electronics markets.”

“Technology in our company is very important,” concludes Minondo, “but either the gases technology or the information technology has to be translated into benefits to our customers, and that is what Fabrigas does best.”

Martin Minondo bio
Martin Minondo, full name Martín Ignacio Minondo Ayau, has been a member of the Fabrigas ‘family’ for over 21 years.

Now 49 ‘well lived’ years of age, Minondo began his career with a BS in Mechanical Engineering at the University of Vermont, in the US. He also achieved a Licenciatura in Mechanical Engineering at the University of San Carlos in Guatemala and had undertaken studies at the Graduate school of the University of Texas in Austin, in the US .

Having previously worked in the highly successful and significant sugar mills industry of Guatemala, Minondo joined Fabrigas in 1987 as a Project Manager in charge of two very important projects: a 4MW hydroelectric plant that started operations in 1990 and now supplies clean and cost-effective energy for the current ASU plants, and the 15 tpd ASU plant itself.

In terms of life away from the office, Minondo enjoys a happy family life with his wife and three children, while he also enjoys playing tennis and Scuba diving – taking advantage of ‘the beautiful locations in the Central American countries, with Caribbean coasts like Belize and Honduras’.

Standards, safety, and associations
A topic for discussion at this month’s gasworld Conference in Chile is the need for a South American industrial gas association, in line with those established bodies of other regions around the world.

Such an association governs the safety, standards and working practices within the region’s industry and in conjunction with fellow organisations, can ensure or at least work to integrate international harmonization of standards and more.

So how does Minondo see the subject of standards and associations in South & Central America?

“I don’t believe the Central America region needs a gas association of its own. Several industrial gas companies, unfortunately not all of our competitors, are aligned with the CGA (Compressed Gas Association) guidelines. But Latin America, as a wider region including Mexico and South America, could be at the threshold of requiring an including association regarding the gases.”

Are standards and safety an issue, gasworld asks?

“Absolutely, yes. Fabrigas embraces the US standards, and even pushes to implement laws in the countries we operate in to close the gap between local regulations and international ones. As stated, we follow the CGA guidelines and rules for all our operations.”