Tuvansa Corp. straddles U.S.-Mexican markets

 

BY MORRIS R. BESCHLOSS

PVF and economic analyst

Mexican-based Tuvansa Corporation has the unique distinction of owning and managing thriving PVF distribution entities in both Mexico and the U.S. It could be said that Tuvansa, which owns American-based Val-Fit Inc., is a superb example of how the North American Free Trade Authority has benefited businessmen on both sides of the border.

Founder Ismael Grinberg started Tuvansa 50 years ago in 1956 in order to meet the growing demands of Mexico’s industrial sector. Tuvansa has been a PVF distributor with an unmatched reputation for quality products and straightforward dealings. This reputation has extended globally throughout the years. In the past, Tuvansa used to stock seamless and welded pipe alongside valves, but as the company has grown so has the product line offered. Currently, Tuvansa stocks seamless and welded pipe, buttweld fittings, flanges, valves, forged steel, hollow bar, and fire protection products. The company distributes, sometimes exclusively for the Mexican market, from distinguished manufacturers such as Tenaris, Hylsa, Velan, FNW, Victaulic and Walworth, among others.

Tuvansa has four locations that strategically cover Mexico with total warehouse and pipeyard space of over 450,000 square feet. These warehouses are located in Monterrey, Mexico City, Mexicali and Veracruz. Tuvansa currently employs more than 150 employees, many of which have great longevity within the company.

Grinberg also started Val-Fit 27 years ago as a master distributor of buttweld fittings, flanges and forged steel. Although not the size of Tuvansa, Val-Fit has also enjoyed a distinguished reputation within the industry. Val-Fit is mainly an import house focusing on quality manufacturers. Val-Fit remained exclusively on the West Coast until the Grinbergs decided to open a warehouse in Atlanta in 2004. This venture has been extremely successful and the idea is to continue growing Val-Fit to its full potential. Currently, Val-Fit stocks product in its two locations with more than 120,000 square feet of warehouse space. Not only does Val-Fit stock commodity buttweld fittings and flanges, the company also stocks large OD fittings and flanges and heavy wall products, too.

Grinberg has also been involved on the manufacturing side. There is a small machining facility in Mexico called CISA that makes forged steel fittings, but more importantly, Grinberg had Empresas Riga from 1989 to 2001. Riga was started in 1989 because Mexico did not have a domestic manufacturer of butt-weld fittings and the factories successful rise was quick and impressive. Within five years, Riga had become an important exporter manufacturing close to 15,000 tons per year with most of the production sent to the U.S. In 2001, the Grinberg family sold Riga to Tenaris.

Future plans include growing both Tuvansa and Val-Fit, with a serious focus on growing the synergies that have developed between both companies. For example, Tuvansa has become a very good customer of Val-Fit while Val-Fit has helped push Tuvansa into newer markets. Also, there is good opportunity to grow exports into Central and South America. Grinberg still serves as president of all companies with sons Gyl and Roy serving as operating director and commercial director, respectively.

We are privileged to publish our personal Q&A with Ismael Grinberg.

Beschloss: It’s obvious that you and your sons are totally committed to broadening the scope of your business in both the U.S. and Mexico. Although Val-Fit preceded NAFTA by 14 years, was freer Mexican/American trade a motivation for expanding stateside?

Grinberg: Although NAFTA certainly helps the trade between both countries, it hasn’t been, and isn’t, a driving factor for expanding our business. We have two solid companies with great reputations that have potential for growth. As any business owner, you always want to grow your business and we see a lot of potential in the U.S. We must continue to increase our geographical presence and our product range.

Beschloss: As one of the largest PVF distributors in Mexico, has the impetus of your Mexican success accelerated your U.S.-based expansion?

Grinberg: I don’t think so. Both companies have been very independent of each other and our success in Mexico does not play a major part within Val-Fit. Probably the biggest driving force behind our U.S. expansion is the fact that both my sons now live in the U.S. They are both active and searching for ways to grow and improve our business.

Beschloss: What prompted your divestiture of weld fittings manufacturing and your concentration strictly on distribution?

Grinberg: Empresas Riga was a great company that we were very proud of and our decision to sell was based on many factors. At the time, the steel markets were very weak and we were competing with other Asian factories that did not manufacture fittings with the same quality. Unfortunately, we were still grouped as an “import fitting” because we lacked some of the AML approvals. Also, we had some important conflicts of interest since many of our customers in Riga were our competitors in Tuvansa and Val-Fit. During this time, Tenaris showed interest in acquiring the factory and we really believed Riga would benefit from this transaction, making it a win-win-win situation for our family, for Tenaris and for our Riga employees.

Beschloss: With both your sons, Roy and Gyl, spending substantial time in the U.S., are future plans afoot to focus more on your U.S.-based growth?

Grinberg: I think we will try and grow both businesses, but I do believe there is more immediate growth potential for us in the U.S. Tuvansa is a mature 50-year-old business that effectively covers Mexico. Although Val-Fit is an established 27-year-old company, there is a lot of territory we do not currently service. We have been very satisfied with our recent venture into Atlanta giving us access to the East Coast.

Beschloss: Would you please comment on the growth of Mexico’s industrial economy in 2007, and your expected growth within it? Will PEMEX reverse the trend of declining oil reserves and generate future growth?

Grinberg: We believe Mexico will have a solid 2007, assuming some of the political turmoil continues to dissipate from last year’s election. As in the U.S., Mexico’s PVF sector has been booming and should continue to be strong. As far as PEMEX goes, there is a lot of work to be done, much of which is stagnant due to political bureaucracy. I hope PEMEX becomes efficient before it’s too late.

Beschloss: Since you are the legendary founder and president of all Tuvansa units, will you personally support your sons in expanding your fast-growing U.S.- based enterprises?

Grinberg: The three of us are very involved in both businesses and any important strategic decisions will most likely be discussed collectively. My sons have the ability to expand with or without me, but we all believe three heads think better than one.

Beschloss: Is Tuvansa continuing to be the beneficiary of Mexican/American cross-border trade? Does its future look bright?

Grinberg: Tuvansa did somewhat benefit from NAFTA, but the main benefactors of these trade agreements are Mexican exporters. It really opened the doors for Mexican manufacturers into the massive American markets. Empresas Riga was greatly helped by NAFTA as import duties into the U.S. were reduced to 0% in a few years. Tuvansa mainly benefited because the overall Mexican economy improved thanks to NAFTA.

Beschloss: Your expansion into Atlanta and the Southeast seems well timed to coincide with the rebound of the PVF sector. Are further U.S. expansions underfoot?

Grinberg: We are considering expanding into other areas, but as of now, we don’t have any plans in motion. The timing of an expansion is very important, and although an economic rebound within the sector helps tremendously, timing for us depends on many other factors such as our ability to hire the right management team.

Beschloss: Since one-third of all U.S. PVF business is transacted within 400 miles of Houston, do you have an eye on expansion into that lucrative market?

Grinberg: Eventually, I believe we will need a presence in Houston. Texas is a vital location for PVF domestic consumption, and also extremely important for trade into Mexico. These are two areas that are very important to us and would generate significant growth.

Beschloss: With global U.S. exports setting new records in 2006, are you bullish on that sub-sector providing significant growth for both your Mexican, as well as U.S. distribution centers?

Grinberg: U.S. exports don’t affect our distribution centers as much as the overall demand and health of the PVF markets in the U.S. and Mexico. Also, global markets and overall pricing levels are big determinants. The enormous worldwide demand has helped us grow in the last few years and we don’t anticipate 2007 to slow down in any significant way. We are bullish on 2007 being a great year for us and the entire distribution sector.

Morris R. Beschloss, a 50-year veteran of the pipe, valve and fitting industry, is PVF and economic analyst for The Wholesaler.