Moussa family and the United Holding Company, a success story from Egypt

Interview with Ali M. Moussa, President of United Holding Company (UHC)

Could you give us an idea of the 3 sectors you cover and your general evaluation of them?

The first sector we are involved in is the Building Materials sector. This sector has suffered in Egypt in the last 3 years. The downturn was mainly caused by the fact that the government did not start any new projects. Government is normally the driving force of this industry. We also suffered from the price of energy. We had tax increases. All these factors had a negative impact on our industry. Now, things are looking much more positive. The government is putting in a lot of effort to generate good projects. We are discussing projects in the Suez Canal corridor. We are discussing building a new administrative capital city for Egypt. There is also a lot of new infrastructure work. This will help our industry. There are many new projects to build medium and low-cost housing. It’s important, because the government is serious about this. Our President is pushing for these projects to be completed very quickly. Over the past few years the media publicized many projects that were announced, but nothing was realized. Today it is different. We are being urged to finish the projects faster, and deliver in better condition. The money is available and they will pay their dues.

Energy prices are definitely a problem. Egypt is facing a gas shortage. A lot of industries are very dependent on gas. Within our holding, we have a small partnership with a glass manufacturer. They are heavily dependent on energy prices to stay competitive. Cement manufacturers and seed manufacturers face the same problem. The government is working on fixing the shortage and they now allow the energy dependent industries to import their own energy supplies. Cement manufacturers are now allowed to import coal for their furnaces. This will help relieve some of the problems. There is also the possibility of importing gas from neighboring countries. There has been a big gas discovery in the Mediterranean. We think this will mean more competitive prices.

Could you describe the holding itself and its relationship with Orascom Construction and your family, because it is a family company?

It certainly started as a family company. It started when I created the SCIB paint company. I started very small. Then we started to grow. At that time, Orascom was purely a contracting company. But we were looking to diversify and enter the building materials industry. I know the family as relations and friends since childhood. They knew SCIB as a very aggressive and creative company. We introduced the concept of direct sales to contractors in Egypt. We had a very professional sales team. We also introduced the tinting machine in Egypt, a great tool for the end customer. We were the first to start training centers for painters to use our products. We were very creative and avant garde. I met Nassef Sawiris, the head of Orascom, and he clearly told me that he wanted to expand into building materials. He wanted to partner with SCIB but he was also very interested in joining forces with me in developing this industry. That is how United Holding company came into being. Orascom is known to work very fast and achieve results very fast. This is a great approach to the job. 

We decided to grow, not just vertically, but also horizontally. We had a program to develop SCIB into the leading paint company in Egypt. We also wanted to develop the retail business. We put in a strong management team in place to do this. Horizontally, we wanted to grow in the different areas of the building material sector. Our best approach to achieve our goals quickly was to enter a partnership with a large, leading multinational company. Our first partnership was with BASF of Germany, it was then called MBT. We built a factory in Sadat City. We then built another factory in Algeria. We then entered a partnership with St. Gobain, for gypsum. It was then called BPB. It is the world’s top producer of gypsum. We acquired a local Egyptian company. It was an industry leader. We bought it from the government by tender, an acquisition. We took it to new heights, producing specialty products, not just the traditional products. We export in the region. We’ve upgraded and updated everything in this industry. Even the labor conditions, the security, the quality of products, the quality of quarries have improved.

We are the leading company in the sector in Egypt with a market share of 55%. We created another company called DryMix, a state of the art cement based company. We produce rendering products, cement façade coloring, self-leveling paint. We got this technology from Germany, from a group called M-Tech, a leader in the field. We are not only the market leader but it is becoming the generic name. Anyone in Egypt who wants cement-based paints simply says “I want DryMix”, which is the name of our company.

We were then approached by Asian Paints, the leading paint company in India and one of the leading companies in Asia. They have a very aggressive global expansion plan. They have factories in Dubai, Bahrain, Oman and other Asian countries. They are very interested in expanding in the Middle East. They started negotiations with us. We agreed to sell part of SCIB to them. I sold 50% of my shares to them. Nassef sold more shares. They now have a majority shareholding in it. But we are co-managing with them; it is our team that is working. The advantage of being in partnership with Asian Paints is their strength in retail sales. This was something we didn’t have. Now, together with them, we have about 500 purely retail franchises in the Egyptian market. These outlets only sell our product. We have another 1000 outlets that sell our products, but not on an exclusive basis. With this move we became the most aggressive and widespread retail paint company. 

What about glass manufacturing? Is it the biggest glass factory in the Middle East?

The partnership in the glass factory is part of the family business. It is not part of United Holding. Our partner Orascom was looking to diversify into fertilizers, focusing on international growth. They were investing in fertilizer manufacturing in Algeria and the USA. They entered the Holland market. The structure at OCI has changed a lot. They were not looking for investments in the local industry. I approached St. Gobain and we built this factory. It’s a state-of-the-art factory. It is the biggest in the Middle East. It manufactures 40% of Egypt’s glass. Half of the product is exported, to Europe, the Middle East and other African countries. Production is robotic. St. Gobain is the number one manufacturer of glass in the world. We are getting the benefit of being a part of this large holding. We are the biggest in the Middle East.

What is your short-term goal, for next year? Are you considering any new partnerships or acquisitions?

We hadn’t planned to make any investment, even basic investments in Egypt in the last 2 years because of the political volatility. The environment was very negative to the business community, especially what was considered the ‘old’ order of the business community. There was a lot of litigation and unsustainable levels of tax increases. Nobody, not our European partners or our Asian partners wanted to invest in Egypt anymore. Now, the mood is changing. We are looking to invest and make up for the 2 or 3 years when we didn’t do anything. For 2015, we have a big program of investment.

Can you elaborate or at least mention the areas of investment?

We are focusing on Gypsum. We have 3 factories. We are planning a total upgrade of one of the factories. We are looking at ways to increase production in another one. We are also planning on some new products, which I will not speak of right now. But they are products which will give us a large volume. We are introducing new lines with St. Gobain’s expertise.

Would you like to conclude with your vision for UHC and perhaps the country itself?

UHC will always be what it was, a superior producer of building materials, a market leader in all its areas, quality conscious, with a very strong workforce. It has always been a very profitable company, even in the hardest times. UHC has always been generous to its shareholders as well as its employees. We believe growth will continue.

As for Egypt, well Egypt has totally changed. We now have a caring and aggressive government which is looking to develop the Egyptian economy. We have fantastic relations with our neighboring countries, which will help us past these difficult times. We are very positive about Egypt. We hope the rest of the world feels like us.

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