The SIAD Group is one of the oldest and largest independently owned gas companies in Europe. Officially formed in 1927 and currently head quartered in Bergamo, Italy, the company has developed into one of the most interesting Tier 2 gas companies operating in the EU. gasworld has the pleasure of interviewing both Roberto (father) and Bernardo (son) Sestini and sharing with our readers the insightful story of the family who has served most of its professional life in the industrial gases business.Company BackgroundSIAD was formed back in 1927 and focused on the acetylene business. Tell us more about the origins of the company in those early days?
Bernardo Sestini///The SIAD Group
Well our family's involvement in industrial gases actually started in 1921 when my (Roberto) grandfather, Prof. Quirino Sestini and my father Dr Bernardo Sestini formed a company called Societa Bergamasca Ossigeno & Azoto in order to sell these gases in cylinders.
In 1927, my father developed a patent for porous mass and formed Societa Italiana Acetilene Disciolto to produce and sell acetylene cylinders. To develop this business we built a factory to produce acetylene plants and compressors. My family then managed two industrial gas companies.From the early days – how did SIAD develop?
Through the period up until 1940, the two companies developed separately, expanding into areas such as Rome, Napoli and in major centres in Northern Italy. In that period Italy was not a very industrialised country and then World War 2 occurred which essentially led to Italy being divided (north and south) for some time. Our companies were very lucky in that none of the facilities we had built were damaged or destroyed and so we were able to quickly resume our business activities following the end of WW2. After the war, Italy started to grow very quickly, the economy was booming and our business increased. In 1946, my father decided to merge the companies SIAD and SBOA into one – Societa Italiana Acetilene & Derivati (the current SIAD)
Until the early 1960s – the industrial gas business was very much a cylinder business with little liquid used. As a result there were many cylinder filling facilities developed throughout Italy and SIAD was one such company that expanded with these facilities in areas such as Bologna, Genoa, Savona etc. – many owned but some shared with other companies.
However, as Italy became more industrialised, steel facilities were constructed and this is when we built our first big plant, in 1962, with a 175 ton capacity ASU which was bought from Union Carbide.
Even before this, SIAD was very technology orientated and we were the first small gas company to develop and produce pure argon in Italy. The manufacturing of Argon recovery plants at the time, was dominated by the German and French companies.SIAD and Praxair – The RelationshipIn 1987 – SIAD entered into a technology and application know-how exchange with Union Carbide Gases Division (now Praxair) which led to the company acquiring a stakeholding in SIAD. What was the origin of this arrangement?
Our relations with Union Carbide date back to that first plant we built with Union Carbide and the discussion that took place in 1961. Following the first large plant we built using their technology, we discovered that their (Union Carbide) porous mass technology was better than ours. We obtained a license from Union Carbide to produce a product with better porous mass, as ours had a porosity of between 82 and 85 per cent while Union Carbide's mass had a porosity of 92 per cent.
In those days acetylene was a very important gas and with this licence, we built the largest acetylene cylinder filling facility in Europe (at the time) which was able to supply up to 60 000 cylinders a year. This plant not only supplied our own network but also we filled cylinders belonging to other gas companies in Europe.
SIAD expanded throughout Italy and the growth of the Italian gas business attracted Union Carbide to enter the market in the 1980s (acquiring Rivoira, an independent gas company July 2005 which had started up in 1922/3). We had discussions with Union Carbide in 1987, which led to SIAD acquiring a minority stake holding in Rivoira and Union Carbide acquiring a minority stake holding in SIAD. This was completed in 1987.Many people within our industry view SIAD as a Praxair company. What is the actual nature of the relationship and what influence does Praxair really have on your day to day management?
Today we hold a minority share in Rivoira and Praxair has a minority holding in SIAD. Rivoira and SIAD work very closely in the Italian market, almost like a single company, combined we are the second largest gas company in the Italian market.
Together we have national market coverage with many ASU plants and filling stations throughout Italy, especially from south to north, Sicily and Sardinia. SIAD has a very good relationship with one of the best performing gas companies in the world (Praxair) which enables us to offer our customers the best technologies and services.
The relationship with Praxair covers all aspects of the business – technical, safety and commercial. As you know Praxair is present in some of the main West European countries; Portugal, Spain, France, Benelux and Germany. SIAD is not only in Italy but for the past 15 years has expanded into Central Europe, covering the Czech Republic, Austria, Slovenia, Croatia, Romania, Slovakia and Hungary. Our largest presence at this moment is in Slovenia (through a jv).
Our relationship with Praxair is such that they were involved in the decision making process to expand our activities eastwards. This relationship has become even more important as some of the manufacturing bases in Western European markets are closing and migrating to Central Europe – and Italy is no exception. So together, both Praxair and SIAD are ensuring that customers who migrate to Central Europe maintain a healthy relationship with their existing gas supplier.
SIAD Venice, Italy///The SIAD GroupWhat is the technology relationship about?
In the plant construction field, SIAD receives good support from Praxair for the construction of ASUs over 500 tons/day capacity and also for the VPSA (Vacuum Pressure Swing Adsorbtion) technology. SIAD Macchine Impianti (SIAD MI) manufactures ASUs below 500 tons/day capacity and also produces reciprocating air compressors for chemical industry and air compressors for blowing PET bottles.
Our compressor business is a worldwide business and we supply the chemicals and gas sectors with custom made compressors which, are leading edge technology. We also offer a range of air compressors which we market worldwide through our own offices and agents – from Canada to Australia.
We make ASUs of varying size up to 500 tpd (oxygen capacity), we can produce CO2 plants and also we retain acetylene production plant capability. The equipment business has been very strong these past few years with the pick up of the global economies.
Compressor///The SIAD GroupThe SIAD GroupHow large is SIAD and what is the current structure of the company?
In 2004, our Group revenues totalled €270m, continuing our strong growth over the past five years. In 2004, SIAD MI - our engineering and design company, had sales of €70m.How important is SIAD MI to the company?
Firstly you have to look back at our origins and we have to say that we are more engineers than salesmen! This applies to the family and our work colleagues. The importance of technology was recognised in our formation and emphasised when we created a separate SIAD company – SIAD MI in 1953.
Today SIAD MI is segmented into the compressor business, gas production plants and equipment to cover the different types of gases such as Oxygen, Nitrogen, Hydrogen, Carbon Dioxide and Argon.What has been happening in the Italian market of late and how has SIAD responded to a changing climate for growth?
The Italian market has shown strong growth in recent years but has been slowing in the past two years due to the low GDP and the migration of manufacturing to Central Europe and the Far East. We still continue to look at ways of developing gas applications in the Italian market to grow our business. Although we were a late entrant, we have increased our presence in the medical gas sector since 1998 and we have built upon our relationship with Rivoira, which is much stronger in medical gases. We consider ourselves the market leader in special gases in Italy but we recognise that we have to grow our business in a more competitive climate.
We have more recently developed our offering to customers and branded products and services to grow the business. We have launched services related to the welding and cutting business, waste treatment and recently formed SIAD Healthcare to address demand for equipment supply to hospitals. This has enabled us to continue to grow our Italian business.
SIAD Europe///The SIAD GroupCentral Europe is now an important market for SIAD. How have you achieved this?
We observed the opening up of Central Europe in the late 1980s/early 1990s but were unable to compete with the major German gas companies when State gas companies were privatised (e.g. the Czech Republic, Slovakia and Hungary). We looked at our neighbours in the Balkan States but had to wait for peace to settle before we could actively invest. Once we made the decision to go in (several of these markets were dominated by the majors) so we adopted a strategy to develop relationships through the supply of industrial and special gases in cylinders. Initially supplied from Italy, we moved from Austria into the Czech Republic and then to Slovakia and Hungary in the mid to late 1990s.
We set up cylinder distribution points and then once we had achieved sufficient business, invested in cylinder filling facilities. These were fed with bulk gas supply from our own plants in Italy or from wholesale purchasing. Obviously moving cylinders and bulk liquid from Italy is expensive but we felt it was necessary to control the supply chain in most cases.
However, the business has grown and our strategy has paid off as we have just this last week commissioned a new merchant ASU in Brno, in the Czech Republic. This will supply our operations in the country as well as Slovakia, Austria and Hungary. We now have two Acetylene plants – in the Czech Republic and in Croatia. In Central Europe we now have several filling stations, laboratories for special gases, an ASU, Acetylene and onsite plants.
Added to which, we have more recently moved into Bulgaria and have two on-site facilities with merchant liquid capability to develop our business in the country and Romania. By the end of 2004 our total sales in Central Europe amounted to 20% of the total SIAD business. Our strategy is simple – offer technology and application know-how to markets that are under-developed and to understand the customer. Clearly customers like our approach!What about the future in Central Europe – any moves to expand into other countries?
Firstly we will continue to develop our business and opportunities in the countries that we have a presence in. These include Austria, Czech and Slovak Republic, Hungary, Croatia, Romania and Bulgaria. Then if such opportunities occur in other countries we maybe interested.We understand that you like to support local community initiatives. In what form does this take?
We have a company policy to assist in local projects. This is in-line with our general company policy that our businesses in countries outside of Italy must be managed by local people.
A project we are involved in and sponsoring is the restoration of a church in Prague. Another was related to the local football team in Most, in the Czech Republic. The football club was in financial difficulty and had never in its 70-year history reached the first division. SIAD invested in this football club and we are delighted to say that this year they achieved promotion to Division 1 (gasworld says watch out the Glaziers and Manchester United!).Final ThoughtYour family has built the company up to a level where it has an important position in Italy and a growing presence in Central Europe. It must be tempting to develop the company to a level where you would sell it – would you ever envisage doing this? If not, what strengths does SIAD possess to ensure survival in a growing competitive environment?
Bergamo///The SIAD Group
We are not interested in selling the company. We are only interested in developing the company. Since 1921, cash flow has been reinvested in the company which has enabled us to arrive at this level.
As a company we continue to look for new opportunities using our basic strengths, especially related to technology. At present we do not see any obvious opportunities outside of the industrial gas business and therefore will channel our strengths into developing our core business in what continues to be a growing and attractive industry.
The SIAD Group