Dubai: Ducab, the UAE's cable manufacturer jointly owned by the Dubai and Abu Dhabi governments, is considering extending its regional reach into Qatar and Saudi Arabia with new production facilities, its chairman said yesterday.
"Definitely Qatar and Saudi have and will be in our focus in the total regional expansion," said Ahmad Al Shaikh, Chairman, during the first press conference to announce the company's financial results.
Ducab's board of directors is looking at a feasiblity study on a cable manufacturing plant in Saudi Arabia, but the decision is still pending, he added.
"We are trying to overcome some rules and regulations. Have we taken a firm decision? Not yet," he said but would not elaborate.
The company is considering the right time, partner and price while striking a balance between shipping products from the UAE versus opening new facilities, said managing director Andrew Shaw. "Prices are becoming more reasonable."
Ducab is also seeking a foothold in Qatar as infrastructure projects flood in ahead of the World Cup 2022e, he added.
The Gulf is Ducab's biggest export market. It sells 60 per cent of its portfolio products and about 30 to 35 per cent of its cable products abroad.
"Currently 65 per cent of Ducab's revenue is from the UAE. A new facility would be key to diversifying its sales into other countries in the GCC. Saudi Arabia and Qatar are natural gas and oil rich countries that would offer cost savings for copper rod manufacturing," said Venkatesen Subramanian, director of metals and minerals at Frost and Sullivan.
Projects outside the GCC
It is looking at projects outside the GCC as well. "There is more than one opportunity in several places but they are put on hold due to the political scenario in the region and is subject to further analysis," Al Shaikh said.
Ducab has applied for technical approval of its products in Tunisia, Libya and Algeria, according to Shaw. "It is work not wasted," he said.
This year, it will continue investments in acquiring or greenfield programmes in Arab and international markets depending on demand, local laws and ownership shares.
"We don't want to go into a partnership as a minority. W're not investors, we are a cable company and we know our work," Al Shaikh said.
sales rise 51% to Dh3.6b
Global copper prices have more than tripled since 2009, forcing cable producers to pass some of the costs onto their customers, Ducab's senior officials said yesterday.
"About 50 to 70 per cent of the value of cable is wrapped in the value of copper, so there is a direct impact," said managing director Andrew Shaw.
Ducab earned Dh3.6 billion in sales for 2010, an increase of 51 per cent over 2009, amid "fierce competition" and rising copper prices that affected demand for cable, said company chairman Ahmad Al Shaikh.
"The high volume of growth might be due to lower revenue base in 2009 and due to the pick-up in pent-up demand and stock replenishment in end-user segments," said Venkatesen Subramanian, director of metals and minerals at Frost and Sullivan.
"Recovery in copper prices in 2010 is also another major factor for increasing the cable prices which reflects in overall sales revenues."
Turnover from cable sales reached Dh2.2 billion with over 67,000 tonnes produced in 2010. Copper rod accounted for Dh1.4 billion of sales with an annual production of over 49,000 tonnes. Copper rod production increased by 47 per cent in 2010 compared to the previous year.
Expanding into new markets in Europe and Africa, introducing new products and opening the region's first high-voltage cable facility were the main reasons for growth, Al Shaikh said.
Ducab plans to increase sales by 15 per cent this year, despite the "economic situation" and steep copper prices, through investments in new technology and expansion into new markets, he added.