It takes a lot of courage taking the right decisions during tough times. In times of economic uncertainty, business owners may become more hesitant to invest. However, Raphael Khlat is one of those people who likes facing challenges head-on and maintaining a steady business stride.
According to a report by the UK-based construction services firm Turner & Townsend, Dubai has been ranked the 28th expensive place for construction and rated “lukewarm” for tendering conditions, characterised by rising prices and growing competition for projects. Khlat, who is the president of Dubai-based Faisal Jassim Group, took a wise decision of acquiring two major factory units — one for electrical accessories and another for ducts — during these challenging times. He says: “The two businesses that we have acquired are very important. The first is acquiring the business of PVC conduits. It’s a business that we started some time ago as a trader. In addition, I was in touch with this factory for some time, and I grabbed the opportunity.”
Khlat adds that Faisal Jassim Group has in the past known how to manage a factory, particularly when it came to material purchasing, streamlining production line, organising materials, getting sales, and starting out a distribution network. He says: “This is something that we are good at, and we have the network for that. The other line of business is ductwork.” Khlat says that although the acquisition of the duct factory is not yet complete, it is in its final stages. This will strengthen the firm’s position on owning its own brand, he says proudly.
Khlat is of the view that one should always think long term. He says: “If you think short term, it might be really tough. You have to think long term. Our strategy has always been long term. Some of the brands that we have today, they have a limitation. For example, we will not be able to go with the switch kit beyond certain territories. We cannot sell that in North Africa or sell electrical panels in Europe. So, it’s a short-term concern that we really have to tackle and we have to reorganise financially. You need to have that financial discipline. The reason we are carrying out acquisitions is because we have the solid financial foundation. We are acquiring because we believe in the future.”
One should have the ability to set long-term goals about the future of the business in order to be successful, Khlat implies.
Faisal Jassim Group’s current focus lies in creating its own brand, says Khlat. He adds: “The strategies that we put for some time now is really to focus on creating our own brand, and expanding on our exports. What we do in Dubai, we need to leverage more in other markets such as Saudi Arabia and Kuwait. The second focus would be on strengthening our own line of products in terms of specification testing, bringing up the product in terms of visibility such as marketing and positioning. We want to focus on our own product, and the brand that we own. The third focus is to make sure that the operation is strong. Operation can cover many things in terms of satisfying customers, making sure that we have the right commitment that we are able to honour financially, and having the capability of advising. By advising we should be able to help the customer to understand how to install the product and how to use it.”
Khlat admits that when you work in different territories the rules are different. He says: “Whatever specifications work for Dubai does not really apply in Saudi Arabia or Bahrain. You take time to understand the product, market, and the needs. In addition, there are already new agencies in that territory who are strong in those particular segments.” He says that the Group has found competition and issues with expansion and are treading steadily and cautiously.
How important is supplier-contractor relationship, especially in a time where cashflow is a persistent problem?
Khlat replies that the firm’s relationship with the contractors has been always based on continuity. He elaborates: “It means that if we are only thinking on a short-term basis, we cannot really build a future with them. Because this is really about partnerships. It’s not really a relationship where I supply you and you pay me. It’s a relation based on trust, and trust is mutual. When you expect Faisal Jassim to deliver the right product on time, this is a big responsibility for all and we take it very seriously. On the other hand, we expect the contactor to be transparent. I understand the market is not easy on them, but it will become much more difficult if they are not transparent. We’ve seen a lot of big contractors having difficulties. It is the quality of their management and their ability to really weather this and talk this through. That will see them passing this through this phase. At the end of the day, it’s about capabilities and communication.”
He adds: “We’ve seen a lot of good days and bad days, and if we all weathered it together, we can take more risks.” Khlat says that the times are tough for a lot of people.
But will the market conditions improve? He replies: “I really don’t know. It will improve only if there’s new money injected in, and the new money is going to come from developers and from the government.”
According to Khlat there is improvement, and there are some good signs in the market but the effect is yet to be seen. He concludes: “There is 70% foreign investment compared to last year. This is a good sign. The price of oil increasing and the announcement of Abu Dhabi’s readiness to re-inject another 50 billion dirhams, are very good signs, with certain positive changes in regulation. However, we need to see their impact.”
As we move into 2019, there are numerous signs of optimism for the MEP industry, Khlat believes.