Manufacturing • Forum

Saudi manufacturers are emboldened thanks to government efforts to diversify the economy, and despite the COVID-19 hiccup, prospects for the future are strong.

Fahd Aldohish CEO, SAUDI NATIONAL AUTOMOBILES MANUFACTURING CO.

FIRST AND FOREMOST, we are a 100% Saudi manufacturing company that intends to produce a passenger car in Saudi Arabia with a focus on local content and automotive infrastructure development. The Saudi market is the largest in the Middle East. In 2015, almost 850,000 cars were sold; however, this figure has since fallen. We expect the number to ramp up again to the same numbers or even more, since women are now allowed to drive. We are establishing our company to set the foundation of the entire automotive industrial field because when you creating an automotive factory for cars, it is not just a single factory, but an entire industrial field because you need the supply chain and suppliers for the parts. That is what we are working on with our partner. We signed an agreement with SsangYong Motor Co. (SYMC) to produce a series of cars. The first car will be a pickup because pickup trucks are popular in Saudi Arabia. The second car after one year of production will be a SUV. In our agreement, we seek to increase the local content. For the first phase, the semi knocked down (SKD) phase, which will last three or four years, our local content will reach 30%. The next period is called completely knocked down (CKD), where we will have a pressing shop, a welding shop, and a body shop as well as a paint and assembly shop. All these will require a large factory, and in that period, we will reach 50% local content.

Fahad Alnanih GENERAL MANAGER, PURE POLYMERS

WE MANUFACTURE RAW MATERIALS for plastic, so all our customers are plastic factories and converters. The idea behind the creation of Pure Polymers was to bring together a large number of small manufacturers of plastic products such as cups, trays, and so on. We only target the B2B market. In Saudi Arabia, there are around 800 plastics factories, and 15 of them represent more than 85% of the market; the rest compete for the remaining 15% market share. The majority of these small factories do not have access to good raw materials or technologies. Pure Polymers provides raw materials, technologies, and technical supporter to these factories. We form as many partnerships and agreements with suppliers, institutes, and universities as possible to further develop our products. Our main supplier is Sabic, though we also have suppliers in India and Europe for additives and chemicals. We are also working with the Saudi Standards, Metrology and Quality Organization (SASO) on biodegradable plastic additives. We are also finding ways to develop additives to make the plastic thinner, smaller, and lighter. By doing so, we will be able to reduce consumption. Other than that, we are working on how to use plastic to support agriculture. We have partnered with a Japanese company to develop a greenhouse that uses UV protection and additives to make vegetables grow better.

Mohnish Rikhy PRESIDENT, UNITED CARTON INDUSTRIES COMPANY (UCIC)

ONE CAN SAY WE ARE manufacturers, but if we look at from a different angle, we are more into service and quality because we supply packaging to our customers. From a profitability perspective, our business model cannot be sustainable until we add value to our clients’ business. Our profitability may vary depending on different stages of the business cycle, but the value that we provide to customers should always increase. Our shareholders have always had a long-term vision. Vision 2030 adds to the confidence of the industry, especially the drive for the non-oil sector. In 2017-2018, when the economy was still going through a transformation phase, UCIC invested in a new plant, with a long-term view in place. We have a new plant in Al Kharj that is line with the best global corrugated facilities with a capacity of 120,000TPA. The latest factory will enable us to satisfy the growing needs. We are building our capacity before the demand picks up in order to fulfil future demand in the most efficient way. The global packaging industry is experiencing rapid changes, which explains our strategy to invest in new technologies that will help us prepare for future challenges and trends. Being market leaders, we need to ensure that the country is not behind the curve in corrugated manufacturing.

Abdullah AlKhorayef CEO, ALKHORAYEF COMMERCIAL

OUR SALES REVENUE GREW significantly in 2019. Overall, we witnessed a greater appetite for conducting business, and as a result, we received many orders and participated in many tenders. At present, we have a fair level of competition thanks to the new platform from the government. The new platform tries to ensure transparency and equity in terms of tenders. It has resulted in improved cash flows and consistent payments. At AlKhorayef, we have done some restructuring in line with new trends. The market prefers contractors over commercial suppliers, so we shifted this division to our water and power division, and it is now part of the larger contracting business. We have also focused more on our four segments: marine, power, agriculture, and material handling. Moving forward, we want to focus more on services, especially after-sales services, in addition to digitalizing our e-store. We invest heavily in R&D to add value to our products. The same goes for our marine division, in which we are trying to implement new products and cater to the B2C business on a larger scale. We are also working to digitalize this area of our operations, which represents a significant value-added proposition. There has also been an effort to develop golf in the Kingdom, which is being led by Saudi Golf. We are in discussions with it on the type of equipment it needs and how we can develop what it needs to support the courses.

Aqeel Kadasah CEO, SOUTHERN PROVINCE CEMENT COMPANY (SPCC)

THE MAIN DIFFERENCE BETWEEN 2019 and 2020 was seen in 3Q2020. The construction business slowed down in 2Q2020 due to COVID-19, and in the third quarter businesses bounced back to normal. The increase was due to two reasons: the return of the construction business after the critical time and the stability of cement prices. In 2020, the quantities of cement sold were 20% more then 2019 and the price was a little higher. Exports can also be a great source of sales, and exports will certainly have a positive impact on company results if export prices return to previous figures. The main goal is to supply the need for the local market. Our goal for 2021 is to have more sales than in 2020 based on the projects announced by the government this year. I expect a positive result for all cement companies based on local demand. SPCC was established in 1978, and the first production was in 1982 at the Jazan Plant. SPCC is considered one of the biggest cement companies in the Middle East. It has three cement plants in three different regions in Saudi Arabia (Jazan, Assir, and Makkah), and the government holds more then 50% of SPCC shares.

Fawwaz Al Mugbel CEO, MIDDLE EAST SPECIALIZED CABLES CO. (MESC)

MESC IS A PUBLIC LIMITED COMPANY that was listed on Tadawul in 2007. MESC’s cables are divided into three categories. Category A targets oil and gas and power companies with instrumental cables. Category B includes data cables, TV cables, and fire alarm cables, and category C comprises building wires, power cables, and flexible cables. In terms of market share, our biggest segment is category A. We represent about 60% of the market for instrumental cables. MESC is the only Saudi company that works with Aramco because it has all the certifications. According to Vision 2030, the government is planning to increase non-oil exports by 25-50%. The plan is to invest more in the industrial and tourism sectors. For example, the government is investing heavily in the defense industry and technology sector. In the oil and gas space, Aramco will continue to grow and further strengthen its position as the world’s largest company. The downstream sector will experience slow growth but the government will try to balance that by localizing all the purchasing of Aramco. This will translate into more investment in the industrial sector.