INDUSTRY VOICES

January - February 2021

Nearly 70 years ago, knowing of the the existence of coal deposits deposits in the north of Coahuila, the U.S. executive Harold R. Pape American executive Harold R. Pape to install a steel plant. He never imagined the scope of his his project would have years later.

This plant, located in the city of Monclova, Coahuila, became what is known today as Altos Hornos de México. became what is known today as Altos Hornos de México. When the latter became a state-owned company, and in view of the lack of local of local suppliers, it was necessary to create businesses that would provide service to both the steel mill and the entire industrial sector in the city of Monclova. This was the beginning of Grupo Industrial Monclova, which today has four divisions: Industrial, Mines and Limes, Energy and Commercial, and more than 10 companies, among them Construcciones Mecánicas Monclova (commsa), gg Synergy, gpa Energy, rebasa, Caleras Bertrán, Automotriz Monclova and Industrial Vendor.

Created in 1951, commsa was the Group's first business. "It began as a maintenance and machining service, and metal-mechanical service for Altos Hornos," says Napoleón Cantú Treviño, CEO of the Group. Napoleón Cantú Treviño, CEO of the Group. It then ventured into the manufacture of components for different sectors of the transportation and metal-mechanical industry, including locomotive chassis and frames for subway cars. for the Metro. Today, it is part of the Group's industrial division and manufactures parts for large transnational manufactures parts for major transnational companies such as Bombardier, Caterpillar, Rhino Pro and The Greenbrier Companies. Greenbrier Companies.

Details of each division

In the Industrial division of the Group, a joint venture and alliance In the Group's Industrial division, there was also a joint venture and alliance with the U.S. company The Greenbrier Companies, forming GUNDERSON-GIMSA S.A. de C.V., with which about 12 years ago a plant was a plant to manufacture railroad cars, mainly tank cars, was installed in Monclova, which today is positioned as the manufacturing site of the largest railroad car manufacturing site in the world. This is also the birthplace of gg Synergy, the group's company company that supplies both internal and external heads for the tank cars.

The Mines and Limes division has plants and quarries plants and quarries in different parts of Mexico, where it Mexico, where it produces lime for the construction, chemical and mining industries, as well as for the steel industry, serving customers such as Altos Hornos de México, Ternium, Deacero and ArcelorMittal. the steel industry, serving customers such as Altos Hornos de México, Ternium, Deacero and ArcelorMittal.

The Group's Energy division is focused on the manufacture of oil rigs. A the Group's expertise in steel processing and heavy parts in Monclova, it was decided to set up a plant in Tampico to and heavy parts in Monclova, it was decided to set up a plant in Tampico to manufacture these super structures, under the name of commsa Tampico. Tampico. Thus, with more than 40 years of experience in the manufacture of oil platforms that go to shallow waters, especially in the Gulf of Mexico, commsa Tampico has positioned itself as one of the most experienced companies in the sector, says Cantú. experience in the sector, says Cantú. In this division also includes gpa Energy, which is dedicated to gas extraction and the to gas extraction and the construction of gas pipelines and infrastructure for the hydrocarbon industry.

WITH THE AIM OF TO ACHIEVE ALL THESE BENEFITS BENEFITS FOR THE COMMUNITY AND MAINTAIN THE FAMILY'S LEGACY, THE PAPE FOUNDATION FOUNDATION ALLOCATES 30 MILLION 30 MILLION PESOS A YEAR TO ITS DIFFERENT PROJECTS.

The Commercial division is focused on marketing and servicing Ford vehicles maintenance of Ford vehicles with an automotive agency located in the city of Monclova. In addition, with the Industrial Vendor Industrial Vendor points of sale, the Group supplies a variety of welding and safety welding and safety equipment, spare parts, tools and consumables for the and consumables for the metal-mechanical industry.

Development in the Mexican energy sector

During 2020, the Group completed construction and shipped two oil production production platforms (Satellite and Central) for the Argentine international oil company Argentine international oil company Hokchi Energy, which were installed in the Gulf of Mexico off the coast of Tabasco. off the coast of Tabasco. In addition, the construction of another platform for Pemex was completed, which was delivered a few weeks ago as a result of a contract with the company. a few weeks ago as a result of a contract that was won as part of a consortium as part of a consortium with other companies.

Recently, commsa also built a platform for Italy's eni, one of the first international companies to start oil production in the Gulf of Mexico as a result of the Energy Reform. Gulf of Mexico following the Energy Reform.

Cantú Treviño says that one of the biggest challenges that commsa Tampico faced during the commsa Tampico faced during the construction of these platforms during 2020 was to maintain operational continuity, taking care of the health of its people during the Covid-19 pandemic. continuity, taking care of the health of its people during the Covid-19 pandemic. "It was very difficult at the beginning, because there was a lot of uncertainty a lot of uncertainty about the best way to operate in order to take care of the health of our care for the health of our personnel in the face of the risks of Covid-19 infection," Cantú Treviño shares. He says that the the yard where the platforms were manufactured had around 1,400 people working at an accelerated pace in order to meet the stipulated delivery dates. to meet the stipulated delivery dates.

Likewise, another challenge was operating with a global supply chain. "Some of the components for these platforms came from Europe, and at the time, due to the pandemic, some components were Europe, and at the time, due to the pandemic, some of the components were affected by the delivery times were affected and contingency plans had to be contingency plans had to be developed so as not to be affected," continues Napoleón Cantú Treviño. Napoleón Cantú Treviño.

Regarding the Group's social and economic impact, Cantú Treviño Cantú Treviño comments that both in Tampico, where the platforms are manufactured, and in the places where they are installed in Tampico, where the platforms are manufactured, as well as in the places where they are installed, "there is a direct and indirect economic spillover, as well as a direct and indirect and indirect economic spillover, and also a very important contribution to the communities. to the communities, very important".

Health, education and social responsibility social responsibility

Continuing with the legacy of its founder, and which continues to be strongly promoted by the Group's president, Mr. Gerardo Benavides Pape, the organization has several social responsibility initiatives, aligned to achieve the Group's Objectives. Gerardo Benavides Pape, the organization has several social responsibility initiatives aligned to achieve the UN Sustainable Development Goals by 2030. Sustainable Development Goals by the year 2030. Among these initiatives are health programs, scholarships, sports facilities and community support programs. These initiatives are carried out in conjunction with the Pape Foundation, A.A. with the Pape Foundation, A.C., which was created in 1963 as a result of the work for the benefit of the Monclova community that the community of Monclova that Harold R. Pape and his wife, Suzanne Lou Pape, had been doing since 1944.

In the health area, mobile medical units have been installed for the diagnosis and follow-up of ailments among employees of Grupo Industrial Monclova. employees of Grupo Industrial Monclova and their their families, mobile units for the diagnosis and treatment of Covid-19, as well as support for health programs in the different communities where we operate. support for health programs in the different communities where we operate.

In the area of education, we created the Líderes program, which provides young talents with a 100% scholarship for educational expenses and living expenses to complete a university degree at the Tecnológico de Monterrey, Campus Monterrey, which ensures them a place in the organization once they graduate, in order to continue developing their skills and, at the same time, contribute value to the Group. their skills and, at the same time, contribute value to the Group.

Parques Xochipilli and Museo Biblioteca Pape, associations of the Pape Foundation, carry out different events and activities focused on education, culture, sports, science and technology, science and technology. Among them, free attendance to the Parques Xochipilli, considered a lung of the city and which receives more than 900,000 people every year. In addition, there are children's and youth soccer tournaments, with an annual participation of more than 250 teams. participation of more than 250 teams, and courses and workshops that benefit more than 1,000 children and young people.

Foreign investment in Mexico

For Cantú Treviño, the Hokchi project is a message to international companies international companies that have been operating in Mexico for a short in Mexico that there is a base of suppliers in the country that operate with "capacity, talent and seriousness that "they can do things well and competitively".

And while today the world is going through a digital era, Mexico has great Mexico has great competitive advantages in the engineering and manufacturing sectors, with highly engineering and manufacturing sectors because of its highly specialized personnel and its proximity to U.S. markets. He assures that, although today Pemex has a significant debt, accumulated over the years, it is one of the strongest companies in the world. strongest companies in the world.

But in order for there to be greater foreign investment, and for Mexico to regain its status as a world-class player and continue to grow in the energy sector, the first step is for Pemex to achieve a healthy financial structure and seek mechanisms to promote public-private mechanisms that promote public-private, domestic or foreign investment, offering legal certainty for all parties, says Cantú Treviño. Cantú Treviño.

The second step is to strengthen the sector through models such as the triple helix, in which there is a "better linkage of companies with the government and universities," which have been applied in other industries with great success. success. Cantú cites as an example the automotive sector, in which Mexico has made a very strong commitment to develop as a major manufacturer, and around which there is a whole ecosystem of suppliers, technologies around which there is a whole ecosystem of suppliers, technologies, programs specialized university programs, among other factors that the industry requires. industry requires.

New opportunities for Mexico and the Group

For the time being, there is great potential for Mexico in the industrial sector, thanks to its competitiveness, its privileged location with respect to the United States and the fact that it recently surpassed China as the main exporter to the neighboring country. "The tension that The tension in the U.S.-China trade relationship opens up opportunities for Mexico. opens up opportunities for Mexico. And it also gives investors a little more certainty certainty for investors with the new trade agreement that was signed a few months ago," Cantú Treviño said.

The Group's vision is to continue growing. Its focus is, primarily on the industrial sector and transportation applications. applications: "That is where we are concentrating most of our efforts," says Cantú Treviño. efforts," says Cantú Treviño. Secondly, towards the energy and infrastructure sectors, mainly with the manufacture of platforms and modules for the the manufacture of platforms and modules for the oil sector. "Mexico's potential and the current government's commitment to this sector is important and represents opportunities for us. The potential of Mexico and the current government's commitment to this sector is important and represents opportunities for us, because we are perhaps one of the companies with more years and experience, with more platforms manufactured. This can continue to position us," Cantú assures.

In addition, the Group is already planning to enter the agricultural sector, with the production of chemical products for the field, in partnership with a Guatemalan company. with a Guatemalan company. These efforts will begin this year.

The Group joins CAINTRA

The Group recently became a member of CAINTRA. Regarding the benefits Cantú Treviño reflects on the benefits that the company has received so far: "We see this benefit of representativeness and we see also communication opportunities: the power, through media (such as Transforma), to have access to the (such as Transforma), to have access to clients, suppliers, to all of CAINTRA's networking. CAINTRA's networking. Likewise, "all the training part, the programs they have and how their different Commissions and Councils are integrated is something in which we can participate and from which we can benefit".

TODAY COMMSA MAINTENANCE MANUFACTURING PARTS COMPONENTS FOR LARGE COMPANIES TRANSNATIONAL COMPANIES SUCH AS BOMBARDIER, CATERPILLAR, RHINO PRO AND THE GREENBRIER COMPANIES.

FOR A MAJOR INVESTMENT FOR MORE FOREIGN INVESTMENT, AND THAT MEXICO RECOVER ITS LEVEL AS A WORLD WORLD CLASS PLAYER AND GROW IN THE ENERGY ENERGY SECTOR, THE FIRST STEP IS A STRUCTURE FINANCIAL STRUCTURE STRUCTURE.

For Cantú Treviño, CAINTRA plays a key role in representing essential role in the representation of companies companies and that make them strong on a national scale. national scale. Cantú Treviño highlights the unity, cohesion and the chamber's work for the interests of all members. the interests of all members. "It is exemplary how things are done and we want to take advantage of that and join this effort of CAINTRA," Cantú Treviño says. CAINTRA," Cantú Treviño assures.