Dubai: Building materials suppliers play a crucial role in reshaping the urban landscape. While urban planners and property developers are responsible for putting the planning and infrastructure in place, nothing can happen if the contractors, sub-contractors and materials suppliers support them efficiently.
Although building materials suppliers remain at the end of the real estate and construction supply chain management, they however, play a crucial role in ensuring the smooth delivery of projects. Danube Building Materials is one of the largest supplier that has benefited from the property boom in the last few years, generating revenues in excess of Dh1.1 billion last year.
Established in 1993, Danube Building Materials FZCO provides more than 15,000 products in stock and in-house value added services in all of its 14 showrooms across the UAE.
Although companies are reducing costs by downsizing operations, Danube is still in the growth mode. It has invested more than Dh200 million over the last few years and is setting up a major facility in Technopark by investing a further Dh50 million.
Rizwan Sajan, who hails from India, moved to the UAE from Kuwait to kickstart Danube Building Materials in 1993, just before the building and construction boom. A self-made businessman, he struck success from the beginning by supplying hardwood to the construction industry. Today, his company has emerged as the top supplier with 15,000 products under one roof
Gulf News: What is the current state of the UAE's building materials sector? What is the estimated size of the industry in the UAE?
Rizwan Sajan: The figures for January 2010 reflect an increase compared to levels in the previous year, which indicate that the UAE building materials sector is headed towards growth. The main driver for the turnaround is the increase in world commodity prices, which means that the materials component of the UAE Cost Index increased by almost 6 per cent over the past year. The market is also beginning to see several key projects resume their construction activities. I believe that the market is taking a turn for the better, and is becoming much healthier despite the decline compared to the levels in 2007 and 2008, which were abnormally high.
What is the current state of the GCC building materials sector? And what is the short and long term outlook for the region's building materials?
The costs of various building materials in the region have increased by 10 per cent in the first two months of 2010, which we believe will have positive implications for the building materials market given the all-time lows that prices had dropped to. We anticipate this to continue amidst the current gap between supply and demand. In addition, we are expecting a busy year from now until 2015, with the number of projects in markets such as Saudi Arabia, Bahrain and Oman hitting record levels, which we expect to translate to further demand for construction materials.
Could you share your thoughts on the current global scenario in the building materials sector?
The rise in global prices of building materials is being driven by factors such as the growing freight charges in Europe, the Far East and other territories, which are major suppliers to the region, as well as the recorded jump in oil prices in the last six months. The rise in prices of building materials within the last couple of months was also fuelled by the shutting down of a significant number of mills, owing to the international downturn.
Are we in for a price shock any time soon?
The prices are moving upwards, but not in the same shocking rate we had in 2008, wherein the price of steel had shot up from $500 (Dh1,836) per tonne to $1,500 per tonne within three to six months' time. We are still expecting some prices to go up, especially for steel and wood, as a result of the increase in the freight rates and the demand that has been created in the region, particularly within the GCC.
Is there a possibility of a price hike in the international markets?
Surprisingly, despite low demand there is a price hike especially in steel and steel products and wood. As a matter of fact, global steel (mill) prices have gone from $490 (December 2009) to $520 (January 2010) to $535 (February 2010) to $570 (March 2010), and latest estimates reveal that a price of $600 is imminent.
Why are the building materials suppliers not investing in developing building materials industry, production facilities that will help the UAE's construction sector to withstand the pressures of future global price shocks.
This is because the main requirement to do this would be raw materials. Unfortunately, we do not have these resources in the UAE.
How much are you investing in expansion?
In addition to increasing our manufacturing capabilities, we also intend to expand our retail presence in the region and have planned 10 new Buildmart branches in 2010. We are also currently undertaking expansion initiatives in Jeddah, Saudi Arabia, and planning on venturing into Riyadh and Dammam, as well as further into Qatar, India and the African region by way of franchise agreements and dealer networks.
To date, we have invested a total of Dh100 million in the expansion of the Danube Buildmart concept across the globe. We have also recruited 350 additional staff during 2009 — the highest employee intake we have seen during our 16 years of operations, during a period when our competitors were in the cost cutting and lay-off spree.
While the sector is suffering from decline in demand, why are you investing heavily in expanding your network?
While there is a definite decline in UAE, particularly Dubai, other markets such as Bahrain, Saudi and Muscat are witnessing steady demand. Even other emirates such as Abu Dhabi, Fujairah and RAK (Ras Al Khaimah) are registering significant demand for building materials, which prompts us to undertake expansion initiatives to tap these markets.
Our recent activities revolve around expanding our Danube Buildmart branches, seven of which we have opened last year. The concept behind the Buildmart brand is to offer a first-of-its-kind customer-friendly retail complex that provides a wide array of interior fixtures and furnishings, and expert design consultancy as a value added service. All complexes house over 15,000 high quality products within twenty four different sections, ranging from chandeliers, light fittings, wallpapers, Venetian blinds, luxury bathroom fittings, shower rooms, bathtubs, parquet flooring, ceramic and porcelain wall and flooring tiles, and architectural hardware.
In addition, all the products being sold are installed in an actual home set-up, thereby allowing customers a more convenient way to shop for building materials, fixtures and other household items.
The idea of Buildmart' came to me when me and my wife, had some work done on my newly-bought house, and we were left with no other option but to go to the market in Deira to pick up interior fixtures and fittings.
I toyed with the idea for close to five years, and after seeing stores in Europe and the US that offer such convenience to shoppers, I decided to introduce this new concept to Dubai.
Our commitment to the UAE market is underlined by our continuous expansion efforts, which is aimed at addressing the building materials requirements of our customers across the emirates. We have not been deterred by the challenges of the economic downturn, and with the impending recovery of the market, we are confident that we are headed towards further growth.
Kindly elaborate on the Dh50 million project in Technopark. Are you going to develop factories there?
The Dh50 million factory project in Techno Park, which is designed to support the company's expansion plan in the coming years, is moving ahead full steam. Upon its completion, the 1.3 million square feet industrial complex will comprise seven state-of-the-art manufacturing facilities and a massive custom designed warehouse to store a wide range of structural steel and wood products. The new facility, to be completed in phases, will be functional by early 2011.
Among the specialised manufacturing facilities within the new factory complex include: a gypsum tile cutting plant; gypsum ceiling tile manufacturing plant; glass tempering and polishing plant; and an aluminum manufacturing plant. This follows the opening of our 365,000 square feet facility in Jafza South, which includes a warehouse, kiln drying facility for treating of wood and a high-tech joinery.
How much revenue did your company generate last year? How much do you expect this year?
Despite the economic downturn, we were able to generate around Dh 1 billion in revenues, which is very close to our earnings pre-recession. This year, we are looking at a 30 to 40 per cent growth.
