Ducab undaunted by global market headwinds
3 October 2024
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The adoption of a business expansion strategy about three years ago has taken Ducab Group to new markets and opened up new industrial sectors. More importantly, the strategy has positioned the company to better withstand global economic challenges, says group CEO Mohammad Almutawa.
Ducab Group, which is equally- owned by the Investment Corporation of Dubai (ICD) and Abu Dhabi’s ADQ, registered a year-on-year earnings before interest, taxes, depreciation and amortisation (Ebitda) of 31%, as of the end of the first half of this year.
“The Ducab strategy has three pillars – optimisation of existing assets and businesses, diversifying our revenue streams and enhancing our organisation,” Almutawa said.
“We still expect a record year for Ducab, whether it is from a capacity and production point of view, or from a market penetration and market expansion perspective, or from profitability,” he told MEED.
Ducab Group recently announced that its subsidiary, Ducab Metals Business, will double its output of aluminium products from 55,000 tonnes a year (t/y) to 110,000 t/y.
Ducab Metals Business will build the new aluminium products facility in Khalifa Economic Zone Abu Dhabi (Kezad), where it already owns a 50,000 square-metre facility, the company said at a conference in Abu Dhabi on 5 September. In May, the firm signed a 50-year land lease agreement with Kezad to acquire a 51,015 sq m plot, on which it will build the new plant.
Meeting demand
The investment in increasing production capacity will help meet rising demand for aluminium products at home and overseas, the company’s leadership said at the event titled ‘Ducab Metals Business Expansion Forum: Advancing capacity, driving innovation’, held in partnership with MEED.
“This [production capacity] expansion will allow us to enter the AED7bn [$1.9bn] revenue club. We are moving from AED6.6bn, and adding another AED600m,” revealed Mohamed Al-Ahmedi, CEO of Ducab Metals Business.
“We are in the hot metals line in Kezad. We are getting aluminium as feedstock from [Emirates Global Aluminium] EGA, producing it, and using Khalifa Port to export the products,” he said to MEED.
“The new facility is expected to be commissioned by the end of the year, and we will start producing next year. The facility is in an advanced stage of construction,” Al-Ahmedi further said.
Market challenges
As a supplier of aluminium and copper products, as well as electric cables of various specifications to multiple industries around the world, Ducab Group is not immune to challenges prevalent in the global economic landscape.
“The geopolitical situation has impacted us [financially],” Almutawa said. There are “difficulties arising from supply chain disruptions, competition, and shifting of capacities around the world. I will attribute this more to severe competition than economic slowdown. I think the sector [metal products] is a challenging one. There is overcapacity”, he commented.
“There is a sort of a shift of appetite from globalisation to regionalisation. Countries putting up trade barriers and tariffs. This is definitely one of the risks that we try to look at consciously,” Al-Ahmedi said.
Almutawa added: “It’s a change in the behaviour of the market. It is a challenge. Overall, the world is becoming quite small [commercially conservative].”
“While, previously, people were looking at expansions through acquisitions to increase capacities, increase efficiencies and manufacturing abilities, there is an added element of market access now, which forces you, some time, to move your investment offshore in order to secure the growth,” Almutawa further explained.
In April this year, Ducab Metals Business completed the acquisition of GIC Magnet, a supplier of paper-insulated aluminium strips, among other products. GIC Magnet “is a UAE manufacturing entity with ties back to India. We acquired this company earlier this year and integrated it into Ducab as part of the expansion”, Al-Ahmedi stated.
“We expect around $40m of additional revenues through this acquisition. To us, this acquisition is one of the gateways to enter into a new business,” he remarked.
Almutawa affirmed he is eyeing targets for acquisitions as a way to grow the business. “We are looking at more acquisitions. We are looking for both organic and inorganic growth,” the group CEO revealed.
Business growth
Ducab Group’s portfolio mainly comprises two subsidiary companies – Ducab Metals Business and Ducab Cables Business.
“DCB continues to focus on growing [its presence/share] in the oil and gas market and increasing its contribution. We are not supplying to the UAE and GCC only. We supply to oil and gas customers in Australia, the UK, Europe, Asia, Far East and India,” Almutawa said.
Ducab Group has been a major supplier of equipment to the oil and gas industry since inception, and has been primarily catering to projects of Abu Dhabi National Oil Company (Adnoc Group), among other regional and global customers.
Almutawa revealed that Ducab has won orders to supply products to Adnoc’s $17bn Hail and Ghasha sour gas megaproject and Adnoc Group subsidiary, Al-Dhafra Petroleum’s Haliba field development projects.
“We are doing extremely well [with oil and gas customers]. We are based in an oil-predominant economy in the UAE. We have always contributed to it by providing the capabilities and diversity, and by introducing technical know-how, and by expanding our contribution to that sector,” Almutawa said.
On the question of expanding Ducab Group’s copper segment, Almutawa said: “We are looking at further optimising our copper lines to squeeze more out of it. There are no plans for a straightforward capacity expansion.
“In the energy sector, there is a huge transition from copper to aluminium. This does not mean that copper is going to reduce. But the usage of aluminium has increased considerably. Hence the expansion in the aluminium business.
“Going forward, 2025 is going to continue to be a difficult year. But I think Ducab is in a much better shape to face that,”
Almutawa said.
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