One to watch: IRN talks to one of South America's largest rental companies

Pablo Lam, general manager of Santiago-based SKC Rental, tells IRN editor Murray Pollok that after 10 years in the Chilean rental market, the time has come to diversify its fleet and its customer base.

If you wanted to create a list of rental companies ‘worth watching', then Chile's SKC Rental would be on it. Only 10 years old, it is already (probably) the largest equipment rental company in South America and certainly one of the fastest growing.

Pablo Lam, general manager of the Santiago-based firm, downplays the 20% annual growth it has been experiencing - his remark that "rental is quite a good business" doesn't exactly qualify as hyperbole - but he is clearly optimistic about prospects.

"Rental is moving fast", he tells IRN during a visit to the International Rental Exhibition in Amsterdam, "Rental penetration was very low...the move from ownership to rental has grown quickly. Contractors now have an alternative."

He says the Chilean rental market is growing at 20% a year, a rate which is being matched by SKC Rental, which last year reported total revenues of around US$50 million, which he says equates to about a 17% market share. (That would value Chile's rental market at close to $300 million.)

The company is benefiting from a still fairly buoyant Chilean economy - over 5.5% GDP growth last year and around 4% expected in 2008 - and the country's vast copper mining sector. Chile's mines, located in the central and northern parts of the country, are the world's biggest copper producers and the mineral accounts for up to 50% of Chile's exports. It is also funds from the State-owned Codelco mining company that are helping finance Chile's investment in infrastructure.

SKC Rental's 15 rental locations in Chile are found mainly in these copper mining areas. "We are trying to be close to our customers", says Mr Lam, "Most of the fleet is working for contractors that service the mining companies. Road construction, major pipelines, hydroelectric projects - but we are also moving into the industrial sector, with equipment like gensets and forklifts."

The connection with the mining sector has also led the company to add Atlas Copco LHD trucks - low profile loaders used in underground mines and tunnels - while other recent additions to the fleet include large water tankers, used primarily for dust suppression.

The company has a fleet of around 1500 units and this is being continually expanded. This has meant, for example, a new focus on aerial platforms, with the fleet now at around 100 used JLG self-propelled booms (and some scissors). "Ten years ago aerials didn't exist in Chile at all", says Mr Lam, "It is starting to grow, [but] labour is still very cheap."

If the fleet was initially dominated by standard earthmoving equipment - from skid-steers up to 18 t wheeled loaders and 38 t excavators - Mr Lam's earlier reference to SKC's diversification into industrial markets has meant investment in lighting towers, generators and compressors, mainly Ingersoll Rand (now supplied by Doosan Infracore Portable Power). "It's a pretty diversified fleet now - we don't rely on any one type of equipment", says Mr Lam.

The gensets are also getting bigger, with a couple of 1 MV units now in the fleet. These will no doubt be in some demand as Chile is suffering from energy shortages as a result of low water levels at its hydroelectric schemes and lower imports of natural gas.

SKC Rental hasn't been growing in a vacuum. It is part of the enormous Chilean industrial group Sigdo Koppers (SK), and a direct subsidiary of the SK Commercial division, which is one of Chile's biggest importers of construction equipment (see box story).

Although it benefits from its connection to the dealership, Mr Lam says "it is a separate operation. This has been one of the keys to our success. We have been focused on rental."

Financial support from its parent has allowed it to grow its fleet in Chile and also, in 2006, to enter the Peruvian market where it now has three depots. (The SKC dealership also represents Volvo in Peru.) Mr Lam says there are of course opportunities to establish rental business in other South American countries, but says they already have enough to do in Chile and Peru.

So SKC Rental is one of a new breed of rental companies in South America. And if the company manages to make its 20% growth target again this year, it won't just be on the ‘one to watch' list, it will also be the first South American company in the IRN-100 list.