Al-Yousifi Group Steps into Kuwait’s Construction Projects, Providing Air Conditioning and Firefighting

Interview with Adel Easa Al-Yousifi, Senior Vice Chairman and Managing Director of Al-Yousifi Group

Provide our readers with a brief overview of Al-Yousifi Group. Which of the segments you are present in is experiencing the most growth in 2017? Which of your divisions are the strongest, currently, and which would you like to develop?   

Al-Yousifi was established in 1955 by my father. He took the agency of National, which is now Panasonic. We have especially grown after the 1991 liberation. Until 1994 or 1995, we were number one in electronics in Kuwait. We were only concentrating on Panasonic at that time, because the deal between us and Japan was to not have other brands in our showroom. Then, competitors such as Alghanim began to come in with their strategies and multibrand shops. They were the agent for Phillips and some other not very well-known brands. They started buying Sony, Panasonic, Sharp and other products and putting them in their shop. The idea of a multibrand shop with a variety of TVs and electronics like in Europe and America began to pick up. We were late in shifting because the Japanese were rejecting this and hesitant to allow us to put other brands next to Panasonic. Panasonic was well-known and the strongest in the market, and we believed that it could survive, but it could not. We started losing shares in the market and we dropped to number two or three. Most of our life we had been number one in Kuwait. Now, things have changed and we have shifted our showroom to best brand and we are also multibrand. We sell our product and our competitors’ products, although they are not really competitors and it is not such a competition anymore. Now, we are picking up. We are moving towards number two, and we aiming for number one. Our whole life story was always in electronics. During and after the invasion, my father decided that it might be best to open some business outside Kuwait. We now have some small businesses in Dubai, UAE, and Saudi Arabia. Saudi Arabia is going well. We are the agent for Panasonic wired devices and electrical sockets. We are moving towards number two in Saudi Arabia, which is a big market. We are aiming to be number one by 2018, but most likely, we will stay at number two for a few years.

Are you interested in branching out into other markets?

To go outside, you need to shift some of your family there. You cannot depend on other people if they are not from your family. Because we are a small family, maybe in the future, when we have more of sons, then we can shift them not to living outside, but at least going out monthly to have control. It is very difficult to have a company outside if you do not have people you can trust that can manage the business there. Saudi Arabia and Dubai are the only two places outside of Kuwait that we have business in electronics and electrical products. In Dubai, we also have real estate. During the invasion, my father lived for a few months in Dubai and decided to acquire real estate there. We have grown the real estate business in Dubai to a good level.

In which segment of real estate are you active?

In Dubai, we have mainly residential buildings, but we also have two commercial properties. We have real estate in Kuwait, as well.

Is the real estate division in Kuwait an important branch? Which is the most important branch you would like to push?

In value, the real estate is a big branch but you do not need to push it. The building, the location, and the quality of the building will speak for itself. Now, we would like to push the air conditioning and firefighting sector because Kuwait is the only country presently in the Gulf Region with ongoing projects. This will continue for the next eight to ten years, and the finance has already been budgeted. There is a large market for construction. These are big projects. Our company cannot handle taking on the whole construction project, but we can take the subcontracting part of the air conditioning, firefighting, and sanitary. We are equipped to do that and we are doing it now. This is the place that we really must push and we see ourselves expanding in this sector.

What is your competitive advantage in this sector? Why should a company choose you over a competitor?

Currently, there is a vacuum. For example, Al Mulla used to be very strong. There were many companies that, for reasons such as shifting their wealth outside, trouble, or deciding to leave the segment, created space for us to enter. We entered a little late. We should have done it four or five years ago. Still, we have two big jobs now and we are applying to eight or nine more upcoming, such as the airport.

What projects are you undertaking now?

We have Al Jahra Hospital and a maternity hospital. We have not signed the contract yet, but our people are 95 percent certain we will get the contract. There is a great deal in the coming few years. We have another construction project with the American Army for a small village near the Iraqi border that we are applying to and we are coming to the final stages.

What do you want to achieve in the oil sector? You have associated yourself with another company to enter this market. What do you want to provide?

Currently, Kuwait is going into big refineries, but also small refineries of 40,000 to 50,000 barrel production per day. Instead of having one very big one in Al Ahmadi or elsewhere, they are now creating small units. Each one will cost around 300 to 400 million dollars. They have already tried this a few years ago, and it was successful. Three have started at the end of last year and one we have already taken over. We would like to go in that direction. We do and pay for everything. They give you the cost of equipment, but they will buy the oil from you. It is a two-year construction period and then for another five years they will buy the oil from you. They give you the crude oil, you refine it, you give them the sulphite gas, and you give them the refined oil for five years. After that, the whole refinery is yours. You have an option of taking one or two million to scrap it, or they will buy it from you for an already set amount of money, or they will allow you to operate it for another five years. The company that we partnered with could not do this on their own, because you need a big loan from the bank. It is not easy. You must pay for everything and run it and you will not generate a profit for six to seven years.

Are you looking to attract investors for financing projects, or is it easier to go to the bank for the loan? Is it an option to partner, or even go to the Stock Exchange?

When it comes to finance, we have no problem in Kuwait. Our name is good in Kuwait and we have never had trouble before. Of course, they will check why you need the finance. When we got this project in the oil sector, they checked to be sure we could fulfill our responsibilities. We showed them that we had enough engineers and enough experienced people that we had hired from India, and we were approved. Of course, with a large project like this, it is always better to partner with people that have the knowledge for this project from outside. My partner is going today to America to speak to two big companies to partner with them. We are already partnered with two big Indian companies for any coming projects. Small projects of about 10 million KD we can handle ourselves. But if we are going to do bigger projects, such as a hospital or an airport, we cannot do it by ourselves. We need technical support and the knowhow of outside companies, or a big company, for example, Al-Kharafi.

What kind of construction projects are you doing?

With the American Army project, we are not involved with arms itself, but the base of the missiles is concrete and designed in a certain way to handle certain situations. Having the plan, we can do any kind of construction.

What is your aim for the Group in the medium term of two years?

Getting two to four big projects in air conditioning is our aim. This can put us in the market for the next three to five years to build a well-known name to enter a bigger project at a later stage. There was an idea that if we build up a good name here, we might go outside to Saudi Arabia or Bahrain, but it is too early for that. There are big players in those countries and in Kuwait. It is not going to be an easy thing like Al-Kharafi, who built up an international company and goes everywhere in the world: from Africa, to the Middle East, Egypt, and Lebanon. If you go to any of those countries and you find a lot of construction or a big project, Al-Kharafi handled it. This is not our first priority, now. Our first priority is to have some big jobs here in order to gain experience to go for bigger jobs in the future. There is no profit in electronics today. In the 1980s, we used to get 8 or 9 percent profit. Now, if you get 2 or 1.5 percent profit, it is a win. It is a very difficult and competitive market. The costs are high and the profit is decreasing. People are demanding too many services for too little money. We have to keep the electronics because it is our main business, but we must find other sectors that generate profit so that we can continue. These two sectors are real estate and bigger project construction. Now, we expect we can do well in air conditioning, electrical, and firefighting.

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