The firm has gone from a small, family-run provider of home-building supplies to one that is now publicly listed in Colombia, on the Bolsa de Valores, and on the NASDAQ in the United States, where it generates about 70% of its sales.
Photo: Loren Moss of Finance Colombia (left) speaks with Tecnoglass CFO Santiago Giraldo at the company’s office in Barranquilla. (Credit: Liliana Padierna)
Tecnoglass’ path has been one that more and more Colombian companies hope to emulate. With an improving security situation and a domestic private equity world that is beginning to mature, the investment community both in the country and abroad is offering opportunities for firms to grow like never before.
As he settles into his new role, Giraldo sat down with Loren Moss, executive editor of Finance Colombia, to discuss the journey that Tecnoglass has taken over the past half decade and how the company balances a family-built culture focused on long-term growth with its responsibility to continually boost quarterly earnings for investor.
Read their conversation in full below or watch the video version here.
Loren Moss: Tecnoglass has been listed on NASDAQ since 2013 and the BVC — Bolsa de Valores de Colombia — since the beginning of last year. What precipitated Tecnoglass deciding to list?
Santiago Giraldo: Basically, it was an opportunity to make the company known in the markets in which we participate. Our main market is the U.S., with about 70% of our sales. So it was a way to further penetrate some markets within the U.S. where Tecnoglass was not known. Originally, Florida was the vast majority of our sales, but by being public we were able to penetrate other markets within the U.S.
Having incremental bonding capacity also helped us participate in larger projects. So it was an initiative not only necessarily to raise cash, but a strategic initiative to penetrate the U.S. market.
On the Colombian listing, because we didn’t do an IPO, we just did a reverse ADR. It was basically an opportunity to meet local investors with an opportunity to participate in the company as well. Given that we are a Colombian company, we also wanted to open the opportunity to local qualified investors and retail investors to participate in the company.
Loren Moss: That’s interesting, because you have some Colombian companies that are listed in the U.S. with ADRs, but you guys have done the reverse. That’s really innovative. So, tell me, now that you are in the routine of quarterly reporting, how has that discipline changed? This company is still run by its founders, and they have a long-term vision. How does that impact the culture of the company internally?
“This has been a very nice success story of a family-based company that has grown into a large corporate that is listed on exchanges.” – Santiago Giraldo, CFO of Tecnoglass
Santiago Giraldo: Quite a bit. I think this has been a very nice success story of a family-based company that has grown into a large corporate that is listed on exchanges and has had publicly issued debt into the U.S. and European markets. So it’s kind of a mix in the sense that the family members are still very much involved.
Our CEO and COO are running the company, but you have to have a mix in the sense that being public obviously implies having a lot of regulations, filing necessities, and other activities that normal family-based companies don’t have. I think that the vision continues to be long term. We’re very much running the company with the vision of being a $500 million USD company within the next five years or so.
But on a quarterly basis you’ve also got to have your financial planning in order. You’ve got to have all the SEC requirements that non-public companies don’t have. You’re going to have to have some of your staff being proficient in U.S. norms while having the skills that a private family-owned company would have to have as well. So it’s a mix.
In the end, the strategy continues to be long term, but you measure the long-term progress on a quarterly basis, and that’s a change. You have to have very good vision on the short-term — what the results are going to be not only for the next year or two years but for the next quarter. And you also must keep in mind that you’re running the company for the long term and doing what is best for the company for its sustainability over the long haul, as opposed to just running it quarter-by-quarter.
Loren Moss: Now, Tecnoglass is in the league with other large and well-known Colombian companies that are listed. We have Ecopetrol, the state-controlled petroleum company, Avianca, Bancolombia, and others. How did the market receive you when you first listed? When you first went to NASDAQ, what was the reception? Were the analysts, or was the investor community, somewhat familiar with you already? Was there a learning curve to orient them? What have the challenges been in the capital markets and in the institutional debt markets?
Santiago Giraldo: Yes, so this is kind of a different story in the sense that it wasn’t public through a straight-up IPO, but it was done through what is called a “SPAC,” which is a Special Purpose Acquisition Company vehicle. Basically, there was already a vehicle that was publicly listed that basically took over the private company — that took over Tecnoglass. And in that transaction, Tecnoglass became public.
But the process of getting to know the company and raising funds is pretty similar in the sense that you conduct a pretty extensive “roadshow” to market the company and educate investors as to what the company is. You have to communicate what its markets are, why it’s a different story, why it’s different than the competition, and where the advantages are.
“As part of the investor relations initiative, you have to be continuously out there and getting people to know the story.” – Giraldo
And that’s an ongoing process, really. I mean, the first amount that was raised was obviously done in 2013 through a very extensive process. But the truth of the matter is that, ever since last year, we’ve been going to investors — doing roadshows, talking to a lot of people, seeing new investors coming on board, and hopefully having your stock price reflect a proper valuation.
It’s really an educational process that’s ongoing. It’s not necessarily one that took place four years ago and then it stopped.
And we are scheduled to participate in two or three different conferences in the third quarter this year and then a couple of others in the fourth quarter. As part of the investor relations initiative, you have to be continuously out there and getting people to know the story and trying to penetrate different investors that you haven’t talked to.
Loren Moss: I imagine, with the success that Tecnoglass has had, it has kind of paved the way and it will probably be easier in the future for other Colombian manufacturing companies when they decide to go that route.
Santiago Giraldo: Yeah, I think you have to be ready. To be public is not a process that is easy to absorb and it’s not something that you’re going to learn overnight, so it’s certainly something that you want to make sure that the company has enough skill, it has enough resources, and it’s ready to make the change.
I think we don’t probably know enough in Colombia about accessing the capital markets. To tell you the truth, I think a lot of the companies — other than the typical top 10, top 15 companies — are just basically relying on bank financing. There are really not a whole lot of companies that issue bonds or that go out and issue equity. But those are very suitable options to grow a company, and I just don’t think we have that culture, and unfortunately our capital markets in Colombia are not as deep as you would like.
I think it’s a learning process and we’re going that way with the MILA (Mercado Integrado Latinoamericano) integration, being associated with Mexico, Peru, and Chile as having one stock exchange. But I think we have a ways to go. I think we need to educate corporates more and make them more aware of what it could mean for their companies, and have people see these as a viable option.
Loren Moss: It seems that the capital markets are very immature in Colombia. Private equity didn’t really exist here — the laws weren’t really set up to facilitate a private equity industry — until 13 or 14 years ago. We’ve talked with Isabella Muñoz, the director of ColCapital, the professional association for private equity in Colombia, and it seems that traditionally the economy, which had been agrarian, has been set up for family-owned dynasties.
“There’s a lot of activity. There has been M&A from PE funds coming from offshore wanting to invest in Colombia. And I think that’s definitely another viable option.” – Giraldo
Tecnoglass head Mr. José Daes has mentioned the Santo Domingo family, for example, and that’s how things have worked here and in a lot of other Latin American countries for a long time. Bringing in investment capital and market-based capital is a relatively new phenomenon, I think, in many places. Brazil and Mexico are a little bit more advanced — perhaps Chile — and Colombia seems to be now on board. But it seems to be still a relatively new thing here, and companies are not necessarily used to dealing with or navigating public capital markets.
Santiago Giraldo: Yeah, that’s absolutely right. They’re not used to it, and I think the new era of PE funds is definitely up and going. You see a lot more PE funds being interested in Colombian-based companies.
Obviously, with the investor confidence and what’s transpired in the country over the last decade or so — as far as people having confidence that the country is secure — you have everything that is required to be successful here from a political standpoint. And also from a security standpoint and from basically everything that an investor will look for.
So I think we’re up and going. There are a lot of PE funds. There’s a lot of activity. There has been M&A from PE funds coming from offshore wanting to invest in Colombia. And I think that’s definitely another viable option. I think PE funds look to have the same interest as the companies do. They want to grow the company, they want to make it more profitable, they want to establish the best practices in order for them to eventually go out of that company when it’s much more robust, when it’s a much larger company.
So, I think that if there are some good fits for PE funds to come in and join private companies, it should also be seen as a viable option. I think that is going to have its own challenges, obviously, from a corporate governance and from a control perspective, but there are definitely good fits for different companies to take advantage of what a PE fund can bring to the table, and I think we’re going to see a lot of growth out of that.
We’re already seeing it. I don’t know the numbers exactly, but the amount of PE funds that were present in Colombia and active 10 years ago versus what it is today has to be tremendously different.
Loren Moss: Oh, it’s much different. I mean, the industry didn’t exist 15 years ago in Colombia. The way it was explained to me, actually I think Chilean investors came in, lobbied, took some leadership, and got some of the laws changed, so that now there’s quite a driving private equity and private capital community. I was at their industry event a few months back in Bogotá and it had interest from the world over. There were investors from Israel, South Africa, the U.S. — very large players from the U.S. were there — and from the rest of Latin America. It was very interesting to see.
“Companies are more professional, more structured. They’re sophisticated. You’re looking at a lot of companies becoming ‘multilatinas’ as opposed to being just local-based-economy companies.” – Giraldo
It seems that Colombia has left behind that old family dynasty kind of thing, where “you’re going to be the president of the company because you’re my nephew” versus “let’s go out and get professional management and have some professional capital.” That, I think, has been one of the things that has held the Colombian economy back in the past. Now the country seems to be making good time in catching up and modernizing those markets and those structures.
Santiago Giraldo: Yeah, I think the frontiers have been opened. I think the mentality of businesspeople has changed. Like you said, I think companies are more professional, more structured. They’re sophisticated. You’re looking at a lot of companies becoming “multilatinas” as opposed to being just local-based economy companies.
So, I think it’s an evolution — and a positive one. I think there are a lot of companies growing beyond the Andean region, which is very positive. There are relationships being established with Europe, with Asia. The government, actually, is very active every year in going out and promoting Colombia so investors can take a look at what the country has to offer. I think that this year’s round was concluded about a month ago, and the president, the Ministry of Finance, and all of his team kind of lead the way. And they bring along top-class executives and CEOs from the main Colombian companies.
There’s much more of a showcase for people to know the country, to know the economy, to know each company — and I think that’s paving the way.
This interview has been edited for space and clarity.