The physical distance between Karlsruhe, home to German mechanical engineering company Romaco, and Brazilian pharmaceutical company Vitamedic’s base in Anápolis, is considerable by any measure: 10,000 kilometres (most of it the open Atlantic) on the map or a flight of 15 hours or so by plane. Numbers like these soon cease to have any relevance in the 21st century though if – as in this case – there is a good deal in the offing.
Vitamedic produces generic pharmaceuticals for the Brazilian market, the world’s sixth largest, which is already worth approximately US$ 22 billion and continues to grow at a significant pace. Brazil’s economic engine may have been stuttering over recent years, but that has not prevented more than 40 million Brazilians moving up into the middle class – and demand for pharmaceutical products has increased as a result. Generic medicines, whose active ingredients, like ibuprofen and cetirizine, match those of pharmaceutical products that have already gained regulatory approval, are effective, thoroughly proven, relatively inexpensive and, therefore, very popular. Vitamedic’s share of the Brazilian market rose by 11.1 percent in 2018, well ahead of the market as a whole, and with this trend expected to continue, the company has a compelling case for investment and expansion.
The share of generics in the Brazilian pharmaceutical market grew by 11.1 percent in 2018 – considerably stronger than the market as a whole.
“It sounds trite, but proper planning and realisation are absolutely essential,” observes Gabriel Steiner as he watches the rain falling over São Paulo from the window of his office. “And there’s nothing simple about proper planning and realisation.” Steiner, a joint national of Germany and Brazil who leads Helaba’s local representative office, played a central role in the Romaco-Vitamedic deal. Vitamedic had decided that mechanical engineering company Romaco was the ideal choice to supply the automated packaging lines for tablet blister packs (including cartooning systems, scales and palletisers), the packaging line for liquid products and everything else it needed for its new production facility. The order ran to over € 10 million in total.
"The loan from Helaba was extremely important for us, mainly because of the long payment terms and the interest rate, which was much more attractive than the options offered by our local banks."
Milton Penna, Grupo José Alves
“We were very impressed with the performance and operational reliability of Romaco’s equipment and by the technical support they were able to offer us in Brazil,” explains Milton Penna, CFO of Vitamedic’s parent company Grupo José Alves. “The loan from Helaba was extremely important for us,” he continues, “mainly because of the long payment terms and the interest rate, which was much more attractive than the options offered by our local banks.” Vitamedic’s financial resources would not have stretched to the advanced German technology without the relatively long repayment period of nine years, meaning that it would have had to satisfy itself with less innovative and efficient machinery from local suppliers.
"The Vitamedic project is the Romaco group's biggest single transaction to date. We would never have managed it without the Helaba team's perseverance in structuring the complex loan. We were greatly impressed with their commitment.
Guido Bourtscheidt, Head of Finance, Romaco Holding
Vitamedic was reluctant to compromise – and once it had Helaba on its side there was no reason for it to do so. “We took on the role of advisor and bridge-builder to secure the export finance,” Gabriel Steiner recalls. “Our understanding of the Brazilian market and our knowledge of the local structures and mentality proved invaluable.” The questions that had to be asked in connection with the structuring of an export finance deal backed by the German government’s Hermes programme (an export credit guarantee system for exporters and banks) were many and detailed and required a huge amount of discussion and analysis: How are Vitamedic and Grupo José Alves organised, financially and structurally? How good is the company’s credit standing and what are its future prospects? How might the credit risk be adequately assessed and how can transparency and legal certainty be established for all of the parties involved?
"Our understanding of the Brazilian market and our knowledge of the local structures and mentality proved invaluable in arranging the export finance."
Gabriel Steiner, Helaba São Paulo
Every one of these questions needed an absolutely watertight answer too, because the deal could not proceed without the Hermes guarantee. The fact that Grupo José Alves had never arranged a Hermes-backed buyer’s credit before meant that it was all hands on deck back in Germany as well and while Gabriel Steiner was assisting his new customer on the ground in Brazil, Diana Häring and her team at the head office in Frankfurt continued to puzzle over the contract. “We spent the best part of a year working out how to structure the transaction. And it certainly paid off,” declares the head of Helaba’s Structured Trade & Commodity Finance department. “We always welcome good, sustainable business of course,” Gabriel Steiner adds, “and we are keen to pursue more of this type of deal in Brazil with our representative office in São Paulo in the future.”
"We are keen to pursue more of this type of deal with our representative office in São Paulo in the future."
Gabriel Steiner, Helaba São Paolo
Providing the best possible support for SMEs like Romaco is a particular priority for Helaba in its capacity as the S-Group bank for the Sparkassen. New business in this area often begins with an inquiry to the Sparkassen thanks to the close contacts they maintain with SMEs in their district – and so it was with the Vitamedic deal. Kreissparkasse Biberach is one of several Sparkassen that work with Romaco alongside Sparkasse Pforzheim Calw. “There’s a strong foundation of trust in our relationship with Romaco,” reports Tobias Rommel, Head of Kreissparkasse Biberach’s International Business department. He and his team consider it perfectly normal to support their SME customers in all aspects of their international business – after all, inquiries about structured finance of anything from € 30 million to € 100 million are not uncommon in the small- and mid-cap area and there are corporate finance specialists ready in-house to respond. Once Romaco had explained to him what it wanted, Rommel wasted no time in bringing Helaba on board to help with the loan. “A standard loan contract wouldn’t have been much use,” he says. “Everyone involved put enormous time and creativity into the project and Helaba was very prudent in its management, all of which was essential to achieving the successful deal we delivered.”
“The deal was a success because everyone involved put enormous time and creativity into the project and Helaba was very prudent in its management.”
Tobias Rommel, International Business Sparkasse Biberach
Helaba helps German and European companies, especially those that bank with the Sparkassen, to break into the Latin American market and expand their local business from its base in São Paulo. It offers attractive borrowing options plus advice on the local business culture too and can assist with introductions to other companies, public authorities, law firms and accountants if necessary. Helaba is also developing its business with Latin American financial institutions wishing to expand their product range or gain better access to Europe.
São Paulo is Latin America’s main financial hub and one of the most important foreign locations for German industry. The German-Brazilian Chamber of Commerce and Industry, which links the Brazilian and German markets, has 1,200 members.
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