"In Chile, we are in the process of building a warehouse and a distribution plant with more than 10 hectares to be ready to operate in August 2022, with 60 tanks, 10,000 cubic meters of storage capacity and 20,000 tons of dry cargo."
How has Reno performed in 2021, and which factors have helped the company rebound from the initial impact of the pandemic?
Reno’s sales volume fell during the first half of 2020, but we ended the year with the same volume as in 2019. In 2021 we have recovered well and continue to grow steadily. Reno imports chemical products and raw materials for more than 15 different industrial sectors such as healthcare, cleaning, paints and coatings, pharmaceuticals, construction and mining products, and our portfolio consists of more than 140 products we have in stock permanently. This amount of product together with a diversified customer base allows us to maintain sales balance so that when one industry is weak, another is strong. This strategy helps us grow steadily. For instance, in the last year disinfection, medical and cleaning products have experienced record sales.
How do you view the current business climate in Chile, Argentina and Peru?
In Chile and Peru the economy is more open and the rules are much more transparent, which generates higher competition. In contrast, in Argentina there are many more regulations, currency control and higher business risk. However, while it is true that Argentina is far more complex, it is a much larger market than Chile and Peru, and therefore offers high upside potential for distributors.
Although Peru has elected a new government, the Secretary of Economy has indicated that the country is interested in supporting industrial development and foreign investment, and President Castillo has had to moderate his speech and take a more centrist stance, which is why we believe there will not be a great deal of changes. In terms of Chile, there will be elections in November, and the candidates have to abandon their radical ideas if they want to win.
Can you explain how Reno has optimized its logistics and supply chain, and how you have dealt with rising logistics costs during the pandemic?
Due to the increase in freight volume as well as the scarcity of tanks and ships, shipments were delayed. Chemical product supply has been affected by the jump in petroleum costs, which led prices of solvents and petroleum derivatives to skyrocket. As a result of a force majeure, a number of factories had to pause their operations for up to three months, and many of them have not been able to fully recover yet. In order to manage these factors, we have had to place our purchasing orders in advance. Luckily, thanks to our company management and the business relation we have created with our suppliers, we have not ceased to provide the majority of products to our customers.
What do you think are the main advantages of the distribution business model in South America?
In South America there are no large production centers for chemical products, with the exception of Brazil, and that is the reason why it is complicated for local companies to develop vertical supply and logistics chains. Reno plans all purchasing five months in advance to give our clients added value by having sufficient stock. In order to create an economy of scale, large volumes have to be imported, and there are only a few companies that are big enough to obtain volume discounts. The third advantage is that we as distributors do not set high margins and that is convenient for the end user, so they do not have to make serious capital investments.
Which markets do you see as having strong potential for growth in Latin America in the coming years?
We believe demand for disinfectants, pharmaceutical and cleaning products will remain robust as countries continue to combat Covid. We also estimate that the mining market will keep expanding due to high metals prices, particularly in Peru, Chile and Argentina.
What are Reno’s planned investments and growth strategy for the next two years?
Reno is always looking for new development alternatives and we favor organic growth. Currently, we are evaluating the possibility of expanding our market share in other countries. In 2021 we opened a new office in Peru, strengthening our product portfolio and inaugurating a warehouse to triple our operations in that country. As for Chile, we are in the process of building a warehouse and a distribution plant with more than 10 hectares to be ready to operate in August 2022, with 60 tanks, 10,000 cubic meters of storage capacity and 20,000 tons of dry cargo.