Hurricanes, Blueberries, and Cemex
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The hurricanes that have hit the Atlantic
How Peru built a blueberry empire
Cemex is among the world’s top cement companies
Make sure you check out the comment of the week at the bottom!
Hurricane Fiona brought a blow to Puerto Rico's power grid. More than a week after it hit, 33% of homes and businesses remained without power as of early this week.
The island has a tragic history of hurricanes. Since 1990, it has been hit, on average, with more than one hurricane or tropical storm each year.
That year was arguably the worst hurricane season ever — the 2nd (Harvey), 3rd (Maria), and 4th (Irma) all hit within months of each other. Irma hit Puerto Rico in August, leaving the country vulnerable and thousands without power. Maria followed Irma in September and delivered a devastating blow of $100B and 3,000 deaths to the island. Puerto Rico's population declined for two straight years in record numbers as many sought asylum in the US.
Hurricane severity and frequency seem to be increasing in recent years. Only three of the twenty costliest hurricanes recorded by the NOAA, happened before 2000.
The Climate Tech industry is quickly growing around the world and recently Latin America. Companies in this industry aim to reduce greenhouse gas emissions through technology. Most notably, Northvolt is a Swedish battery manufacturer worth $11B that aims to “make oil history.”
Will we see others emerge to solve Latin America’s climate problems? Puerto Rico is still struggling to recover from the 2017 damage, with a lack of funding, and now, Fiona. In an effort to become less vulnerable to outages, The Puerto Rico Electric Power Authority has set an ambitious goal for the island to produce 100% renewable energy by 2050.
Carlos Gereda was the spark that lit Peru's blueberry boom of the past decade. He asked a simple question: "can blueberries grow in Peru?" In 2006, he brought 14 varieties from Chile to see which ones adapted well to the Peruvian climate. He narrowed it down to four and, in 2009, founded Inka's Berries. The company's service consisted of assisting the development of plantations that adhered to the growing standards Carlos had conceived. The blueberry revolution ensued.
In a very short time, Peru became the world's number two producer of blueberries and the world's number one in exports and per capita production. Seriously, the growth resembles that of bitcoin's value. In 2010, Peru produced 30 tons of blueberries; in 2020, 180K. That means that production multiplied by more than 6,000x in ten years. Blueberries are now the country's 2nd most significant export, just behind grapes.
This new industry ($1B in 2020) that was born seemingly out of nowhere is being led by corporations that can afford the high cost of entry. Most notably, Camposol and Hortifrut hold a combined 34% of the market.
Peru's climate allows for year-round production, giving the country a competitive edge over seasonal agriculture. The productivity of Peruvian land is 13 tons per hectare. The world's top player, the USA, produces 8 tons per hectare. Given the massive competitive edge, we believe it's only a matter of time before Peru becomes the blueberry capital of the world.
Cement Industry 🧱
Cementos Hidalgo was founded in 1906 in the city of Monterrey with the opening of its first plant. Competitor Cementos Portland Monterrey began operations in 1920. In 1931, the two companies merged, becoming Cementos Mexicanos, or Cemex. The company listed in the Mexican stock market in 1976 and on the NYSE in 1999.
Today, Cemex is one of the largest cement companies in the world. It currently operates in 50+ countries with over 41K employees and has an annual production capacity of 93M metric tons of cement— about 7% of the global cement production.
At the time of writing, the company had a market cap of around $5B — making it the 7th most valuable cement company in the world. The fact that Cemex has such a small market cap and such large revenues ($14.5B, almost 3x their market cap), as compared with other cement companies, could be a signal that Cemex's shares are undervalued.
To illustrate it, we flipped the formula on our chart — a bigger bubble indicates that a company is undervalued. Still, it’s important to note that there may be other factors playing out and revenue shouldn't be taken as the sole indicator of a company's value.
Cemex recently announced its goal of delivering net-zero CO2 concrete globally by 2050. It'll be interesting to see how this strategy plays out and how investors react over time.
Realize Latin America’s Potential 🚀
This week’s opportunity:
Cemex has hundreds of jobs available throughout LatAm on its careers page. Check them out here.
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That’s all for this week 👋
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