As part of our programme of connecting our global members during the COVID-19 outbreak, WCA is hosting video interviews with our members to discuss the situations in their countries and to find out more about the impacts of the pandemic on the cement industry around the world. Here is an interview with Mr Joey Ghose, CEO of Raysut Cement, Oman.
Video Transcript
[How has the COVID pandemic affected your business?]
JG. It has impacted us in that the downstream industry was also restricted in their operation, and all of that, the lack of travel, the lack of business remaining open and we in the construction industry, there’s a lot of people movement, you have large numbers of working groups and labour in any construction sites, so all that restriction led to an overall demand drop by about 40% and then that coupled with Ramadan in May coupled with summer months here in the middle east, demand has seriously dropped to about 50% of what we had budgeted or what was planned. Most of our export markets, our business is 50% reliant on export sales to Eastern Africa, Madagascar, Indian Ocean islands, all that we had major restrictions at the ports which led to long waiting times at each and every port due to quarantine, which then also resulted in a decline in the exports by 80%. We hope that now the next 6 months will be a time of some recovery, however the major recovery in our opinion will come in 2021.
Our business, we have fine-tuned it to tiny inventories, not carrying too much stock, but relying a lot on outsourced or subcontracted activities, but we realised in the first two months, in March and April, all of the savings we had a achieved in the past five years were wiped out in two months of not having spares on time, not having the subcontractors here, not having bags for example, all of these things, and that led us to start relooking at, how do we get self-sufficient. In Eastern Africa, ME, they’re looking inwards and saying, do we really only rely on imports or do we support the local industry. That is good, in my opinion, whilst we see an immediate drop in our exports, in the longer term I think it is important that businesses should work with governments and local partners to increase their local presence. I think this COVID situation has created a reality check, now all company in every market, every government, the businessmen in those countries have had time to reflect and do a reality check on is this sustainable in the long run, do we carry on importing or do we partner with someone who can invest in our country and grow the local markets.
[IR: What do you expect to see if you look at 2020 vs your budgets or previous forecast and also for next year, what’s your outlook there?]
JG. Against the budget for this year 2020, I think we will be at 50% of the budget because the first half the year as been washed out, the second half I believe will recover 30% in real terms, at the end of the year we are looking at 50% of the budget. 2021 in my opinion is when things will be back to normal, all the business units in every geography will be up to speed, and that’s when we’ll see more and more of the construction activity in terms of large projects, where the big cement demand comes from, so in 2021 I see us getting back to our budget of 2020 and after that there will growth, 5-7% per annum.
[IR: Even before the COVID crisis there were a lot of financial problems and bankruptcies in Africa, is in an opportunity, presumably their finances are going to get even worse, is it an opportunity to restructure some of these industries to have something that’s more sustainable long term?]
JG: Absolutely and you know, this is where if you have a partner which understands their limitations and can appreciate what we as a company, as Raysut Cement can bring to them, then there is a good synergy between the partners, and this is exactly as you say, over the past decade a lot of these new companies have mushroomed from traders, and they made a lot of money in the beginning and decided OK now we need to go backstream, however, without a robust technical partner, to guide them through this, it’s a difficult business as you know, and not having a reliable clinker source leads to all these quality discrepancies, so it's a good opportunity for any integrated company who has any ambition to expand into those markets to tie up with local partners who are struggling in one way or another and create a very robust, win-win industry which is exactly where we are positioning ourselves and we would like to see as the future. Having said that, especially in Eastern Africa, these markets are quite challenging, you need to have a good understanding of the local environment, and this is where a good, robust local partner can add value for a regional player like us who are looking to enter these markets but don’t necessarily have the in-market skills on how to navigate through the road blocks and challenges in those markets.