Sao Paulo — For over 60 years, WEG (WEGE3) has had only three CEOs. Alberto Kuba, the fourth to lead the Santa Catarina-based industrial conglomerate, says his biggest challenge is maintaining growth rates without disruption, while remaining attentive to megatrends in the economy, such as the energy transition.
Having been with the company for 21 years, Kuba took on the CEO role in April, succeeding Harry Schmelzer Jr., who led for 16 years. Previously, only one of WEG’s founders and his son held the position at one of Brazil’s largest and most international companies.
“A CEO who stays for just four years, for example, doesn’t have a genuine learning curve. The world changes significantly over a period of seven to ten years, and we invest in our businesses for the long term,” Kuba stated in the interview.
In the early 2000s, WEG generated R$ 1 billion in revenue and had no factories outside Brazil. Since then, the Santa Catarina manufacturer has embarked on an extensive internationalization process, now boasting 63 production facilities worldwide and revenue of R$ 32 billion.
Kuba, who previously oversaw operations in China and most recently served as superintendent of the Industrial Electric Motors division, explained that WEG operates through seven divisions, each with distinct cycles and capital expenditures.
“When I became CEO, I spent considerable time understanding and connecting the dots to build the WEG of the future. We aim to grow without disruption, and all investments must align with market megatrends,” he said.
He emphasized that WEG will continue focusing on developing new technologies. “We’re not a company that will change the world with disruptive innovations. Instead, we want to create technologies that assist businesses across various sectors and stand out in the future.”
The executive noted that the company has experienced double-digit growth in recent years, often achieved through acquisitions.
“Our internationalization strategy has two pillars: first, M&As [mergers and acquisitions] involving mature businesses in segments where WEG is already a leader. The second pillar focuses on acquiring smaller companies with advanced technologies.”
The Santa Catarina firm recently acquired a US operation specializing in BESS (Battery Energy Storage System). “WEG is placing significant emphasis on the North American market, especially with local production incentives,” Kuba explained.
According to the executive, the company has already invested in increasing transformer capacity in the U.S. and purchasing two new electric motor factories.
In addition to the U.S., WEG is also seeking opportunities in the Indian and European markets. “We aim to provide more value-added solutions from Portugal. We have also acquired niche product factories in Italy and the Netherlands. China remains on our radar, even with its economic slowdown. WEG continues to make progress there.”
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The conglomerate has undergone three phases of internationalization. The first began in the 1970s when the company started exporting its products. In the mid-1990s, WEG opened subsidiaries abroad, reducing its reliance on distributors for overseas sales.
The third and most significant phase of internationalization took place in the early 2000s with the acquisition of competitor factories, starting in Mexico, Argentina, and China.
“There were numerous challenges in this process, related to culture and understanding the local market. WEG acquired companies in segments where it wanted to scale operations, but it took time to learn how to operate abroad. We lost money and people,” he recounted.
WEG’s most recent acquisition occurred in Turkey, where it purchased Volt Electric, a company with a production capacity of one million motors annually, for $88 million. This marks WEG’s 25th acquisition outside Brazil. The company currently operates 63 factories in 17 countries.
In September, WEG announced a R$ 670 million investment plan in Brazil and Mexico over the next five years. In Mexico, the plan includes expanding production capacity and constructing a new plant. In Itajaí, Santa Catarina, the company aims to double its wire production capacity, and in Guaramirim, also in the state, it plans to expand its foundry area.
WEG also announced a separate investment plan of approximately R$ 500 million to increase transformer production capacity in Brazil, with resources allocated to factories in Betim, Minas Gerais, and Gravataí, Rio Grande do Sul.
“The transformer business has grown significantly. [This investment] is a way to supply the market with competitive prices,” Kuba said.
For analysts at Itaú BBA’s equity research team, the company’s investments reinforce the outlook that WEG’s margins indicate growth potential.
According to the analysts, this expansion is underpinned by a positive pricing environment for transformers in North America and an improved revenue mix.
“Moreover, this announcement highlights the company’s ongoing efforts to vertically integrate its operations and enhance its competitive advantages. We maintain our optimistic outlook on WEG,” they noted.
Involved the in Energy Transition
Nearly 60% of WEG’s revenue in 2023 came from products launched in the past five years, one of the metrics the company uses to drive innovation. “This isn’t something we pursue at all costs, but we focus on technological innovation,” Kuba explained.
He mentioned that R$ 838 million was invested in research, development, and technological innovation in 2023, with particular emphasis on areas related to energy transition.
“We have invested in a complete line of charging stations. We are working with automakers to evolve toward larger chargers and those that can be used in consumers’ homes.”
The executive indicated that WEG will concentrate efforts on electrification and the digitalization of production lines in the industry. “We don’t want to reduce jobs at companies. The idea is to eliminate operations that are hazardous and highly repetitive.”
In his assessment, the energy transition is an irreversible path, although the speed of the process remains uncertain. “We will increasingly use products with greater energy efficiency,” he stated.
Riding the Wave of Opportunities
Kuba noted that in the past twenty years, the world has faced numerous crises—including the U.S. subprime mortgage crisis, which led to the global financial crisis of 2008, the oil crisis in 2015, and the COVID-19 pandemic. “It’s challenging to anticipate challenges greater than those we have faced in the last twenty years.”
With the Paris Agreement on greenhouse gas reduction signed at the end of 2015, he pointed out that energy transition has gained more traction in corporate agendas, albeit at a pace slower than expected.
“To meet the emission reduction targets by 2030, companies will need to invest two to three times more than what was invested in 2023. These are opportunities that WEG will capitalize on,” the executive stated.
“My role as CEO is to prepare the company to seize this period, and we are developing new products across various geographies,” he added.
To provide assurance in this process, he emphasized that cash reserves are one of the company’s strengths. “Having a strong cash position allows the company to weather turbulent times. Generally, interest rates have been high globally in recent years, but we have maintained robust cash reserves.”
