While FAMCO is a well-known name in the UAE, with a recent acquisition in Saudi Arabia and launches in Oman and later Qatar, they’re aiming to replicate that success across the wider GCC. PMV Middle East editor Stian Overdahl speaks with FAMCO managing director Paul Floyd about its regional focus.
Ask a company how they weathered the down-turn, and the answers are often the same. First to go was frivolous expenses, followed by excess staff and unneeded capacity. Businesses streamlined back room operations, tailored their offerings to suit more cautious customers, and focused on inventory levels.
But while all businesses have focused on paring costs, some have also continued to diversify and expand, looking to build market share and position themselves with an eye to their longer term prospects.
Al Futtaim Group, well-known in the UAE with over 40 different ventures, is looking to build their presence in the Gulf, a move led by their automotive division. Heavy equipment and truck sellers FAMCO is a part of this roll-out, as they expand their presence on the Arabian Peninsula.
Late last year FAMCO finalised a takeover of Al Rehab Equipment and Machinery in Saudi Arabia, who is the exclusive distributors of Volvo Construction Equipment in the Kingdom.
And the company has start-ups in Oman and Qatar, with the first branch in Oman launched last month, while the Qatar branch – already trading – will be officially launched later this year at the Construction Week Qatar awards in Doha in September.
The roll-out is already brearing fruit . As PMV went to press, news came in that Al Rehab had sealed a deal to sell 62 Volvo EC210BLC hydraulic excavators to Al Swailem Company for use on the Haramain High Speed Railway Project, linking Makkah, Madinah and Jeddah. That’s on top of 100 units sold in 2011.
Managing director Paul Floyd says that one of the clear lessons from the down-turn was the benefits of diversification for a company. While FAMCO experienced a sharp-drop off in demand for its construction equipment in 2009, conversely their storage and handling business, which includes the Linde franchise, as well as industrial shelvings and racking solutions, had record sales in 2008-9.
However while it had product diversification, it was concentrated on the UAE markets. During this period the company began to look outward says Floyd.
“We made a strategic decision during that time to take the skills and knowledge and experience that we’ve gained in 33 years here in the Emirates and apply some of these best practices in other markets. Where we’ve developed core competencies that people can recognise here in the UAE, we want to put them into other markets and replicate what we’ve done here.”
For FAMCO, there is confidence that their ‘total package’ approach to customers will be recognised by buyers in those markets. While some operators may focus on the upfront costs, Floyd says that FAMCO is focused on supporting machinery and vehicles across their useful life, including with servicing and operator training.
Well-serviced equipment and properly operated equipment will have less downtime, and a higher residual value when it comes time to sell he says.
“Our approach is to be more of a consultant than a sales person. We try and listen to what a customer wants from its fleet, and try to help make sure they’re choosing the right machine for the right application, and then talk about some of the soft-products that come with that.”
In the Emirates, FAMCO has introduced a range of services that include rentals and leasing, as well as finance and Islamic finance. They can even provide trained machine operators.
“Renting can be useful for operators who win a project, and need a dozen machines, but don’t want to make a capital expenditure up front.,” Floyd explains. “There can be a fixed cost of operation from FAMCO, because included in the rental fee each month is the servicing, and we can even supply the operator, all the company needs is to put fuel in.”
With its strong construction market, Saudia Arabia is an attractive prospect for any company with regional ambitions. FAMCO’s recent acquisition Al Rehab has five branches in the Kingdom, the three largest in Jeddah, Dammam, and Riyadh.
Floyd says they’re looking to expand that number to 12 during the next three years, and invest heavily in the network. During that same period FAMCO are looking to double their market share.
The geography of KSA can make providing high levels of service challenging, but Floyd is confident that the branch network expansion will help to overcome these difficulties.
“Saudi is a boom market, and there are opportunities there. But it is not an easy country to operate in. To try to offer the service levels that we are used to offering here, we’ve really got to beef up our network, and our capability with service and plants.
Ultimately, it’s about bringing an outstanding service level to our customers in the Kingdom. It’s not just about moving machines, it’s about really supporting those machines through-out their life cycle.”
At the same time, the company already has IT systems, inventory management systems, and logistics systems that it will leverage upon for the Saudi market.
“The Al Rehab facilities are first class, we’ve got some great people in the organisation. There are some things that we believe that we do a little bit better here, that can add some value to the Saudi operation, and raise the standards even higher. If we get that right in the next year or two, then we’ll be in a very strong position.”
In Oman and Qatar the company has start-ups, and Floyd says that with a lot of infrastructure development in both countries, they’re excited about the opportunities. “They’re a little bit easier to operate in than Saudi Arabia. Although Oman is a big country the challenges are not the same as they are in Saudi.”
In Oman, FAMCO will sell Linde material handling equipment, Merlo telescopic handlers as well as other brands. But the company is actively looking for new brands to bring to the markets Oman and Qatar markets, a process which includes talking to manufacturers in Europe who do not already have representation.
Asked whether he could see FAMCO acquiring another company in a fashion similar to Al Rehab, rather than a start up, Floyd says that it is ‘quite possible’. “It could be anywhere, if we are presented with an opportunity that makes sense, with the right kind of product. It is very much case-by-case, we’re not just blindly going to go out acquiring, and it would have to be a good fit in terms of our overall strategy.”
Floyd is confident that they will be able to establish and build market share, giving customers more choice, and says that the ‘first class’ reputation of the Al Futtaim and FAMCO brands is helpful too.
“Our philosophy at FAMCO, with regards to construction equipment, is that if we can’t be number one, two, or three in a market then we probably shouldn’t be there. We want to be a leader in anything we are involved in.”
TCO versus Up-front-cost
For fleet managers, purchase decisions are more likely to be based on total cost of ownership (TCO) calculations, rather than a quick check of who is selling the cheapest unit on the market. Floyd says that UAE buyers are relatively sophisticated in their approach to purchasing.
“Operators in the Emirates have always been pretty smart, we’ve done a number of market surveys with manufacturers over the years and we found that the fleet operators of heavy trucks and CE are more aligned to European-type management of the fleet than possibly to other parts of the developing world.”
A product that is fully supported – including servicing and operator training – will have minimalu down-time, and operator training can save money for the fleet operator on fuel costs says Floyd.
“If you buy a cheaper machine, then the down-time on that machine will very quickly off-set the few thousand you may have saved up front. There are also going to be questions about the residual values – but I think operators here understand these issues and see the bigger picture.”
Floyd says the savings can be ‘quite significant’ if done properly. “We have a number of products which are available, including the Caretrack Remote monitoring system from Volvo, which really helps the fleet operator to get the best efficiency.”
There are no regional trends in terms of country says Floyd, as every customer will have a different approach.
“The important thing is to understand your customer, know your customer’s motivators, and offer a solution that really fits his needs and wants – that’s our approach.“
Floyd believes that their approach will go down well in their new markets.
“Customers understand that when they’re buying fleet they’re investing, which is a more complex decision-making process.”
