“Megaprojects in Saudi Arabia on Track” says MCC

Interview with Yousof M. Al-Hammouri, Operations Director of MCC

First of all, tell us about the company – your beginnings, history, and what makes you the leading supplier of chemical products and chemical supplies.

We’ve been in this country for more than 38 years. We’ve been dealing with the biggest construction companies, consultants, and architects. What we do, we’re elected through mechanical suppliers; as traders, we’re agents for more than 32 brands – mostly American brands – because, as you know, this country runs under American standards, which are ASTM standards, and we have a good reputation in this country with all the suppliers and contractors, and we have a big client base. This is how we try and penetrate the market.

As I understand, you are the leading company?

We’re one of the largest in this field, and the oldest. We were one of the first to start in this business and this is how we built our relationship with clients and consultants. With the traders or agents that we deal with, we penetrate the market with their help through presentations to educate and talk about new products and innovations.

Would you say that your major clients are larger constructions companies or contractors?

Big contractors – we target the mega projects in the Kingdom, and the main contractors are our main clients because our materials are approved by the consultants for those projects. There are steps that you need to take to work with consultants, architects, and then you work with the contractors in order to make sure that what is approved is what is bought by the contractors. The contractors will sometimes try to make more money for themselves and approve something that is less feasible for him. It’s a long process or cycle that you need to start from the beginning and work your way up.

What do you feel about the construction/contracting sector in Saudi Arabia? It has been going over the past decade, what is the outlook in your opinion: positive, negative, or stable?

Well, there is always a boom in Saudi Arabia. You learn from history, and every king that comes wants to put his name in the country, so he brings new projects, new ideas, and new ways of thinking or how he wants his country to think. That’s always positive – looking for new things for this country.  

What is the overall value of all the projects? And, are you most involved in Jeddah?

We’re involved in Saudi Arabia and Qatar. We have branches in Jeddah, Riyadh, Al Khobar, and in Qatar. Wherever the project is, throughout the Kingdom, we have our people that go there and start from Day 1 to achieve our goals.

What has been your growth over the past few years? What do you predict in the future?

The growth is the strong ties that we have with our suppliers and strong relationships with the consultants. We start with them from scratch on Day 1 and we work our way up on the project. We are known in this country for having the elite items in electro-mechanical field, and for mega projects the consultants are always looking for people that offer the best for the projects in this country. This is why we’re always looking for the best products that the world can offer for those prestigious projects. 

There is a high competition in chemical supplies and mechanical supplies in Saudi Arabia, what makes you different or stand out from other companies?

Our reputation makes us stand out because we’re well known in this country. The contractor will always hesitate when a new company wants to supply a big project – they don’t know if he’s going to deliver on time or if the materials are going to come.

They give us advantages over others because they know how strong we are – even if they don’t pay us money, we still have the power to supply now and receive the money later. A lot of times, projects get delayed, contractors don’t get paid on time, and if you’re going to stop supplying them, then they’re going to get in trouble or they’re not going to finish this project. But, if you’re strong enough to supply them, and you know that you can get your money later on, this is what gives you an opportunity over others. There are different strategies and every country has its ways – we wouldn’t be running MCC like we do in Saudi Arabia if it was in a different country. In Qatar, for instance, we have a different strategy. It depends on the rules in the country and the way the people are in the country.

What’s different in Saudi Arabia?

What’s different in Saudi Arabia is that you can always have the upper hand over your competitor if you have strong ties with the client, contractor, or consultant. This always plays an advantage over others.

This is not the case in Qatar?

In Qatar, it’s a different market. It’s a market that we’re new at, and there is a lot of competition. Everyone that is in Dubai is in Qatar – as you know, the Dubai market is not doing very well right now, so everyone is heading to Qatar and willing to sell for less profit because the competition is high. They’re not selling a lot, so to sell is better than not selling. That’s the case in Qatar because it’s an open market for anyone to go and work. In Saudi, you have to be Saudi or have to have a Saudi partner. Or, if you’re a foreign investor, there are taxes that you have to pay and they make life difficult for you.

You represent a lot of brands, what are your strategic priorities for 2015 and 2016? Do you want to work on new brands?

Of course, we’re always looking for what the country is missing. You have a project, let’s say there is a new tower in Saudi Arabia that is owned by the government, the government will ask the contractors to come and bid for this project. The contractors will get all the information and the BOQ, and then will send the price of the materials and project to the suppliers. By giving us those prices, you can always give the better price to the contractor who you have the best ties with. By giving him a better price, you’re giving him a better chance of winning this project.

For instance, if I give you a price and I give someone else a better price, he will probably win this project. This is how it’s run because most of the items are approved and they have to be used for the specific project – that’s our main target, to approve our materials before selling it. If it’s not approved, then we won’t sell it. If we don’t work from Day 1, then we can’t just jump at the end and expect to get an order. It’s a long process, we usually work for about three years on a big order – nothing comes in a day or two because there’s high competition in Saudi.     

How has your margins evolved over the years that you have been in business? Do you see the margins of companies, like yours, shrink because of more competition or remaining the same?

We’re developing. We have better numbers each and every year, we are increasing the number of employees, and we develop the weak points in different areas to cover and expand our business.

As for the margins and profitability, are your profit margins are going down or up?

Our profit margins are steady. We have a strategy for keeping our margins the same. In Saudi, we don’t change our strategy. In Qatar, we have a different strategy because there are more suppliers and people from Dubai are able to sell the same products, so you need to be more competitive and your margins need to be lower to be able to sell. But, in Saudi Arabia it’s a different case, because if my material is approved, and the contractor has to buy from me, why would I put my margin lower.

What are some of the largest projects in Saudi Arabia that you are currently looking to be involved in, or are already involved in?

The biggest project we’re involved in at the moment is the Al-Shamiya Mecca expansion project. I think this is one of the biggest projects. There was the Al Faysaliya Center project in the Riyadh financial district that is almost done, the PNU (Princess Nora bint Abdulrahman University), and the new kingdom tower in Saudi Arabia (Burj al Mamlakah), which is a kilometer high.

The new, upcoming project is the Medina project, which is supposed to be five or six times as big as the expansion project in Mecca that is currently happening. Then, there is the Jabal Omar hotels development project in Mecca. Also the power plants and water treatment plants are always expanding because the population is growing, so you need more electricity and water. Then, the highway and railway station, and the metro in Riyadh are other big projects. All these projects were signed by the previous king, King Abdullah, and now we have a new king, so he will most likely start more projects in the kingdom under his name.

Last question, can you give us an interesting story that illustrates doing business in Saudi Arabia?

We need to employ Saudis to keep the Saudization in the country – you have to have a certain number of Saudis in your company. Those are rules set by the government, and it depends on which sector of business you’re in.

For instance, we’re traders so our percentage has to be 25. For contractors, it’s less around 8-9%. Some of the Saudis that we employ are not skilled workers, but we hire them because we don’t want to have to pay more overhead for our company – even if we don’t have space for them and are running the business well, we don’t want anyone else to interfere. We’ll hire them, and say answer the phone, send a fax, or just drink coffee.

One day, I was in a hurry at the office and needed to give someone some papers. I went outside to look for the secretary, but the secretary wasn’t there. I see a Saudi guy sitting in the office, and I give him the papers because I can’t find the secretary. He looks at me and he says, ‘What are you saying, this isn’t what we agreed on – what we agreed on was I sit here, I answer phone calls, and I drink coffee.’ Unfortunately, this is the mentality for some in Saudi, and there is nothing that you can do about it, so I had to go and deliver the papers myself.