The niche Pesco has occupied so successfully is in the provision to its clients of specialised machinery, sourced from around the world, that they need in their operations. As a measure of its success we need only look at the sales graph: since it was founded in 1998 turnover has progressively risen from zero to more than $55 million in 2012.
One of the most stable, competitive and fastest growing economies in the world, let alone Latin America, Chile recorded an enviable five percent growth in 2012, much of it achieved through its mineral resources, with the state mining company Codelco accounting for a third of the nation's economy. So despite the diversity of its client base it is not surprising that mining is the major contributor to Pesco too. Mining related business now contributes a third of its turnover and about the same proportion of the company’s profits. Inevitably a good amount of equipment supplied by Pesco ends up working on the operations of Codelco, though it is not Pesco's model to partner directly with the end user but rather through a third party, usually a leasing company.
This dramatic growth has been achieved using two basic principles, explains General Manager Nicolás Vicencio. “We develop the markets for the products we sell, to increase the volumes we handle; and we add new products to our range according to what the customers say they need.” The company goes to great lengths to source the right equipment for its clients, he adds, visiting OEMs that may be interested in establishing a presence in Chile, and attending trade shows in China, Europe and America. But it's not all about volume: “It's our strategy to be experts in every product we sell: we do that by training our people either at the manufacturers' premises or by bringing their technicians to Chile.” It is a very dynamic process, he says: often a product imported for one client will turn out to have applications in another sector or application. Fire trucks, for example, are used by municipal fire services, one mine sites, and also in forestry operations among other industries.
A lot of the equipment supplied is for cleaning of a specialised nature, so vacuum trucks figure large in the list, whether for cleaning the shovels and large plant in the mine, or in another version, adapted for conveyors. One particularly hazardous operation used to involve cleaning under moving conveyors: now Pesco is supplying a new remote control mini shovel from Movex that takes humans away from the conveyor – with safety the number one priority in today's mines this product is attracting a lot of interest he says. Among other recently supplied equipment are fire trucks and safety equipment destined for Codelco's Andina project, vacuum trucks for Siemens working at a Codelco/Rio Tinto joint venture, further vacuum trucks for services contractor Sierra y Plaza and telescopic cranes for the leasing company Relsa for the world's biggest copper mine, Codelco's Chuquicamata. In order to extend its range of specialised cleaning equipment, Pesco has introduced Altec insulator-cleaning equipment – essential for keeping clean the supply power lines to the mining facilities.
Pesco does not involve itself with the conveyors themselves, nor with the heaviest capital equipment like shovels and ore carriers which are bought direct from the manufacturers. The next tier of equipment is supplied indirectly, and here there is a major opportunity. On the waste management side, apart from vacuum trucks there is a demand for waste water control – high pressure washing equipment, skips and the hook lifts that move them about, and a wide range of containers. Pesco supplies all these. Much of this work can't be done at ground level, and needs specialised products to facilitate working at height – up to 30 metres above ground. With brands like Axion, Elliott, Altec and Sky Jack clients have access to the safest and most cost effective lift systems available internationally.
With stock valued at around $20 million on its books, this is a capital-intensive business that works, Nicolás explains, a little differently from most places. “We don't lease it out directly. We leave that business to the banks, who have their own leasing companies that make arrangements with the contractors. They buy the equipment from us.” Thereafter, maintenance is a matter of agreement. Pesco can provide full service in its own workshops – again that would be the norm in many countries and Chile is catching up with this practice. For those customers who choose to do their own maintenance Pesco is happy to supply parts and to train their engineers.
As a company, Nicolás Vicencio thinks Pesco is now right-sized. “We have grown a lot in the last three or four years and now we have the workshop areas and staff that will enable us to consolidate our operations in Chile and consider our next steps,” he says. During 2012, it should be noted, Pesco augmented its main six-acre Santiago facility, with its five office buildings and 50,000 square feet of warehouses and workshops, by opening two subsidiary sales and service depots. These are strategically placed at Los Ángeles to the south and Calama to the north, giving excellent access to clients operating anywhere in the 2,700 miles north-to-south extent of Chile's territory.
With that in place Pesco is now looking outside its borders. Peru is the first target, and Pesco is actively looking for the right partner to help it grow from a base there. That will be its strategy, says Nicolás, since each country has its own culture and way of doing business and it will be essential to integrate local knowledge with Pesco's unrivalled expertise and scale in the region. For now the most attractive economies are the mining 'tigers' of the Pacific coast – Peru, Ecuador and Colombia. Pesco does have a dealership in Uruguay, he adds, however this is mainly concerned with forestry products.
“Brazil,” he declares, “is another continent!” Nevertheless there are opportunities in that huge but rather protectionist economy. Pesco's strength lies in the agreements it has to import equipment from all over the world under favourable trade agreements that exist with Chile. To import the same equipment into Brazil would be very expensive, however under Mercosul of which Chile is an associate member it would be possible to export specialised equipment to Brazil if it had enough Mercosul content. Pesco already supplies a forest trailer to Uruguay, assembled in Chile using only key components that are imported. That model could be extended, he believes, with Chile becoming a platform for supplying such equipment, value added, to many South American countries, with no duty.
Meanwhile, Pesco is remaining focused on servicing the burgeoning mining industry in the region – that is where most of the demand is coming from, he emphasises.
Written by John O'Hanlon, research by David Brogan