Our newly launched slogan, “Solutions that make life simpler” expresses our growth strategy, which builds on our original portfolio of nitrocellulose products through product differentiation, portfolio expansion and greater proximity to customers. Our commercial, marketing, innovation and other departments have worked together to understand business challenges facing our customers in every segment and delivering solutions that improve productivity and product quality

Internationalization

As part of our expansion strategy, we have recently taken our first steps on our journey to internationalization. To better serve our customer base in more than 70 countries on all continents, we concluded our first international acquisition in 2016. Alchemix, a US-based producer of nitrocellulose-based solutions, is now a Nitro Quimica Group company. Located in Atlanta, Georgia, Alchemix supplies products to the pharmaceutical and dermatological product segments, adding to our capabilities. Besides resins, our US division also supplies sulfuric acid used in the manufacture of batteries for generators and heavy machinery.

Our new US manufacturing site will allow us to extend our local portfolio to the US market. Customers currently sourcing from Alchemix will now have access to additional product and service offerings and Alchemix can now develop additional accounts with an expanded product portfolio. As a logistics strategy, the Company has allocated space at two distribution centers in Atlanta, GA and New Jersey, NJ.

We also expanded our European operations in 2016 with a new regional office in Vienna, Austria. The new office provides a closer presence to customers in Europe as well as the Middle East and Asia. We also have allocated space under contract with three important distribution centers in Le Havre (France), Rotterdam (The Netherlands) and Tavazzano (Italy).

Total investment in 2016 was R$ 60 million and we have medium-term plans to continue our international expansion, building a presence in key consumer regions and closer relations with our international customers.

Customer orientation

Nitro Quimica is committed to working closely and collaboratively with our customers

We use a systematic approach to understand our customers’ requirements and translate them into business opportunities and new, tailored products and services that cut through operational complexity. New product formulations in the chemicals industry can require considerable R&D effort.

In 2016, we invested 14% of our CAPEX in R&D, a new record. Investment spend was allocated to developing new technologies and products and hiring researchers for our Research Center. This has made our New Product Development process more disruptive, connected to the market and integrated with other functions across the company. All levels of the organization now work closely with R&D staff from idea to go-to-market (see further information on New Product Development). An Innovation Committee was also created towards the end of 2015 and began functioning in early 2016. The Committee will play a more strategic role throughout 2017 in coordinating NPD.

Five new product categories were launched throughout 2016 (learn more in Our company) and Nitro Quimica’s new portfolio has been incorporated into new product ranges and brands that reflect the Company’s strategy more effectively. In 2016, these new products achieved a revenue share of just over 10%.

Products with sustainable attributes

Among the resins used in the coatings market, nitrocellulose is by nature a renewable and biodegradable substance as it is derived from cellulose, a natural raw material. The industrial-grade nitrocellulose produced globally has an average of 50% biorenewable content, while Nitro Quimica produces nitrocellulose that is up to 80% biorenewable. This is because our resin is developed from sugarcane ethanol, which is itself a renewable raw material. The Company has continued to invest across all product ranges and in our internal processes to achieve continued disruption in environmental attributes.

We have also made important progress in the use of cellulose as a raw material. While cellulose from pine wood is typically used in the industry to produce nitrocellulose, Nitro Quimica has progressively replaced pine wood with eucalyptus as a raw material. This has required technology and process changes while maintaining high standards of product quality. The upgrades have paid both environmental and strategic dividends, as eucalyptus wood is both highly available in Brazil and derives from reforestation.

Environmental awareness permeates our R&D efforts – all products in our New Product Development pipeline undergo environmental assessments at each stage of the process. In addition to water-based formulations, our researchers are also developing organic solvents using more sustainable components. Every stage of product development is monitored by environmental specialists to mitigate any impact.

Comprehensive Technical Support

Customer service is provided not only by our sales team, but every Company department understands its responsibility to customers and the need to work on a daily basis to provide high-quality solutions. We offer our customers an enhanced technical support experience that goes from understanding customers’ evolving requirements and developing solutions that address them, to advice and best practice recommendations on the use of our products.

As another differentiator demonstrating our commitment to customers is the access we provide to our unique subject-matter expertise in areas such as exports, drawing from our experience of supplying products to more than 70 countries. For customers looking to operate in foreign markets, we provide trusted advice on legal and safety issues and compliance with Brazilian and foreign legislation.

An innovative culture

Established in 2015, our Innovation Committee works continually to foster a culture of innovation. One of the Committee’s first programs, called Innovation Leads, encourages and rewards employees who generate new product and process improvement ideas.

Nitro Quimica elicited more than 100 process improvement and product leads in 2016, of which 19 were under study, 9 in progress and 23 completed at year-end. One implemented lead improved our product label printing process. Product labels are now printed on an application-specific printer without requiring outsourced printing services. This has generated cost savings and helped to minimize printing waste, as any layout changes previously meant that all labels in stock had to be disposed of and replaced with new labels. Other leads are currently under study.

Beginning in 2017, new product leads will be processed through the NPD workflow of ideation, technology and process development, manufacturing and go to market, as shown in the graph below.

Process improvement leads generated by employees will continue to be handled by the Innovation Committee. The next step of implementation will be handled directly by the relevant department. The Innovation Committee’s successes in recent years led to the creation of Inova Nitro, expanding the Committee’s scope of activity. Improvement leads will now be handled by the Management team.

Nitro Quimica’s R&D function also works with universities and research organizations to develop technology and innovation projects. The Company is currently working with the Federal University of Santa Catarina (UFSC) on the development of analytical methods for nitrocellulose. We have also collaborated with Instituto Senai de Inovação in developing new sustainable products. Other universities and research centers in Brazil, Latin America, North America and Europe have been approached or concluded contracts for technical cooperation.

Investment

Nitro Quimica set a new record of investment in 2016 despite Brazil’s challenging economic environment

We allocated R$ 60 million to R&D, plant expansion and upgrades, sustaining capital and health, safety and environmental performance.

Substantial investment was also made in building our team, including 50 new hires in 2016 for our Brazil operations as well as investment in training and development programs aligned with employees’ individual development plans.

Operations and performance improvements

Every two years, our sulfuric acid plant conducts a preventive maintenance turnaround to ensure the integrity of our assets. In 2016, the plant was shut down for a turnaround lasting 30 days. This can typically lead to added COx emissions generated during shutdown and startup. However, emissions levels were lower than expected thanks to the team’s efforts during plant startup. As a result, the plant achieved its highest availability levels in the last 10 years (see the chapter Social and environmental management for more information about emissions). These positive results provide good prospects for the next turnaround in 2017, with a planned duration of 40 days, and the scheduled shutdown in 2018 to implement a new converter technology that will increase productivity by 20% and reduce SOx emissions.

The nitrocellulose plant, which was originally built to operate using cotton linter as a feedstock, has been upgraded so it can also operate on wood- and especially eucalyptus-based cellulose. This will both enhance our carbon footprint and further diversify our sources of raw materials, as both pine timber and cotton linter are imported from overseas markets. In 2017 we will continue our transition to wood-based cellulose adoption, keeping the weight of raw materials in our costs at more competitive and sustainable levels.

A centrifuge at the nitrocellulose plant will also be replaced with a more efficient and economical model in 2017, further improving plant performance.

Productivity improvements have also been implemented at our nitrocellulose solutions plants, where nitrocellulose-based products our custom-crafted to meet customers’ unique industry requirements. In 2016, the plant produced approximately 600 metric tons per month for customers across a range of segments and regions. In 2017, plant capacity will be expanded to more than 1,000 metric tons per month by year-end to accommodate growing demand over the coming years and new additions to our product portfolio in recent years. With the added capacity, nitrocellulose solutions will increase in revenue share.

In addition to expanded volume capacity, overall plant efficiency is another indicator that has improved. Overall plant efficiency in 2016 was 75%.

We also installed new chlorine dispensing systems at our water treatment plants in 2016. This improvement was especially designed to mitigate risks to surrounding communities in the event of a spill, as required by Convention 174 (Prevention of Major Industrial Accidents Convention) of the International Labor Organization.