- M&A: 2021 – A year of surprises and major rearrangements
- Brenntag SE appoints Michael Friede to the Management Board effective April 1, 2023
- US economy and coatings industry trends: Is there cause for optimism in 2023?
- Chemical Business Association: Unwavering support in uncertain times
- PPG names new packaging coatings global technical director
Following on from our interview with Tawazon at the Middle East Coatings Show last September, PPCJ spoke to Oussama Ghandour, Managing Director, at Tawazon, to find our more about the company, the challenges and trends it faces and to discover more about doing business today in the Middle East region
Q: Tell us a little bit about your company
A: Tawazon Chemical Co LLC is a multinational organisation that has been in operation for more than three decades. The company was established in 1991 with its head office in Dubai and subsidiary operations at various locations, covering markets in Africa, Middle East, Indian Subcontinent and South East Asia. With a turnover of US$125M, Tawazon is a leading distributor of speciality chemicals for Coatings, Construction, Inks, Plastics, Packaging, Fibreglass, Rubber, Food and allied industries. The company is ISO: 9001, ISO: 14001 and ISO: 45001 certified. The operation is managed by a long-term dedicated group of professionals, with extensive knowledge and experience in chemical distribution. Consolidation of speciality chemicals is one of the company’s fortes. Stock points are located in Dubai (UAE), Riyadh (KSA), Jeddah (KSA), India, Indonesia, Kenya and South Africa. Tawazon has been awarded Best Distributor consistently by our principals including Troy (now Arxada), Benda Lutz (Sun Chemicals) and Synthomer. We have also been awarded the best SME exporter of the month by Dubai Chamber of Commerce.
Q: The company has been in operation for more than three decades – what has changed in that time, in terms of: what products the coatings industry is asking for; the difficulties and challenges in the industry; trends in the industry; geographical regions of importance, etc?
A: Tawazon started off as distributor of speciality chemicals, when the focus of most of the players in the industry was on bulk distribution of generics. As paint companies go up the value chain, we have seen a huge shift in focus on speciality additives and pigments. In recent times, apart from acute competition, one of the serious challenges posing the industry is that of maintaining a steady supply of raw materials which has been impaired severely, due to the collapse of supply chains worldwide. We had to beef up our stock holding in the last two years to ensure that our customers are unaffected by the supply chain hiccups. Though that had a sizeable bearing on the profitability, it enabled us to have an edge over the competition in terms of servicing requirements on a consistent basis.
Traditionally for Tawazon, the Middle East and Africa have been our key markets, contributing to the bulk of our bottom-line. However, in recent times, we have expanded our footprint into the subcontinent and the Far East; both of which have been exceptional in growth terms. We also have a foot mark in North America which we aspire to expand to in the near future.
Q: As well as the actual chemical products, what else does Tawazon offer eg, technical support, warehousing, etc?
A: Stocking is our biggest value proposition. Tawazon has a rich understanding of raw materials and chemicals that cater to the coatings and inks industry. The focused approach of the team, ensures that customers are prioritised with prompt technical support from Tawazon’s Principals at all times. We are a one-stop shop for technical queries of our customers, be it trouble-shooting production hiccups or assisting with tailored formulations.
Our supply chain is geared to move huge volumes of inventory across the globe, promptly. With stock points at Jeddah, Riyadh, Nairobi, Chennai, Jakarta, and South Africa (Durban/Johannesburg/ Cape Town and Pretoria) and competent manpower at these locations we are able to effectively co-ordinate deliveries across the globe. This in turn enables our customers to have a seamless experience when it comes to vesting us with their procurement.
Q: What is the mission and vision of the company?
A: We are driven primarily by the vision and mission of our founder(s). Vision: Building reliable partnerships towards mutual prosperity. Mission: “To be the leading raw material supplier to focus industries, while growing internationally, with the emphasis on relationship building, customer-relevant service and our core values”.
Challenges and trends
Q: Can you talk us through the major challenges and trends that Tawazon faces today, in terms of the coatings industry? What is affecting the company and how is it responding to the following different challenges and catering to industry trends:
Raw material costs
A: Raw materials costs have gone up on an average by 35-50% in the last year. This has been on account of various factors including freight charges which have a prominent bearing on the costs, especially of generic low value items. Add to it factors like increasing energy surcharges and key raw material shortages that have led to hikes unseen in the last three decades. With the Chinese government getting stricter with environment norms (due to the upcoming Beijing Olympics) and otherwise too, have also added to raw material costing woes. We had anticipated the hike coming during the onset of COVID and started building up stocks. That, apart from giving our clients financial efficiencies, also enabled them to continue their production uninterrupted during the lean period.
Supply chain issues, logistics and transport issues
A: The supply chain has been affected adversely by non consolidation of empty containers by shipping lines, hoarding of containers by export economies, diversion of containers for emergency medical supplies etc. All this has not only led to increased lead times, but also delays on account of transshipments. We expect things to get better towards the year end unless another COVID variant disrupts the equation. Bloomberg had an interesting statistic to share: before the pandemic, it would take about 45 days from the time cargo was picked up at a factory in Asia for it to depart the US West Coast ports by rail or truck for a warehouse; today the same cargo takes about 105 days.
To add to shipping woes are transshipments whereby important orders got transshipped due to space constraints to remote locations, jeopardising the already fragile situation. We managed to tide through these hiccups with our proactive planning and stocking.
A: At Tawazon sustainability is governed primarily by innovation and adaptation. We are quick to adjust to emerging market situations and are constantly tailing betterment of the value chain for all our stakeholders. We aim to service our customers big or small to the best of our abilities and provide them with value added products at competitive prices and prompt service. To our suppliers, we ensure that their product portfolio gets due attention. We constantly apprise our suppliers with specific requirements from our customers to ensure our customers get access to products which can enable them to offer cutting edge technologies to the market.
Q: What trends do you believe will be most prominent in the industry in the next 10 years?
A: Changes in environmental regulations and increasing potentials for greater sustainability and performance at competitive pricing will continue to drive innovation. Tightening environmental norms, globalisation, reduced costs and the necessity to surge efficiency – through ease of application, condensed material usage through thinner film builds and the ability to apply coatings over uneven substrates would be trends impacting industrial coatings. Similarly, decorative coatings which are low VOC and child friendly coatings will have a huge market in times to come.
With health being a prime focus, hygienic coatings which in the past were primarily categorised under the industrial segment restricted primarily to hospitals and medical centres, will have a new niche in the decorative segment too. Likewise for underdeveloped economies in Africa, antimalarial coatings and antiviral coatings will be the prominent game changers in the deco segment.
For specialised industrial coatings like aerospace, the focus will be on high performance coating materials, which provide protection against corrosion, ultraviolet rays & solar heat, climatic stress, and offer wear resistance to aircraft surfaces, thus reducing the amount of time
for maintenance and repair. All these are a few of the upcoming trends of the industry in times to come.
Q: What challenges do you anticipate in the next 10 years?
A: The global paints market is projected to grow from US$150.76bn in 2021 to US$217.66bn in 2028 at a CAGR of 5.4% during the 2021-2028 period. We expect global economic recovery to prevail through the whole of this year, if not until the first half of 2023. A slew of headwinds including Omicron, UHU and the existing delta variant, inflationary pressures, Fed’s potential rate hikes, China’s property downturn along with the systemic shutdown of polluting industries and other geopolitical concerns may slow down the pace of growth in the short run, coupled with the fact that paint companies have not been able to pass on the price hikes to their end customers, which has an important bearing on the overall health of the industry. But we are still optimistic about the paint industry either surpassing or coming very close to the industry forecast of US$217bn in the next six years.
Other challenges include the mushrooming of competition, foreign exchange fluctuations in export markets, especially the ones which are not pegged to the dollar and mergers and acquisitions of key principals also would have a prominent bearing on the business in the long run.
Middle East region
Q: What trends are specifically important to the Middle East region?
A: The Middle East is a very established market where the focus primarily is on the value proposition to the end user. Low VOC paints, UV wood coatings and intumescent coatings are the latest trends in the region. We have also seen a gradual shift to organic pigments in the decorative segment. There is a gradual phasing out of lead, as companies strive to be more responsible in their offerings.
Q: What are the main benefits of doing business in this region?
A: There are multiple advantages in doing business in the Middle East. First, we are located almost in the centre of the world. The UAE is an international transit point. Our geographic location is a great strategic advantage. Secondly, both the local and expat population has access to disposable income owing to better perks and salaries in the region. Another great advantage of the GCC region is the fact that there is no personal income or corporate tax in the region as of now. VAT which is applicable in some pockets of the GCC is also at very low rates compared to the rest of the world. Yet another benefit is the fact that most of the currencies in the Middle East are pegged to the dollar. Add to it, the fact that most of the GCC countries do not have a branch profits tax. Repatriation of profits between branches and their head offices are also not subject to withholding tax (WHT) or other forms of repatriation tax in the UAE for example. In addition to this, the UAE boasts a marvellous infrastructure along with being one of the best places in the world to do business. The vision of the leaders is one of the most prominent reasons why businesses thrive in the region.
Q: How are things expected to play out in the Middle East, as we recover from the pandemic and its related effects?
A: Working from home, which was unheard of in the region is becoming a norm, not only in the private sector, but in some government sectors too and is going to be the future of the workplace even after the pandemic is over. Another major shift has been in people investing in their homes more than they did in the past.
A very important observation will be the hike in prices of villas and town houses in the UAE. There has been a 25% hike in independent homes during the pandemic as people prefer to stay in standalone units than apartments. We expect the boom in real estate in the region to continue, owing to the extremely investor friendly sops being rolled out by the UAE and other GCC countries. Travel and tourism have rebounded (although, at the time of writing, it has been temporarily disrupted in the past two weeks due to the surge in Omicron cases worldwide) and tourism will be a major contributor to the economy in the long run.
Businesses will gain huge costs savings with software offering remote meetings like Zoom/Google Meet/GoToMeeting/ MS Teams/Cisco Webex etc. This will completely change the whole landscape of how business will be conducted in times to come. The Arab world’s second biggest economy is already implementing an array of reforms including Golden Visas/Silver Visas and property-linked visas all of which will attract FDI into the country, both in the institutional and retail sectors. The aim is to improve ease of doing business, attract foreign investors, create jobs and diversify the economy to reduce its dependence on perishable resources. The UAE has allowed a 100% foreign ownership of companies in 13 sectors from manufacturing to renewable energy. It has also eased visa restrictions, provided incentives for small and medium enterprises and introduced a new insolvency law in line with established international standards. The UAE stands in 16th place, with respect to ease of doing business and is the strongest performer overall in the Middle East and North Africa region, according to the World Bank’s Doing Business 2020 report released in October.
The Middle East is a resilient economy which has stood the test of time. Despite upheavals on economic and political fronts, the region has always bounced back and we expect double digit growth in the post pandemic world, God willing.
Photo caption: The Senior Management Team. From L to R: Mr Pradeep B R (Business Manager – Coatings); Mr Thiyagu Mani (SR Manager – Finance); Mr Rakesh Mishra (Head of Dept – Plastics & Food); Mr Parvinder Singh (Head– Packaging Division); Mr Oussama Ghandour (Managing Director); Mr Rohan Aranha (Director – Sales & Operations); Mr Nipun Shah (Head of Sales & Marketing – Packaging Dept); Mr Amol Watkar (Head of Sales & Marketing – Inks); and Mr Sudeep Udayabhanu (Business Manager – Coatings)