Interview with Adélio Barofaldi, Director of Rovema Group

First of all, I would like you to introduce the Rovema Group (history, activities, etc).

The Rovema Group is a family business that has been operating in Rondônia for 27 years. We have 900 employees in all sectors of Rovema’s activities.

We are Scania and Iveco trucks dealers, we have two automobile stores, one in Porto Velho and another one in Vilhena. We have two REX franchises (rent-a-car), one in Porto Velho and another one in Rio Branco do Acre. We also have a company that rectifies and does motors maintenance (Bosch, ZF and Delfi franchise), we have a bus rental service company, we have a Suzuki dealership in Porto Velho, etc.

Our company is professionalized in every area. Our accounting, finance, legal and HR management is centralized in the holding company. All companies within the group have only commercial activities: we have an executive person that takes care of the Scania business, another one takes care of the Fiat business; we have an executive taking care of a particular operational area/activity of our group.

In the Fazenda Madeira we have an activity of beef cattle. We also have there a forestry management area where we explore wood in a sustainable and certified way.

We also have a part of thermic energies generation. Due to governmental policies that want to end the use of diesel it’s an area that tends to cease. So we already have two approved projects to build two small hydroelectrical plants; one with a capacity of 12 megawatts and another one with a capacity of 10 megawatts.

Those are the activities of ROVEMA group at the moment.

From those activities, which represent the core business of the group? Which one(s) would you like to give a special emphasis in the future? Which of them have the greatest potential?

All our companies have grown approximately 117% from 2010 to 2011. In 2012 the growth was not so high: it was 8% only. We had such a huge growth in 2011 due to the peak of the wood industry: they started operating in 2009 and they needed huge amounts of services and vehicles.

Today we have more than 100 buses transporting employees to the factories; we have more than 500 rental vehicles.

Our greatest goal for 2013-2015 is to open borders: we have to get into other states like, for example, Manaus (with the road to Manaus opening soon) and we also have to get to the Pacific through logistics.

Our main focus is in logistics, then in the power generation and in the forestry management. All other segments are already consolidated. Of course I will have some difficulties like, for example, in the bus rental business and I will have to find other alternatives for the segment. I’m expecting to have some difficulties in the car rental segment as well. All these difficulties are going to be created by the closure of the wood industry. We are thinking of taking our business outside the state of Rondônia due to the closure of this industry.

What would you identify as the biggest challenges for the group?

In the last 2 to 3 years our biggest challenge has been finding well-qualified labor, simply because our state is small and not industrialized. As for the commercial sector, we want to maintain the level of billing.

Are there any investment opportunities for national and international investors in the Rovema Group? Are you looking for any partnerships?

First of all, I would like to talk about the region as a whole. Rondônia is a new agricultural, mining, fishing and wood center. It has great potential but we don’t have the technology. Rondônia would need to have a partner who will provide capital. Our state is rich in terms of the abundance of natural resources found here, but at the same time the state is poor in terms of (industrial) knowledge. We have plenty of raw materials going out of the state to be transformed / industrialized while we could have been doing all that right here in Rondônia.

In terms of our group, we have great investment opportunities like, for example, the soya transportation, because we have lots of external transport companies coming into Rondônia to transport our goods. If we invested and acquired 100 or 150 trucks, we would be able to transport the soya beans by ourselves.

We would also like to invest in the logistics area to create a route to the Pacific and to the outside world. Nowadays when you need to export, you go from Rondônia to Paranaguá and you have to drive 3,200 km to get there. But from here to the Pacific you have just 1,800 km of road and you can in this way save almost 50% of the costs related to the road transport.

Just for the two hydroelectrical power plants we need an investment of roughly US $50 million. To do that we need a partner because Rondônia does not have any big development bank and thus we have to depend on the banks outside of Rondônia in order to make these big investments possible.

Those are all great opportunities; all our existing projects – depending on the area - need an investment.

What would be your dream for the group in the next 3-5 years?

As a family company, our greatest challenge and a dream at the same time is to consolidate the business for the next generation. We have to make the family understand and be fully aware of the activities as a whole. We have 12 economic activities and it’s difficult to tell young people and make them understand these activities as a whole. These young people are 20 to 30 years old and we need to prepare them to understand the (institutional) aspects of each of the group's economic activities.

Rondônia has many challenges in terms of production. Our group has grown a lot in the past few years - just during 2008-2012 our employees went from 300 to 900 – and that changed everything in terms of structure and organization. The current period is a consolidation period.

The greatest challenge for us and all other businesses in Porto Velho is the end of the wood industry. We have to think about the reutilization of the structures we already have in some other ways. What can we do with the buses? We can obviously use them for tourism or we have to look for other markets outside Rondônia. As for the trucks, we can use them for our logistics projects, and as for the farm, we will transform it in agribusiness with the production of cattle, fish and wood.

Our future is consolidation and finding new markets outside Rondônia.