Andrew Shaw is MD of cable-maker Ducab.
Andrew Shaw, MD of cable-maker Ducab, speaks to MEP Middle East about the company's latest results, the effect of the economic downturn on the cable market, and the impact of the fluctuating copper price.
Shaw reveals that Ducab recorded a 35% growth in turnover for the 2008 financial year – from AED2.4 billion in 2007 to AED3.3 billion in 2008. “We did about 80 000 copper tons last year. This translates into roughly double the number of cable tons, as copper comprises about half the weight,” he explains. This figure for 2008 is up from 65 000 copper tons produced in 2007.
“Not only was it a record year in terms of the numbers, but it was also a year of strong growth and expansion. We expanded our factory capacity in Mussafah, purchased an additional factory there, and also opened the copper-rod plant in Abu Dhabi. So it was on the back of this expansion that we were able to boost our manufacturing volume, an increase that really came in the second half of last year,” comments Shaw.
Growth
He adds that the latest figures represent a bigger growth in the total volume produced, as opposed to turnover growth driven by the copper price. “Copper accounts for about 55% of our inputs,” reveals Shaw. “We have to pass the copper price fluctuation onto our customers, as it is such a huge component.”
The copper price remained fairly stable until the fourth quarter of 2008, when it “pretty much halved in a period of six weeks,” says Shaw. It hit a peak in May 2008 of over $8 000, and then fell to between $3 000 and $3 500 towards the end of the year. “While the copper price definitely affects our sales values, last year it was relatively stable compared to 2007.”
Recently the copper price broke out of its ranged trading band, peaking at $3 700, but it has since stabilised to its previous level. “No one really knows where the copper price will go next. With bad economic data from everywhere, the global demand for copper is falling, so there is speculation the price will remain at its current level.” Shaw adds that Ducab hedges against the copper price in consultation with its key customers, as it cannot afford ‘speculative exposure’.
Story continues below
Advertisement
|  |
|
Turnover
Shaw explains that the UAE remains Ducab’s largest market, accounting for three-quarters of its turnover last year. “Our growth in the UAE was very strong last year. However, this was paralleled by growth in the rest of the region. We are very focused on growing our market share outside the UAE as well. We already have joint venture companies in Bahrain and Qatar, and have opened a new sales office in Saudi Arabia. Going forward, we certainly foresee the potential for future growth lying outside the UAE.”
Commenting on prevailing market conditions, Shaw points out that there is still a lot of construction activity in Dubai. “So while our volumes are down on last year, we are still shipping cable. Plus you have to bear in mind that our volumes last year were exceptionally high. In fact, our volumes at present are running at about 2007 levels – which, I think, is not bad compared to many other businesses.”
Part of the reason why the economic downturn has had such a decimating affect on the entire construction supply chain is that Ducab, in common with every major contractor and consultant, had been geared for continued growth. “Thus when the growth ended abruptly, it meant an adjustment in terms of everything, from people to raw materials, orders and lead times. However, I think we are now coming to the end of that adjustment period,” comments Shaw.
Site Map
\
FEATURED COMMENT
Please click here to comment on this article