Gulf Construction Online - Balexco in major expansion drive

Glass & Metal

Seyadi ... spearheading growth.

Balexco in major expansion drive

The current expansion drive at Bahrain Aluminium Extrusion Company will see its capacity hit 33,000 tpy of extrusion and 6,000 tpy of anodising on its new lines.

01 October 2012

BAHRAIN Aluminium Extrusion Company (Balexco), which this year commemorates 35 years of success in the regional markets, is in the midst of an extensive expansion and revamp which will culminate in a major rebranding scheduled for early next year.

The Bahrain-based aluminium extrusion company is poised to flag off full commercial production this month (October) at its fourth extrusion press, which is currently in the commissioning phase.

The state-of-the-art press, from GIA Clecim Press of Spain, will increase Balexco’s extrusion capacity to 33,000 tonnes per year (tpy) from the current 25,000 tpy.

The firm has also just started up a new anodising line with an annual capacity of 6,000 tonnes to replace its existing 4,000-tpy facility, which was built when the plant was established in 1977. The line has been designed and supplied by Monti Engineering of Italy while the supervision of erection was carried out by Balexco’s in-house team. Its other three presses, also from Europe, include one Clecim and two SMS units.

Leading the growth strategy from the front is the company’s CEO Jassim Seyadi, who stepped in to revive Balexco sagging revenues some seven years ago, a challenge he has successfully tackled.

Seyadi used his decade-long previous experience in the brokerage insurance business – in restructuring loss-making operations into profitable ventures – to turn around Balexco’s fortunes. Enlisted initially as a consultant by Balexco in early 2005 to study the company’s operations and recommend a strategy to turn it around, Seyadi soon found himself presented with the daunting task by Balexco’s board of directors. Seyadi took on the challenge, determined to succeed – and succeed he did by communicating with the staff and developing a team spirit within the organisation.

“We achieved a 180-degree turnaround in Balexco’s performance in 2006, thanks to the efforts of our people who came together to work as a team. We have a good board of directors and excellent manpower that is well experienced and committed to the company,” says Seyadi, who firmly believes that Balexco’s staff is its vital asset.

The company managed to attain year-on-year growth, reaching a peak in 2010 before the impact of global financial crisis and the prices of aluminium sharply dented its revenues. Revenues in 2010 peaked at BD28.079 million ($74.48 million), up from BD24.808 million ($65.80 million) in 2009, before dropping to BD25.767 million ($68.35 million) last year (2011).

Capacity boost ... the new extrusion line.

The volatility of the metals market continues to be a serious issue impacting the company’s overall performance.

“Nevertheless since 2006, 95 per cent of the capital has been paid up to shareholders in terms of cash dividends,” he quickly points out.

Balexco’s integrated manufacturing facilities are located at Sitra Industrial Area. They include the extrusion presses, the anodising line, a 12,000-tpy remelting and casting plant from Hertwich Engineering of Austria and a 6,000-tpy powder coating line supplied by Interproject Corporation of the US.

The fourth extrusion press will ensure that Balexco can maintain its production capacity levels as its existing presses need to be upgraded – a project that is earmarked for the next two years.

The company also has a special fabrication centre, which produces custom-made products that do not fall under the ambit of its fabricators. Among the special products produced by this centre are bus shelters, telephone booths, lighting and flag poles and ladders for military aircraft.

“One of our special fabrication projects was the Formula One, where we provided a range of components,” he says.

With space being at a premium – given Bahrain’s regulations that only 60 per cent of an industrial plot can be devoted to machinery – Balexco has had to postpone its plans to install its vertical power coating line until the existing anodising line can be decommissioned. These plans, which are expected to be implemented shortly, also involve the installation of a smaller wood-finish powder coating facility.

The new and existing (below) anodising lines ... upping capacity to 6,000 tonnes.

Among other projects under way at Balexco is a new wastewater-treatment facility, construction of which was necessitated when the company lost access to the sea due to reclamation around its premises.

“We have been spending BD8,000 ($21,220) per month to dispose of our waste water and hence decided to go ahead with the construction of this wastewater-treatment facility, which will be completed shortly,” Seyadi says, adding that this facility will provide Balexco with surplus water, which it intends to use to turn its neighbourhood green, in line with its environmental focus.

Apart from its production facility, Balexco has a sales outlet for profiles, gaskets and accessories in Salmabad in Bahrain as well as in Riyadh, Saudi Arabia – which has been in operation as Balexco International for the past 10 years – and in Qatar, operating as Balexco Trading since early this year. The company is now looking at setting up other outlets by next year in Jeddah (Saudi Arabia), Kuwait, and the UAE (either in Dubai or Abu Dhabi).

Architectural systems

The construction sector currently accounts for the bulk of Balexco’s business. Its product mix comprises commercial extrusions such as flat and round profiles used in a variety of applications ranging from window and door frames to kitchen cabinets and system solutions comprising profiles, gaskets and accessories. These come backed by a 25-year guarantee for performance that has been tested for wind, water and air resistance in buildings up to 20 storeys high.

The company’s systems include the Balexco 60 curtain-wall, the 45/45i casement series and the 100 sliding series, which have proven themselves in the market for more than the past 15 years. Earlier this year, the firm launched the Balexco Luxury System at gulfBID, the premier construction showcase for the Northern Gulf, which was held in Bahrain in April (24 to 26). The Luxury sliding system, which contains a package of 10 profiles, five gaskets, seven thermal insulators and accessories, can be used as both sliding and lift and slide, just by opting for different hardware and accessories. The system was introduced in cooperation with Giesse, an Italian specialist in hardware for aluminium doors and winds.

“The Balexco systems are the best for schools, villas and multi-storey buildings of up to 20 levels, and are economic compared to international systems,” he points out.

These products are offered in three finishes, namely mill finish, powder coated or anodised.

Apart from extruding its own systems and its existing partnership with Technal of France, Balexco has this year signed up to extrude systems for the British aluminium systems specialist Brital.

Market
Commenting on the market, Seyadi says that competition is intense, with demand being low and production capacity high, which has forced some of the smaller presses in the region to close down.

“The lack of quality codes for the aluminium sector and the dumping of cheap products has had a severe impact on the market – a problem that is compounded by the volatility of the metals market and the drop in demand as there are fewer projects under construction that are approaching the finishing stages, which is when finishing systems made of aluminium are required,” Seyadi comments.

He identifies Saudi Arabia as the most active market in the region, adding that “Kuwait is starting to launch government projects and Abu Dhabi is another key market; Qatar is a potential market but demand is yet to come as the projects are still in the early stages”.

The Bahrain market accounts for 15 per cent of Balexco’s revenues with Saudi Arabia being the largest both for its commercial extrusions and system solutions. Other key markets include Yemen, Algeria and Lebanon.

Despite the market conditions, which has forced most companies to cut overheads by shedding staff, Balexco has not resorted to such measures given the fact that 85 per cent of its staff is Bahraini and its expatriate workforce have virtually grown with the company.

“In addition, the cost of consumables has also been shooting up, and the machinery cannot be switched off, which means manufacturing costs cannot be controlled – all of which is putting pressure on prices, and hence margins are shrinking,” he says.

Well aware that the worst will soon be over, Balexco has set in motion its expansion plan to take advantage of the anticipated upsurge in the market, which he expects to come “in two years’ time”.

In addition, Balexco is also positioning itself to take advantage of the boom expected in Qatar as the country develops its infrastructure for the 2022 Fifa World Cup. The company is in negotiations with a major investor to start-up an extrusion plant in Qatar and Seyadi hopes that construction of the facility will commence next year for completion by 2015.

Balexco’s client base comprises the projects market, individual developers and stockists. Today’s market, however, is dominated by stockists, who being commercially driven, put pressure on the price with scant regard for quality, Seyadi points out, lamenting the lack of a quality code in the aluminium sector – which means a lot of substandard profiles and extrusions are flooding the market.

This, in turn, has damaged the reputation of local aluminium system manufacturers in the projects market which hesitates to specify local systems, he adds.

Green focus ... the new wastewater-treatment facility.

Seyadi calls for greater government support in drawing up and enforcing a strict quality code as well as in providing incentives to local aluminium downstream industries, which are also suffering on account of rising fuel (gas) and water prices, particularly at a time of crisis. He believes that the aluminium industry needs to support horizontal and vertical development of the sector to create a sustainable industry.

He urges Alba to play a pivotal role in spearheading growth in the local downstream sector to ensure its success by reducing the financial burden on the companies as well as providing services such as training people right up to the management level and technical and logistic support, rather than purely selling aluminium.

Seyadi also highlights the gap in the regional market in die manufacturing, powder coating and logistic services. “For instance, dies are a significant aspect of our business. Each die costs in the region of BD600 to BD700 ($1,591 to $1,856) and we use thousands of dies. Most of the dies for the region come from Europe, with the GCC only producing the basic dies. Powder coating also comes from Europe,” he states.

Balexco has supplied to a large number of projects in the region including the Busaiteen Building, Juffair Tower, Kareem Villa, KAS Residence and Zayed Town in Bahrain. The company is now supplying all the profiles for the National Theatre project coming up along the King Faisal Corniche.

In Saudi Arabia, its profiles have been used for the Al Khobar Hotel, in Al Khobar, Al Mousa, Kayan, Samir Abdulah Hadi and Fahad Al Dawood buildings in Riyadh, Al Othaim Mall in Buraidah, Hafr Al Batin building in Hafr Al Batin, and Khamis Avenue in Khamis Mushayit.

With customer satisfaction seen as a key ingredient in its success, Balexco has opened up channels for clients to voice their complaints with their emails directly reaching the CEO’s desk.

In order to maintain its leadership and its commitment towards quality, Balexco has been certified to ISO 9001:2000 standards, having first received its accreditation in 1996. The company is also certified under the international Qualanod and Qualicoat associations and is authorised to use the quality sign for anodic oxidation coatings and paint and powder coatings respectively, on all aluminium used for architectural purposes.

Commenting on plans for the future, Seyadi indicates that company is looking at penetrating the mid-segment of the extrusion pyramid, where extrusion profiles represent the base and system/solutions the apex. “There is now a shift in the market, with solution providers downscaling to penetrate this segment and meet the requirements of regional markets and extruders like Balexco adding value to tap into this segment,” he says.

“The market potential is huge,” Seyadi points out, adding that it covers everything, from huge parts for vehicles to cabins, solar panels, ladders and furniture. “We are seriously looking at strategies to improve our returns by expanding our activity through adding value while using our strength in extrusions as a base product,” he states.

Seyadi’s vision for Balexco’s future? “I would like to see the sons and daughters of our employees continuing their legacy with the company; Balexco making a larger contribution to Bahrain’s economy as well as its Bahrainisation efforts; the company achieving good resulting and ensuring reasonable rewards for its shareholders, who in turn will invest further in the company’s growth in the market; and Balexco continuing to support the aluminium industry in the country,” he concludes.