TBY talks to Hernando Chiriboga D., General Manager of CEPSA, on the various lines of business it is engaged in and almost 50 years with Castrol in the lubricant business.

What was the founding mission of CEPSA and how has it evolved?

CEPSA is a 57-year-old company representing several important lines of business. In the lubricant industry, we have represented Castrol in Ecuador for the last 47 years. In the tire business, we represent several brands, such as Yokohama Rubber Company, Roadstone Tires from South Korea, and Daewoo Tires from South Korea. We also represent Volkswagen, a German automaker, which is the second largest automobile company in the world. Our ambition is to be the leader of the automotive industry, which is the goal of our three-year strategic plan from 2015 to 2017.

CEPSA is the distributor of three renowned brands. How have these alliances emerged?

CEPSA was initially a British-owned company, which brought the distribution rights of Castrol to Ecuador, which we have now handled for almost 50 years. CEPSA nowadays is a family-owned company, and we are proud to distribute Castrol Lubricants in Ecuador. In relation to Yokohama, we decided two years ago to distribute a prime brand, and when we looked at brands that were not distributed in Ecuador, we noticed the absence of Yokohama. We contacted the company, and they were delighted to grant us the distribution rights. We distribute tires for trucks, buses, and passenger cars. CEPSA was a General Motors distributor until 1999, but due to the economic crisis in Ecuador, we ceased car distribution. In 2010 after CEPSA re-gained financial strength, Volkswagen granted the distribution rights for the city of Quito and Los Chillos valley.

“Our main objective is to maintain CEPSA's excellent performance during this difficult year."

In what areas is CEPSA investing its resources?

We are building a new warehouse facility in Los Chillos, a valley 30 minutes away from Quito, with an investment of $3 million that will provide us with excellent distribution in the northern region of Ecuador. We have our own facilities in Guayaquil and Cuenca, and opened other offices in Manta, the second largest port of Ecuador. CESPA also increased its production facilities, investing in a new filling line of lubricants in Guayaquil.

How did your financial performance in 2014 compare to 2013 and what is your outlook for the coming year?

We have been growing for the past eight years, whereby our sales during 2014 exceeded $50 million, with an AAA credit rating, which is a challenge to maintain. We anticipate three difficult years ahead due to the impact of lower oil prices that will affect the economic growth of Ecuador. Therefore, we will concentrate on increasing our operational efficiency and diversifying our product and client portfolio.

What are CEPSA's competitive advantages?

First, in lubricants, we operate across the entire business chain. We import the base oil for lubricants and additives; we have our own bottle-making facility, a grease plant, and now a lubricants filling facility. We also have our own logistics and transportation company supplying the majority of Ecuador's cities with lubricants. In tires, our strength is reaching all segments of the market and we have a particularly dynamic sales force.

The government is set to restrict automobile imports in 2015. How is CEPSA planning to overcome the impact of this?

The sale of new vehicles will be reduced according to the quotas set by the government. We are planning to emphasize our sales in some vehicles that do not have the quota system such as Vans. Also, we are planning to grow in service shops and sales of spare parts throughout the country.

How is CEPSA adapting its business strategy to the government's plan for the productive matrix?

By producing lubricants domestically, and integrating all the business from imports of base oil and additives, by having our own filling, packaging, and blending facilities, and by controlling logistics and transportation, CEPSA will be aligned with the country's new productive matrix. In the tire division, we are investing in a retreading facility, which is crucial from an environmental perspective. If we recycle and retread the tires, we reduce the country's ecological footprint dramatically, while reducing tire imports.

What is CEPSA's strategic plan of action for 2015?

Our main objective is to maintain CEPSA's excellent performance during this difficult year. We will take different actions, such as launching new products in the lubricants division, increasing our retreating tire business, implementing new service workshops for VW, and finalizing our new warehouse at Los Chillos. These are some of the managerial steps in our 2015 business plan.

© The Business Year - April 2015