How Adnan Nalwala is charting Al Ansari Trading Enterprise's growth
EXCLUSIVE: Look beyond machinery and manpower, and learn about contracts and claims, Nalwala says
Oman’s construction market has not been an easy place to work in over the last 12-24 months, as is evidenced by the financial and operational woes of local contractors such as Al Hassan Engineering, which in March 2019 said its cash position continued “to remain precarious” in the face of payment delays and disputed claims.
Even Galfar Engineering & Contracting, one of the sultanate’s largest construction companies, revealed in April 2019 that it faced liquidity issues and payment delays in 2018, in addition to challenges around the sourcing of skilled talent and a slowdown in certain infrastructure project sectors.
In this context, it is commendable that Adnan Nalwala, executive director of Al Ansari Trading Enterprise, is relatively confident about his construction organisation’s growth prospects for the year ahead.
Founded in 1975, the Al Ansari Trading group operates in three verticals – construction, building materials, and engineering products. As such, its umbrella of entities includes familiar names such as Natural Stone Oman and UAE and Akar Technical Services.
The former firm deals in the supply, processing, and installation of natural stone and marble products, while Akar Technical Services provides landscaping and electromechanical services.
Across the board, Nalwala explains, the Al Ansari family of companies has recorded favourable performance over the last 12 months – but the road to success hasn’t been smooth-sailing.
THE STORY SO FAR
“There has been a slight slowdown in our group over the last 12 months, as there has been a reduction in demand in general,” he tells Construction Week.
“But, fortunately for us, our contracting business has enough projects up to 2020, so our order books are full and we are reasonably busy.
“Our building material trading business is one of the largest traders of steel in Oman, but steel and rebar consumption has dropped across the market too. The business that delivers engineering for trading products has expanded into Saudi Arabia, and we are bagging a lot of hotel projects where we do installation of kitchen and laundry equipment.”
In Oman, Al Ansari’s mechanical, electrical, and plumbing (MEP) activities account for 15-20% of its total turnover within the contracting division, and of this figure, 60% is delivered for external clients. In Dubai, 65% of the group’s business concerns the landscaping sector, with MEP work making up the remaining share.
Among the contractor’s ongoing projects in the GCC is a “sizeable” Petroleum Development Oman’s (PDO) job, and the company is also working on Duqm Refinery – with Petrofac as the client, and PDO as co-client – on a separate project.
Global oil price and sentiment fluctuations have led engineering, procurement, and construction contractors to bear the brunt of market volatility.
In Oman, a market with oil and gas projects worth $83.8bn (OMR32.2bn) as of March 2019, the energy sector’s slowdown has had an impact on construction firms, be it through the reduction of projects available to work on, or through the effects of low liquidity in the wider market.
ProTenders data showed this March that of Oman’s $83.8bn oil and gas schemes, the majority were under construction, with only $3.4bn (OMR1.3bn) of these projects on hold. As it appears, the availability of oil and gas work is not the biggest challenge in Oman’s construction sector.
In fact, even Galfar’s chief executive officer, Dr Hans Erlings, said in the company’s 2018 financial review that “there was significant work available” in Oman’s upstream and downstream sectors last year.
However, Erlings said that lower global oil prices were causing “serious fiscal constraints” for some contractors both in Oman and in the wider region.
Indeed, Nalwala says Al Ansari’s project portfolio with PDO and Duqm Refinery is testament to the Omani government’s commitment to developing the energy sector, and particularly the entire region of Duqm.
Additionally, collaborating with PDO and Duqm Refinery is particularly important for Al Ansari because, as Nalwala explains, their “terms and contracts are a lot fairer and easier for us to work with”.
In the UAE, Akar Technical Services is working with local real estate giants Dubai Properties, Emaar Properties, Meraas, and Dubai Municipality, and was recently awarded a contract for for Dubai Properties’ Serena townhouse homes.
“The landscaping business has picked up in a big way, because this is where the end-user is willing to the premium to the developer for their home – they want to see good landscaping, a nice pool and community park, and facilities for their children,” Nalwala says.
“Landscaping has become one of the most important elements of property development, and all major developers in the UAE are accounting for it in their plans, and are willing to spend a lot more on it with high-quality contractors.”
WHAT LIES AHEAD
The last 12 months have not been without challenges for contractors. So it is no surprise that adaptability is a priority for Nalwala, who says that a new philosophy and approach are now needed for companies to successfully do business in the years ahead.
“I think, in general, every contracting company is going through a lot of cash flow issues,” he says.
“This is where we’re trying to train and educate our clients, customers, and employees. Typically speaking, a contracting company was sized up by the three ‘M’s – material, machinery, and manpower.
“For a certain period of time, it so happened that clients would only hire or employ contractors that had these in place,” Nalwala adds.
“Contractors now have to graduate from the three ‘M’s to the three ‘C’s – claims, contracts, and cash flow.
"You have to read each and every term in the contract to make sure it is fair to the contractor; ensure that you claim at the right point of time, because [professional clients] will require proper paperwork to justify the extra money they need to pay you; and you have to educate your project managers about cash flow, who must manage each project and make sure the client pays on time.”
The lack of such due diligence can create challenges for regional contractors, who already face issues with procuring finance as well.
Over the last few years, Nalwala explains, the culture of easy lending has changed in the Middle East, and the due diligence work implemented by banks means that even though securing finance has become more difficult for some contractors, the “silver lining”, he explains, is that competition is evening out in the somewhat-saturated engineering market.
“The non-professional contracting companies, sometimes operating out of small offices and using improper equipment, have been wiped out,” he tells Construction Week.
“To some extent, this has been a positive aspect of the situation.”