Aval Engineering’s leap into Mexico brings more than 700% sales growth in one year

Aval Engineering’s leap into Mexico brings more than 700% sales growth in one year

When Canada’s economy took a downturn, Aval Engineering’s executive team started looking south. Soon after, an opportunity in Mexico presented itself and the engineering procurement and construction management company that specializes in power-transmission projects took the leap into exporting.

“We did some serious thinking about whether we wanted to expand or stay in Canada,” explained Max Gutierrez, the company’s co-founder and president. “Expanding was the best opportunity.”

Aval Engineering was founded in late 2013 after Gutierrez and Alain Guerard — who were both working for bigger construction firms — decided to found their own smaller specialty shop.

“Our growth regionally was quite rapid,” Guerard said. “We grew from two to about 15 employees in the first two years. Then, after a friend asked if we were interested in working in Mexico, we set up there in February 2015. That’s when our exporting and working abroad began. Now we have 25 employees.” They also now have $25 million in annual sales, up from $3 million, a leap they made after just one year in business.

The Mexico operation is a subsidiary wholly owned by Aval, a move made to deal with the tax implications of working in Mexico.

“Max speaks Spanish and many of our people do,” said CFO Jeremie Lavoie. “That helped a lot with the Mexico opportunity.”

Guerard describes Aval as a boots-on-the-ground operation, although they also do the engineering components ahead of time. “We build substations and transmission lines,” he said. “Our specialty and bread and butter is in field engineering and adapting the system designs to what conditions you find on site. We start from the beginning of a project and try to make it a reality — from engineering to construction management, and from procurement management to procurement services.”

Aval’s Canadian customers are in Manitoba, Alberta and B.C. and they’re currently working on deals in Saskatchewan.

More recently, with the support of EDC for insurance and financing, Aval has been pursuing more work in Mexico.

“We are looking into three more projects,” Lavoie said. “We had a premature contract in Peru in 2014, but the client wasn’t ready yet. It’s stalled in Peru due to the regulatory process.”

Now the company is daring to dream beyond this continent. It’s been approached by some African countries, but talks are preliminary.

“We do have a contract to deliver the manufacture of a gas facility in Turkey,” Lavoie said. “It’s a Canadian client, but the work is in Turkey.”

“In addition, we are working with the Asian Development Bank to provide engineering services for their projects in Asia.” Guerard said.

Aval’s relationship with EDC is extensive. Its major Mexican client, Comision Federal De Electricidad (CFE), is a pull customer of EDC, meaning EDC can offer it loans provided it’s working with Canadian exporters. EDC has also given Aval bridge financing and working capital in the form of export guarantees.

Lavoie said the biggest difference between customers in Canada and foreign customers is the concept of relationships, which differs according to the culture.

“When you’re dealing with local suppliers, you have to deal with local contracts, and they’re not going to give you credit like companies here,” he said. “In Canada, there’s trust that people you hire will get paid. In Mexico, you will get push back. You have to really reassure your suppliers that you will pay them. That was a big obstacle.”

He said they often expect payment on the spot, granting no credit, because they don’t trust foreign companies they don’t know.

“It’s very relationship-based,” Lavoie said. “In Canada, you can easily deal with someone you don’t know while in Mexico, although you have a contract, it’s not really going to happen unless you build a relationship and a partnership.”

Working in another country adds a layer of difficulty to projects, the Aval folks say, and that has improved how they market themselves in Canada.

“In Canada, we can say ‘If we can deliver this in Mexico, imagine what we can do in our backyard,’” Lavoie said. “We’ve learned a whole new level of intricacies and difficulties. We’re leaner, meaner and more efficient.”

Asked what characteristic got them to where they are today, Lavoie didn’t hesitate before saying “open-mindedness” that will allow you to adjust to new cultures and realities.

Get more exporting insights from Aval Engineering’s Jeremie Lavoie here.

Categories Infrastructure & Construction

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