Middle East Specialized Cables: strategy and expansion plans

Interview with Tamer Salama, VP for Sales and Marketing of MESC

First of all can you talk about your strategy for the company?

Our company was established in the 1990s as a family business. Then over the years it was listed as a public company. Our main strength is in instrumentation cables especially for oil and gas, petrochemicals and industrial use. We are considered number 1 in Saudi Arabia and the MENA region and number 5 worldwide in this sector. The economy is slowing down now in the region so our strategy will be diversification. We are trying to expand in other geographical areas like Central and Western Africa as well as South Africa and Egypt. We were there studying the market and we want to make big growth in this region. Also we are trying to develop some new products that are not available in the market to strengthen our position in specialised cables.

How do you differentiate yourselves from the bigger companies such as Riyadh Cables and Saudi Cables? What is your main speciality?

All cable manufacturers work in commercial projects, buildings and housing and we are one of them but on a lower scale; our main strength is in oil and gas petrochemicals with the instrumentation specific cables plus we have the advantage of consultancy and partnership with customers from the beginning, tailoring the cables exactly to their needs; even if they don’t already exist in the market we can manufacture them to their requirements.

Can you give us a specific example of a client that needed a special cable and how you helped them to develop it?

We had one client last year who wanted a data cable but with a special armouring so that it could be offshore on his plant in the oil and gas sector. We went through a three months study before even getting the order as a consultancy free of charge to the customer until they were comfortable that we could do this cable for them. We made a shop trial and then we got the PO and we manufactured the cable. This was the first time that kind of cable was manufactured in the whole region.

What kinds of special know how, processes, equipment or innovation helps you to tailor make these specific products?

These specific products require lots of R&D and lots of knowledge of the technical side of the cables; we have a very strong team dedicated to that. We have one team here in Saudi and another team in Ras Al Khaimah in our two locations. These teams are always updated with the new technologies and with what’s happening in the cable industry so that they can help our cable customers with their requirements.

Can you talk about your branding strategy?

In fact MESC is very well known in the oil segment. It is a very strong name; all of the oil customers, end customers and EPC contractors know MESC and they ask for it by name. However in the market as a whole we are not that strong so we are going to conduct several marketing campaigns. We are going to go to some exhibitions outside of the Kingdom to try to broadcast our name more widely. Our marketing strategy this year will focus on putting the branding at the heart of each project.

Do you feel that branding is very important in an industry such as cables which is very business 2 business?

The cables industry was always doing business in the old fashioned way, however in the past few years everybody is now looking at e-commerce and going on the web, having their catalogues available to everybody, so that any customer can go online, check the product and order it without any human intervention. It goes with the ICT domain and technology. If we don’t go digital like everyone else we will be lagging in the market. Our strategy is to try to be online as much as possible, and to be close to our customers so we are also going to implement the ecommerce very soon on our website to enlarge our availability.

What do you think is the global outlook for the cable industry in Africa and in other countries? Do you feel that there is still a lot of demand for cables?

If we go by geography, yes of course the Middle East is seeing a slowdown in projects; it is not a major cancelation of projects but a lot are on hold or being delayed for some time. I think this is a transit period and that probably over the next 6 to 9 months it will recover again. However I see big potential in the African and North African market. This will be our focus for next year.

How would you like to establish your presence in these countries? What is your strategy?

Our presence is in two domains, firstly in the projects: the projects are handled centrally here by the projects team and we are appointing some partners and local distributors for us in each country. We started with Egypt recently. We are going to announce this in the press release probably over the coming month and we are also going to try to expand in North Africa as well as Central Africa. We do it indirectly through business partners and channels.

What makes you competitive when it comes to price? You are competitive when it comes to innovation but are you also competitive with pricing?

With what is happening now in the world and the pressure on prices, the only way to stay competitive is to always work on your costing. This is what we are trying to do; we are trying to be innovative and to find alternatives for our designs, working on our costing to stay competitive in the market.

At the same time you have a bit of an advantage because the prices of the raw materials such as copper and base materials went down significantly. Is that going to help you?

Actually this is not helping a lot because it reduces your volume of sales so when the copper goes down it puts more pressure on your pricing. If you were achieving let’s say 100 dollars when the copper price was 7,000 dollars, if the copper price drops to 4,000 you will not achieve 100 dollars with the same volume, you will achieve probably 70 or 60. So it reduces your volume of sales.

Can you talk more about the specialty cables for the oil and gas industry? What types of products do you offer?

In fact we are producing all kinds of instrumentation, control, data cables, fire alarm, fire resistant cables that are required in the oil field and petrochemicals which are sometimes armoured, oil resistant, resistant to fire etc. all specific to the oil domain. This is our speciality.

With lots of oil projects in Africa perhaps you will be the leading manufacturer.

Yes, here there were lots of projects, they are continuing but we don’t see large projects coming up again during this year because of the slowdown and the pressure from oil prices for sure. However I can feel comfortable that it will recover by the end of 2016.

Are your manufacturing facilities located in Saudi Arabia or elsewhere?

We have a main manufacturing facility here in Saudi Arabia in the industrial area. We have another one in Ras Al Khaimah in the UAE and we are a major shareholder in MESC Jordan in Amman. Here we manufacture many instrumentation cables, in Ras Al Khaimah we manufacture both instrumentation and low voltage power cables, and in Amman we manufacture the high level of the low voltage cables as well as the medium voltage cables.

Do you plan to expand your manufacturing facilities?

With the current economic situation we will remain as is today and we shall see over the coming years if the economy recovers quickly then we may think of expansion.

Can you give us a brief history of the company and the ownership structure?

As I said, it was a family business started in the 1990s. To begin with there was just one small factory here in Saudi Arabia and over the years it has been expanded 9 times. Then when the business started growing, we also built the factory in Ras Al Khaimah in the UAE and then the company became publicly listed.

Why did you choose Africa for your expansion? Why not Asia, China, Eastern Europe or Brazil for Example?

In fact if you look into Africa, first of all it is very close to the Middle East which makes it accessible for us. Also we see lots of American, French and Japanese firms going into this region. If we decided to go to China, you have to be very local so you have to build a factory there because we could not export from here. The prices are very tight there so you need to build your own manufacturing facility in China. Therefore it is not foreseen in the coming period.

What about other regions?

Other regions might come as a second choice but we want to be focused in the beginning; if we expand to the whole world all of a sudden, we will lose focus so we are going to focus on Africa only next year and then the year after once we are successful and maintaining our presence and distribution network, then we can expand to other regions.

Lastly, what are your major challenges in your operations?

The major challenges include the very low oil prices and the putting on hold of lots of projects in the region. Another challenge is the continuous technology changes; we have to keep up the pace with these changes and try to be innovative in our product design so we can remain competitive in the market. The shrink in projects has put a lot of pressure on the prices. These are our main challenges for the coming year; we have to look at how to achieve our targets while still being profitable.

At the same time innovation is good because the old cables become obsolete and you have to innovate. What is the lifespan of the average cable?

In fact in the cable industry you have lots of cables that are used for ages and will continue to be used. The only thing that will change will be something in the design or use of alternative materials if the raw material is not available. What can change with technology are the special cables, and this is where we want to focus. Fire resistance is very important now, for example you saw the fires that happened in Dubai recently? That is why we are now trying to brand a new product for fire resistant cables that can be used and which eliminates the spread of fire in buildings with a low smoke propagation. We have even built our fire testing facility in Ras Al Khaimah; we inaugurated it last month. This will help us because instead of sending the cables for testing outside of the Kingdom, which takes a long time, we will test it ourselves immediately in front of the customer and it will be certified as well.