The rapid growth of Barranquilla-based Tecnoglass (NYSE: TGLS) makes the company seem like a high-growth startup, but the Colombian-origin aluminum and glass manufacturer just celebrated its 40th birthday. In Colombia, the company is well known as a socially conscious national champion, but even though over 90% of its products are exported to the United States, the company still has only around 1% of total market share.
With its hurricane resistant and energy efficient high-technology glass products, Tecnoglass and its subsidiary ES Windows dominates the South Florida market but is just now starting to expand in earnest throughout the rest of the United States. Finance Colombia executive editor Loren Moss sat down with Tecnoglass Chief Operating Officer and co-founder (along with his brother José Manuel) Christian Daes to talk about how the company’s solid foundations underpin its high-growth outlook and recent activity.
Finance Colombia: I’m here with Chris Daes, the COO and cofounder of Tecnoglass. We are here in sunny Barranquilla, it’s always sunny here. I saw it only rain once, and boy did it rain! [Laughs].
Chris Daes: [Laughs] When it rains, it pours.
Finance Colombia: Well, it’s great to be here again at Tecnoglass operational headquarters, the factory site basically, and you guys are coming off of a great year, so first, congratulations. I already talked to (CFO) Santiago about that. So let’s talk a little bit about…I know that you just came off of a great quarter too, that was announced last week, so the good news just keeps coming. So I think that you guys obviously have been doing a good job here. I’ve seen you grow from…the first time I was here you had less than 4,000 employees, I think you’re now about 10,000, that’s amazing. And so, tell me a little bit. We won’t go too deep into the numbers, but just tell me a little bit about, let’s recap the great first quarter that you had and the strong start to the year.
Chris Daes: Well, it’s becoming usual that every quarter we give good news: that we grew, that we are doing better, that our margins are improving, that our backlog is growing, so I sometimes think that I’m living in a dream, and I wouldn’t like to wake up. The truth is the company is doing so good, we’re trying to keep it that way, we’re working hard to make sure that it continues to be moving that way. Quarter two is looking great too. So here we are, looking for opportunities, looking for new markets, looking for new geographies. Sales went up 60% in quarter one compared to quarter one last year, EBITDA almost doubled, profit almost doubled, and we think the rest of the year is going to be very similar to quarter one, only better, and we really believe that 2024 is gonna be the best year for the company ever. It’s looking that way, we get in a lot of new orders, construction is booming, still, you know, we’re getting, I don’t know if the market is slowing down or not but we are growing, maybe we are eating too much of the pie.
Which, either way is good news, and we are moving into new geographies to make sure we can continue the train.
Finance Colombia: You know let’s talk a little bit about that, because you guys already have a great strong base in Florida, as most of your sales go into the United States, but you guys now are expanding. I know that you attended a major trade show a few months ago, you guys are opening showrooms across the country, you know I was in the Bahamas, and I was at my cousin’s restaurant, which is on one of the remote islands, and I met a guy, and I said, you know, “what do you do?” And he said “I’m a Tecnoglass dealer (Palm Beach Glass Specialties)” and I said “really?!”, you know, so you guys really are growing. But tell me a little bit about the expanded footprint in this new… I guess not retail, like to the consumer, but showrooms and a new presence across the country.
Chris Daes: Well it’s a lot easier, I mean it makes a lot more sense to open new geographies, because then we take the stress off of Florida, we don’t need to, you know, worry too much about Florida. Even though, like I was saying yesterday in a phone call with some stockholders that were interviewing me, I said, “we don’t want Florida to be 50% of the pie, but we grow outside of Florida, and Florida keeps growing stronger than the outside too!” So even though we try to move away from Florida, Florida has a hold of us and won’t let us go. But anyways, we opened in South Carolina a show room, in Texas, Arizona, Manhattan, in California, and in so many places where they want our windows. And we’re coming with new products, for example what happened with the garage door; we developed a new garage door and it’s already selling two and a half to three million dollars a month. So it’s unbelievable what the company is doing, what our research and development team is doing, the production guys, the selling side is, I mean, we have no complaints, so it’s like a perfect story.
Finance Colombia: That’s great, you know I talked to Santiago a little bit about the backlog increasing, and there’s two ways that happens, you can either get more sales, or not have enough capacity. Now, I know you are getting more sales, but you guys are also taking steps to increase your capacity, your output, your production capacity here in Barranquilla, right?
Chris Daes: We have increased the capacity so much that now we can produce 20% or 30% more not working on Sundays. Before we used to invoice 30% less and have to work on Sundays, that’s how much the capacity has increased. And we are adding more, now in September and October we’ll add another big percentage of capacity that will make us be, you know, we can [our delivery times] to three weeks to be there in the States, this is gonna be unbelievable, what we are going to be able to do. We want to have our customer’s satisfaction at the maximum level possible, customers are happy, services are getting there soon, reports are coming soon, the replacements are coming soon, I mean, like I said before, this is a dream come true.
Finance Colombia: You know it’s great, and I’d love to—now is not the time, but I know you guys have a tremendous story going back to how you and your brother first started. You know, even making solar stoves, and that’s a story that I’d love to tell with you one day, even before that, even the story—your family’s story and everything like that, we won’t go into that here. But really, when you say it’s a dream come true, it’s amazing, because I know, knowing a little bit about your story and the Tecnoglass story I know that’s true on so many levels, and I want to get into kind of, some of the things that you’re going to give back. But before we do that, I want to talk a little bit about…you know I’ve been down on the floors, you guys have automation in place, you guys have state of the art facilities, all coupled with the robotics, and the computerized measurements and quality controls and things like that. So I do want to talk a little bit about: do you need to expand the output capacity here in Barranquilla to meet current demands, are you concerned about the—there’s not really a slowdown right now in the US but the growth is slowed, it’s still growing, are there any concerns about the economy right now, and how that fits into your prognosis?
Chris Daes: I like to read a lot, and one of the things I read lately from somebody in the US, was that they were in another business, and they were expanding and he got a question saying, “why do you expand if the economy might slow down?” And he says, “maybe we’ll miss it now, and with it too much today, but in a year and a half, this comes around, turns around, then we’ll be ready when the economy booms again.” We are ready for the next high, because economy always keeps; you know, slows down, goes down, and then goes up again then slows down and goes up again. If you look at the chart from the Dow Jones for example, the last 50 years, it’s always going up.
Finance Colombia: Yeah.
Chris Daes: You see it slows down, but it always comes back to normal and continues to grow. So we have nothing to worry about, we are doing it not with debt but we are doing it with the cash flow, the company doesn’t owe too much money, I think net debt is 30 or 40 million dollars. This couldn’t be better, we couldn’t be doing any better, we are not afraid of having too much capacity because, you know, we can rationalize later and wait for the good moment again, but even though we have built so much capacity, we are still sold out! I mean, we are not working on Sundays but we have enough on our hands, I mean, right now we couldn’t [do anything else] but sell glass and aluminum, I mean, we are waiting for more machines to do more windows, we are waiting for more machines to do more laminated glass and insulated glass…Simply, we are taking the right steps, and there is a lot of news that you will hear within the next few months that is going to make a lot of sense of why we are doing this.
Finance Colombia: Wow, that’s great, and I’m excited to hear that, knowing what can be coming. Now, you know, you guys always have had a great record of giving back. We are here in Barranquilla, and I think that Barranquilla does not get enough credit. In Colombia, Bogota gets a lot of attention, Medellin gets a lot of attention, but Barranquilla, I mean, you’ve got a great public-private partnership as far as the relationship between the private sector, not just Tecnoglass but other companies in the area working, there’s a lot of civic engagement that I see when I come in here, and you can feel it. Now, we talked to some people, and I think this is really important.
Outside we can see the “Ventana al Mundo”, which is a monument sculpture that you guys gave to the city, but more important than that, we talked to, I talked to various people, I talked to some people that are receiving scholarships from Tecnoglass, we talked to a lady who has been working here for 15 years and you guys went out and looked at her house to see what it needed and fixed up her house. Now I know that you’ve been shy about talking about this, but when it comes to ESG (Environmental, Social, Governance), investors want to know, so maybe if you could talk a little bit about the philosophy. I know you don’t like to brag, I know that you don’t do things to go “oh look how great we are, look at us!” I know that’s not how you do things, but I think that it’s important that stakeholders, that customers, that investors, understand the commitment that Tecnoglass has made to Barranquilla, to the Atlantic coast, and to Colombia.
Chris Daes: We definitely love to help, I mean it’s in our system, in our blood. We see every opportunity to make Barranquilla better, beautiful, exciting, I mean, we don’t have enough hands to do all the things that we would like to do for Barranquilla. We are building a third monument that is going be close to here, to the plant, in Puerto Colombia, the city next door, like five, six kilometers away from here, 3 miles, and is gonna be the most beautiful of the three sisters.
Finance Colombia: Okay.
Chris Daes: “La Ventana al Mundo” (Window to The World), “La Ventana de Campeones” (Window of Champions) and “La Ventana de Sueños” (Window of Dreams). And we are going to build a school for poor people here in La Playa.
Finance Colombia: Okay.
Chris Daes: We are going to invest 2 to 3 million dollars. We have 500 people going to the university, we pay for their scholarship, we fix 10 houses of employees every month. We invest money in them, and we have many other things that we do for people here, because we would like—I mean, our dream is, for the people at least, for the people that work with us, to make them the happiest that we could, and for the city of Barranquilla that they could be proud that Tecnoglass one day was here. We don’t want to be rich and: what did we leave? Nothing. We: “oh, we came out in the list of the richest guys,” no no no, like I say always, I don’t wanna be rich, I wanna be ‘sabroso’ (savory).
Finance Colombia: [Laughs].
Chris Daes: I wanna be you know, desired, that we were good people, that we helped the city, that we were always constantly thinking of the wellbeing of everybody around us, because that’s within our DNA.
Finance Colombia: Yeah. You know I was going to ask you to tell me a little bit about the prognosis for the coming year but you’ve actually already done a very good job about that. But one of the things I wanted to ask you, since we are on the theme of Barranquilla and the community, you guys have an advantage being here because it’s a port city, but like I said, not enough people outside of Colombia know about Barranquilla. I know that when you bring big customers and investors in here, I bet for a lot of them it’s the first time that they’ve ever been to the city.
Chris Daes: And they love it. You know, the first time they come scared.
Finance Colombia: [Laughs].
Chris Daes: And then they come alone…And they go visit Cartagena, and they come to Barranquilla, and they go to Santa Marta, and they love it. Because hey, you know, the coast of Colombia is a beautiful sight, it’s two hours away by plane from Miami for example. It’s close, it’s nice, I mean people are friendly. Obviously, we have problems, like in every city, but Barranquilla deserves better luck than we have had so far. Barranquilla, like you’ve said before, most people don’t talk about it, but having a company in Barranquilla, you export a container from here to Miami, all included, all included, from Tecnoglass’ door to Miami’s door for $1,600 a container.
Finance Colombia: Wow!
Chris Daes: $1600 a container! All included! The land and the freight. I don’t know where you can get it cheaper than that.
Finance Colombia: I know somebody that is getting shipments from Bogota to the US, and they are paying $3200 a pallet!
Chris Daes: That is simply too much, because they are located in the wrong place. That’s why locating the company in Barranquilla is so important, and that’s why Tecnoglass won’t move out of here. I have said that the day I have to move the company, I’d prefer to go.
Finance Colombia: I got you. You know, so just briefly to finish that theme up, when you talk to companies outside of Colombia, let’s say in the US, why should they consider Barranquilla for their base of operations, whether that’s manufacturing, logistics, I know that there are contact centers here, I know that you have bilingual people, I know that you have good universities…
Chris Daes: Here everything is made simple. We are not complicated people. We handle people right, we welcome the people from outside, the guys are good workers, they learn quickly, they are not complainers, they are happy, the help you out, they really love the company where they work, so it’s the perfect environment! Barranquilla is everything to us.
Finance Colombia: Wow. That’s great to know. Now, you guys are almost at your 40th anniversary, 40th birthday-
Chris Daes: Almost no, we are 40.
Finance Colombia: 40 years old, wow, wow, congratulations!
Chris Daes: 8th of March we were 40 years old.
Finance Colombia: Well, happy birthday to Tecnoglass!
Chris Daes: Thank you.
Finance Colombia: And you know, is there anything that you wanted to mention? You guys are moving so quickly, I told Santiago, it’s hard to report on Tecnoglass, because every time there’s a headline, it’s “Tecnoglass breaks new records,” I’m like, I need to, as an editor, come up with better headlines!
Chris Daes: I am sorry to tell you but you are going to keep being harassed by us!
Finance Colombia: [Laughs].
Chris Daes: And by what we do, because there are three or four things that you are going to find out soon that we are working on that will be game changers, like usual. I mean, we always try to make it good, make it right, go forward, and we will continue to work that path.