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A flagship company, naturally

Article - September 8, 2011
Present in Chile for 77 years, Empresas Copec has contributed significantly to Chile’s history and success. The giant company provides products and services
that drive the economy, while cleverly using the country’s natural resources in a sustainable manner
It takes many successful, responsible companies and businesses to sustain a country’s economy. Often, however, there is one particular enterprise that stands out, whether in scope, in its financial figures, or even in its community involvement. Empresas Copec shines in all of these areas, making it one of Chile’s flagship companies.

Initially established as a fuel distribution company, Copec soon expanded into other energy sectors and natural resources, namely forestry and fishing. The Copec group of companies is now making incursions into mining as well. Today, 70% of the group’s income stems from natural resources, and the remainder from energy-related activities – two very different yet complementary activities, according to Eduardo Navarro, CEO of Empresas Copec.

From the very beginning, it was clear that the group’s path would be closely linked to that of the country. Founded in 1934, Copec’s first president, Pedro Aguirre Cerda, was elected President of Chile just four years later. Current numbers speak for themselves: Empresas Copec’s activities generate a US$2 billion a year operational cash flow, its sales are equivalent to 5% of Chile’s GDP, the company’s market capitalization represents 10% of Chile’s stock market and it employs a total of 19,000 people. Counting direct and indirect employees, between 0.6% and 0.7% of Chile’s workforce works for Empresas Copec.

At home in Chile, Copec is a household name for gasoline and service stations, with a market share of more than 50% in an industry where companies such as Shell and Petrobras are involved, according to Mr. Navarro, who adds that this is due to Copec’s focus on service as its most important strategic driver. “It is our vocation,” he says. Copec’s current position is impressive, with more than 600 sales points throughout Chile, import terminals and storage facilities which allow for stable and diversified sourcing, and a leadership stance as the most important supplier to industries such as mining and power generation.

Another one of Copec’s recent growth strategies in the energy sector is its entry into other Latin American markets. Copec bought part of Terpel Colombia in 2010, achieving control of the company and not just taking the lead in the country’s fuel market, but also ensuring its entry to Panama, Ecuador, Peru and Mexico, where Terpel also operates.

Empresas Copec also distributes liquefied petroleum gas and natural gas, through subsidiaries Abastible and Metrogas. In addition, the former is entering Colombia, with the objective of creating value in a market that is following the steps of Chile in terms of regulation and industry structure. With this in mind, Copec recently acquired a 51% stake in Inversiones del Nordeste, the leader in the Colombian liquefied gas industry, with a 34% market share.

“We’ve grown a lot in Chile and now it’s time to deepen our productive steps abroad,” explains Mr. Navarro. “It’s time to have production platforms in Uruguay, Brazil, Argentina and Colombia. The task at hand now is to internationalize our business beyond commercialization, into productive areas.”

Abroad, Copec is already known for its forestry and fishing products, which are exported to more than 70 countries. Thanks to a deep understanding of the markets, a talented team of workers, and constant innovation, research and development, the group – especially through Arauco, its largest subsidiary, which operates in the forestry industry– manufactures some 25,000 different pulp and wood products.

“Innovation and the desire to be market leaders in our sectors are embedded in the DNA of the entire company,” says Mr. Navarro. “We try to transmit to our work teams that today we can do what we did yesterday, but much, much better.”

Over the past 20 years, Empresas Copec has invested a total of US$12.9 billion, making it one of Chile’s largest investors. The group will invest a record-breaking US$1.2 billion in a wide range of projects in 2011 alone. The largest it has underway (and indeed the largest project ever undertaken in the group’s history) is in Punta Pereira, Uruguay, where Arauco has joined up with Stora Enso, a Swedish-Finnish forestry company, to build a US$2 billion plant with a capacity for 1.3 million tons of pulp per year.

This investment will raise Arauco’s total capacity to 4 million tons per year, consolidating the company as the world’s second largest pulp producer. This position has been achieved through subsequent investments in productive capacity, many of which have taken place over the last 10 years.

“Chile’s competitive advantage in forestry is enormous, sustainable and very hard to replicate,” says Mr. Navarro. “Pines grow faster in Chile than anywhere else in the world, and their versatility as a raw material allows for the production of different varieties of pulp, wood panels and lumber.”

Copec’s Corpesca is Chile’s principal fishing company, with an 80% share of the capture quotas in the northern part of the country. In addition to producing fishmeal and products for human consumption, Corpesca, together with the company’s other fishing company, Orizon, are developing the Golden Omega project, aimed at the production of omega-3 fatty acids for the world’s nutraceutical and pharmaceutical markets, thus taking the Chilean fishing industry to a new level of scientific research and value creation beyond raw materials. Golden Omega is collaborating with Harvard University to study the properties of omega-3 and produce cancer-prevention products through the Bioambar society. At the end of 2011, the omega-3 factory will begin operation, aiming to challenge leading Nordic producers of omega-3 oils who look to Peru and Chile for raw materials.

“The difference with other players is that we will be located at the source, accessing fresh raw materials with a high concentration of omega-3’s two main components,” says Mr. Navarro.
One of Empresas Copec’s features is the strong environmental and social commitment that it puts into its operations. The company supports many different initiatives related to the improvement of education, social housing and the promotion of research and development, among others. Arauco, for example, was the country’s first company in its category to measure its carbon footprint as part of its corporate policy for the protection and care of the environment. The measurement included all of the company’s operations and parts of the value chains in Chile, Argentina and Brazil – including emissions originated in harvesting – and the transportation of raw materials and finished products. The amount of carbon sequestered in biomass and finished products was also determined. Mr. Navarro explains: “If there were three more forest companies like Arauco in Chile, the country would be neutral in terms of emissions.”

With such a pivotal role in the economy, it has long been clear to Empresas Copec’s management that the group’s activities must go beyond business and into the social sphere. A long-term vision has characterized the corporate social responsibility policies of this group of companies, as was demonstrated after the earthquake that affected Chile in 2010.
Copec’s supply network was seriously damaged, particularly in the south, but was able to deliver to the affected areas in just a few hours, showing enormous logistic capabilities and, above all, a fierce commitment to the country during the catastrophe.

For its part, after the earthquake, Arauco carried out the “Sustainable Reconstruction Plan for Constitucion” – an initiative focused on the reconstruction of the city of Constitucion, one of the most affected by the earthquake and subsequent tsunami. Arauco has also made one of the most powerful academic contributions by a Chilean company to society in the past 20 years. It assembled a board of directors, a management team and construction specialists, and developed a roadmap that was delivered to the public sector for the construction of a sustainable city that faces earthquakes and tidal waves efficiently.

Empresas Copec’s support for the country’s goals is the corporate policy’s leitmotif and the reason for which it has become one of the most prestigious and relevant companies locally, as well as internationally, standing out for its social and environmental commitment, and its focus on innovation as the fundamental element for the development of Chile and its people.