Forbes Middle East


Go Forth And Diversify

Hannah Stewart
Go Forth And Diversify
Tensions are simmering again in Egypt following the acquittal of the “Camel Battle” defendants, but for self-confessed workaholic, Moataz Al Alfi, chairman and CEO of Egypt-Kuwait Holding Company (EKH), it is business as usual. In fact, with interests and indeed investments centered on the energy and fertilizer industries in Egypt, Kuwait, Sudan and Syria, Al Alfi’s holding company, established in 1997, has learned not only to survive the twists and turns of economic and political turmoil, but to thrive. For the chairman-CEO who was involved in relocating Americana Group’s operations from Kuwait to Saudi Arabia in the midst of the 1990 conflict with Iraq, the secret to success is quite simple: experience, and lots of it. “We have been living in a turbulent world, and we know how to handle it. Let’s put it that way,” he remarks.

However, while consistently proving his ability to prevail against the odds—revolution in Egypt, secession of South Sudan, and devastation in Syria—EKH’s leading man is the first to admit that the past two years have been a challenge, not least on home soil. Weak infrastructure, red tape and poor access to energy supplies across Egypt have hindered growth and in some cases led to plant closures of companies that just three years back were booming. Closure may never have been on the cards for this industrial powerhouse that boasts 15,000 employees and multiple companies across five groups, but even EKH failed to escape the financial blows dealt by the unrest of 2011.

Despite an increase in revenues to $499.3 million last year compared to $458.7 million in 2010, EKH’s total assets dropped to $1.75 billion in 2011 compared to $1.86 billion the year before, while net profit fell to just over $182 million down from $185.1 million. Perhaps most shocking of all, the value of shares in Al Alfi’s company fell by 70% in 2011, indicative of plummeting confidence in Egypt’s economic strength. Nevertheless, almost a year on, the optimistic leader is confident that better times lay ahead, “in the future we will be much better. I think next year will be better, hopefully.”

In fact, while EKH’s financial performance was subdued in 2011, an Uncovered Stories report from Egypt-based Pharos Securities released towards the year’s end presented a relatively optimistic picture given the persistence of high crude oil and fertilizer prices since 2007. With the US dollar as the company’s functional currency, the securities firm also explains that EKH’s operations are hedged against depreciation risks where the Egyptian pound is concerned.

While safeguarded against depreciation risk, geopolitical risk is another matter. One might be forgiven for regarding Al Alfi’s investment choices—especially where location is concerned—as somewhat questionable. The chairman-CEO, however, thinks otherwise. “I tell you something, they were great locations to work four or five years ago! We’ve made a lot of money out of these locations.” With a smile, he adds, “We don’t choose the countries that are going to make a revolution, the revolution happens after we invest!”

In Sudan, EKH’s investments include energy company Tri-Ocean Energy involved in the exploration, production, trade and shipping of oil, as well as manufacturing companies such as African Paints and Al-Shrouk for Melamine and Resins. True to the increasingly common saying that from crisis arises opportunity, Al Alfi sees great investment potential in Sudan, yet conflict between the south where the oil fields are located and the north which provides vital shipping infrastructure has been problematic to say the least. However, the recent treaty signing between the two sides brings fresh promise, with production set to resume later this year. “We have a great team there working for us and now I think the oil situation will be solved in Sudan...We’ll see revenues coming in the beginning of next year” chimes Al Alfi.

Meanwhile in Syria, EKH’s operations in the beleaguered Middle Eastern country are on hold for now. In addition to the obvious challenges of operating in what has become to all intents and purposes a warzone, EKH partners in the country with Shell and the ongoing boycott has presented significant obstacles. But, once again demonstrating his optimism,  the experienced CEO explains that while activity may have halted, research and exploration already conducted into Syria’s oil and gas potential (again with Tri-Ocean Energy) have yielded findings beyond his expectations. “Once things get normal in Syria we’ll start working because we have good findings…our asset is still under the ground,” enthuses the CEO.

In the face of hard times, experience and the lessons from former EKH chairman, the late Nasser Al-Kharafi, have taught Al Alfi the importance of flexibility and diversification, with projects in the Fertilizer, Petrochemicals, Energy, Manufacturing, Insurance, Information Technology and Transport sectors counting amongst the company’s portfolio.  “I learned from the late Mr. Nasser Al-Kharafi, who was my mentor and business role model that I should diversify in different fields and in different countries” explains Al Alfi, highlighting also the key roles played by the leaders and executives of EKH’s sister companies. As a result, where one of EKH’s companies has suffered, another has flourished. “It was a strategy developed a long time ago and now we are reaping the benefits,” explains the CEO.

Egypt today offers a prime example. While companies across a range of industries are still suffering the lingering effects of revolution and economic paralysis, EKH’s strategy has brought the smooth with the rough, with the company’s food business experiencing growth of 30%. Likewise, though admitting that business has been hit, Al Alfi explains that EKH’s involvement in the fertilizer industry is doing well, “We are exporting…we are doing great in the ammonium urea business which is one of the backbones of our business.” Serving as just one example, Alexandria Fertilizers Company, in which EKH holds a 38% share, had a production capacity of 635,000 tons in 2011 with 100% of exports destined for European and American markets. EKH’s significant share in the National Fertilizers and Chemical Company (NFC) which boasts authorized capital of around $162.5 million also bodes well for the future, with production expected to commence in 2014.

Ramzi Sidani, associate at Shuaa Asset Management affirms the importance of Al Alfi’s fertilizers, “For Egypt-Kuwait Holding their biggest asset is the fertilizer side of the business. They own 58% of NFC and this is the major catalyst for the company.” Sidani explains that EKH will be producing 1 million tons of downstream fertilizers, mainly single super phosphate. “The capacity is huge” he asserts, but adds that the NFC plant may not be finished on schedule due to delays and difficulties in funding.

Building on his existing strategy and strength in the fertilizer and energy spheres, Al Alfi is now looking to expand its oil and gas operations into the USA and Europe, and diversify into new territories including Georgia and Turkey—countries which he believes possess strong growth potential. But in a world where energy demand continues to rise in line with a growing population, the wise Egyptian is well aware of the need to develop renewable and sustainable energy sources.

Now, Al Alfi is turning his attentions to alternative energy sources such as wind and hydro power generation, considering a host of projects across Egypt and the wider Arab world in addition to new markets. “Energy is going to be the challenge of the future and if we don’t take care of that, we won’t be able to do anything,” he asserts. Illustrating the scale of growing energy demand in his country alone, the chairman-CEO explains, “Egypt’s population is something like 90 million now, and every year we have 2.2 million more. So every year we have the equivalent of another Emirates!”

Combining business growth with social responsibility—renewable energy, waste management and investing in education across Egypt amongst his priorities—Moataz Al Alfi’s achievements, often through the toughest of times, are significant. Sharing his advice for other budding business leaders, the accomplished chairman-CEO who claims that he is first and foremost a human resources man, explains that passing on knowledge and expertise is of vital importance for success. “I am training and re-training, so I am available all the time,” asserts the dedicated CEO. In fact, Al Alfi’s 24/7 open-door policy comes as a refreshing change in a world where entering the offices of company chairmen and chief executives can be a foreboding prospect for employees. The CEO’s personal mobile number is even available for each and every staff member should they need to call.

Al Alfi makes his motivation for adopting this approach clear, “Whoever is working with me in any organization he has to be better than me to make me happy!” he asserts. “My operation is a pyramid standing on its head…the workers who are managing the business are giving me my income and giving the shareholders their revenues so I have to respect them. They are on top of me, I am not on top of them,” he adds.

While this may be the case, Al Alfi has provided solid leadership as CEO and now also chairman of EKH, guiding his company through the trials of 2011. Going where others dare not venture and investing in some of the most challenging locations across the Arab world, the experience and long-term vision of this Egyptian stands EKH in good stead. Further supported by a team of skilled protégés, this unique holding company lies in solid hands.

Despite the challenges of weak infrastructure, poor access to energy supplies, shortage of foreign currency and lingering political uncertainty amongst other issues, Moataz Al Alfi is optimistic for the future both of his company and his country. “In my personal opinion, the country is big and business will flourish at the end of the day…we’re passing through a very tight period, but after this bottle neck, things will get better.” Indeed, having successfully navigated the challenges of political and economic unrest, adapting strategy along the way and having the foresight to hold back where necessary, experience, and lots of it, has told him so.
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