Modern day merchants

AK Almoayed Group chairman Khalid Almoayed, sits down with Bahrain Editor Benjamin Millington to discuss the history and future of his family-owned company in Bahrain’s steel market.

After five generations in Bahrain’s building materials industry members of the Almoayed family should by now have steel running through their veins.

The business was started in the 1880s by a great-great grandfather of Khalid A Almoayed, the current chairman of the AK Almoayed Group (AKA), a diversified company he owns in partnership with his siblings.

As the word diversified suggests, the group has expanded its interests into a number of fields including shipping, industrial equipment, real estate and project sponsorship, but the company’s roots are firmly planted in trading building materials.

“We have inherited a liking for building materials. In the old days it was of course mainly wood and steel and then we added derivatives of wood and steel -- decorative stuff, drainage, fencing and roofing,” says Al Moayed “And every single generation that comes in brings modern products into the formula, so there’s always excitement -- never a dull moment.”

Indeed, given the rollercoaster ride of steel prices last year, the industry has been anything but dull.

In 2008, AKA traded around 15,000 tonnes of steel and supplied around the same from their mesh and cut-and-bend facility to various big name construction projects such as Bahrain Financial Harbour, Bahrain Bay, Durrat Al Bahrain and Marina West.

But as all steel suppliers will testify, it wasn’t an easy year for anyone in the industry as prices rapidly escalated to a peak of US $1500 (BHD565) a tonne, only to dramatically plunge to around $700 a tonne towards the end of the year.

“All materials went up and down but steel is the one that left the biggest scars,” says Almoayed.

“If you see any of the building material stockists on the street, please feel sorry for them because they are going through a rough period at the moment.

“They are stuck with lots of steel they bought at very high prices and they have to sell it at a quarter of the price. It’s as low as that.”

Almoayed says this “steel crisis” hit Bahrain particularly hard after the country’s major steel supplier, Saudi Arabia, imposed strong export restrictions early last year to fuel its own domestic demand.

“This resulted in a major imbalance of supply and demand in Bahrain,” he says.

“The building material suppliers could not cope with supplying, which increased demand and this is what helped lift the price so high.

“At the end of the day, the steel business is of course all about supply and demand.”

Almoayed says all profits made in the lucrative first half of the year have now well and truly eroded since the crash in steel prices, but it was an impact that AKA’s diverse portfolio and family business model helped absorb.

“We are traditional merchants and generally don’t depend on borrowing from the banks to the same extent as some of these modern businesses,” he says.

“We always tend to prefer to use our own money for financing business deals.

“Building materials is also not our only business, over the years we have also shifted into steel manufacturing and shipping and industrial products – all offshoots which came from the building material set up that we had.”
And the business is continuing to expand well beyond the building materials industry.

As each new Almoayed generation returns from university they bring with them new ideas and skills and a desire to set up their own businesses.

Younger members of the family have recently formed more offshoots in fields such as electrical contracting, computers and advertising, which operate as affiliated companies.

Almoayed says this generational surge brings new thought and impetus to the entire company and helps keep the “traditional merchant” business model up to date with current best practice.

“We are lucky in many ways, it is the blessing of God that we have had good members of the family working over the generations,” says Almoayed.

“God willing the new generations will uphold our reputation.” A reputation that Almoayed is clearly proud of. “We like to feel that our family name in the building materials sector is synonymous with quality and honesty and I’m honoured to
get this feedback from some of our traditional customers.

“We are trustworthy and we have earned a reputation that was created by my father, grandfather and great-grandfather.”

Almoayed says they traditionally purchased their steel from Europe and then the Far East before shifting to the Gulf region where it was more convenient to transport and easier on cash flow.

Since supplies from the Gulf have diminished, Almoayed says they’re looking to steel producing countries like Turkey and others from around the world, but is cautious that the quality of steel is maintained.

“There are some places that are offering steel which does not meet up with the specifications of our engineers in Bahrain so we do not buy it,” he says.

“There is good and bad steel everywhere in the world and some of our competitors are supplying steel below the accepted standards and claiming it is otherwise, but they are always found out.”

In an industry where demand is high, fierce competition is bound to follow and Bahrain’s building material industry is no exception.

Anybody who is starting a new business in building materials is probably making a mistake, says Almoayed, because without an established name it is difficult to oust a competitor on limited margins.

“Suppliers have always got the problem that there are always too many other suppliers because the business is guaranteed to go on.  People will always build houses and property and so on,” he says.

And it seems that trading in steel and building materials will remain a focus of AKA’s activities for some time yet. The company is currently building new supply sheds and revitalising its steel factory – a sign they are optimistic about the future despite the gloomy financial climate.

Almoayed says he believes Bahrain is better placed than some other Gulf countries to deal with the economic crisis because the country has not over-extended itself in terms of high-end property development. 

But like any successful merchant, he is not burying his head in the sand with regard to tightening liquidity markets and the inevitable tough times ahead.

“Anyone who tells you that we have not been affected is not telling the whole truth.

“No one can claim prosperity forever, there are ups and downs in growth and there are ways to deal with the dips and the rises in the economy, and in your business.

“I hope that the Gulf will sustain its development and growth but there are new challenges and requirements.
“We have first to admit that we have been affected and then start dealing with it.”

Khalid A Almoayed is a member of Bahrain’s Upper House, the Shura Council, and a key board member of several groups including the General Trading & Food Processing Company (Trafco), and Bahrain Petroleum Company (Bapco).

He also chairs his own company, Khalid Almoayed & Sons as well as Ace Almoayed Consultants, the Bahrain Businessmen’s Association and the Alliance Francaise de Bahrain. Almoayed is a qualified civil engineer after obtaining a bachelor degree from Birmingham University in the UK.