The meeting with Future Pipe Industries, Chairman, Fouad Makhzoumi begins with an innocuous question, ‘how is business’ and the next thirty minutes is a snapshot into Future Pipe’s beginnings, current acquisitions and future plans, all detailed by Makhzoumi with such intense passion, that you may forget for a minute that he manufactures and sell pipes.
So, is pipes such an interesting line of business, we ask and he says, “well, let me put it this way, we live in a desert, where there is plenty of oil and a shortage of water. For every new-born, you need at least two metres of pipes and with the growth of population in the region, I leave it to you to do the math on how pipelines are lifelines,” he says.
Makhzoumi is not one to sit idly and let opportunities pass. Future Pipes Industries, as a company has grown from a $100-million-a-year business into a billion-dollar conglomerate today with global reach.
“We represent 16 per cent of the world market for fiberglass pipes and are the largest manufacturer; the world market for these pipes is $117 billion annually,” says Makhzoumi.
Future Pipe Industries (FPI) is the core of Future Group, which includes an investment arm, ventures in real estate, engineering and business development; as well as, an organisation dedicated to philanthropy.
While the group is headquartered in Dubai and the philanthropic Makhzoumi Foundation is focused on Lebanon, FPI has operating manufacturing plants in seven countries, which distribute their goods across the globe.
The company is on a rapid expansion mode at the moment and has recently acquired 100% of the fibreglass reinforced pipe business, Specialty Plastics from ITT Exelis. SPI, based in Baton Rouge, Louisiana, USA, is a supplier of fibreglass pipes and systems for offshore platforms and marine vessels.
The takeover is seen as a strategic addition to FPIG’s composite pipe business and adds a significant new offering to it’s already extensive product range extending FPIG’s global capabilities in the offshore rig and floating production and storage of oil (FPSO) market.
FPI’s economic contribution to Future Group’s business is nearly 80%. The past of FPI is as interesting and colourful as its present. Makhzoumi was a young graduate, who left Lebanon, owing to civil war, seeking opportunities in Saudi Arabia.
As a young chemical engineer, he joined Amiantit – a large Saudi pipe manufacturing company, which was at that time linked to the Swiss cement dynasty, the Schmidheiny family. Makhzoumi having put in under a decade of work, decided to buy all of pipe manufacturing business of the company outside Saudi Arabia from the Schmidheiny Group.
“With Stefan Schmidheiny not too keen to stay in the business after his father’s death, I was able to obtain a syndicated loan and buy all the business in the Middle East outside Saudi Arabia in 1984. I obviously had to convince my wife, as it was my life’s earnings that I was playing with, but today I think it has all paid of quite well,” he recalls.
Well, it has indeed, as Makhzoumi altered the manufacturing process to use fiberglass instead of asbestos and the company is today a Middle Eastern fiberglass pipe manufacturer of repute.
With a large product portfolio of large diameter, high pressure, high-temperature, fiberglass pipe systems, FPI is one of the few companies that globally provide bespoke solutions across the three product segments; water, oil & gas and industrial.
Managing a unique global delivery model, driven by engineering, FPI’s Vision is to deliver water and energy to the world in the most efficient way, says Makhzoumi.
Fibreglass pipes are rapidly gaining acceptance in the oil and gas industry as an alternative to steel pipes, as the pipes are proving its benefits for specialty applications where large diameter pipes are required; or pipes are needed for high-pressure and anti corrosive networks which extend over several thousand kilometres.
Makhzoumi’s first work for the oil and gas industry for fibreglass piping was for none other than the kingpin oil producer, Saudi Aramco. When asked to describe the project and experience, he says, it was nothing short of a nightmare.
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“It was one of the first fibreglass piping projects and at that time we were still in the process, where the clients had to be educated on how fibreglass pipes work. It was a downhole tubing project and we did some testing and it was with this project that we realised that fibreglass pipes are a fantastic product, but we need to have the engineering and installation part to go with it.”
So that is exactly how our business model works today, he says. “At FPI, we don’t only manufacture pipes and supply them, but work with the company for the installation.”
One of the best way’s to highlight FPI’s contracts would be from their installation at Ras Laffan in Qatar; this is one of FPI’s largest projects, as well.
The contract valued at more than $138 million, called for the supply of fibreglass pipes and fittings for Phase Two, Category Two of a project to expand a seawater cooling facility at Ras Laffan Industrial City in Qatar.
FPI, through its subsidiary, Future Pipe Industries Qatar, had already supplied Fibrestrong pipes for a portion of Ras Laffan’s piping systems in connection with Phase One and Category One of Phase Two. By the time Phase Two was completed, it had delivered approximately 176,000 m of pipes.
“In Ras Laffan, when we negotiated with the ministry, the pipes were for a project to deliver water to all petrochemical projects in that area. Initially, we spoke about a three year tenure, but we were in-between asked to speed up and deliver in 18 months so that they can start the supply of water to the petrochemical plants.
So, I mobilised two other machines to work exclusively for the project and we were able to deliver a three-year project in 18 months, so that Qatar Petroleum would not be penalised by the downstream companies. Herein lies our strength, I think,” elaborates Makhzoumi.
The company today is also setting it sights on the United States regulation to cool industrial water before it is discharged into the sea. This could potentially mean billion of dollars worth of contracts for FPI in the States.
The company has manufacturing units in Abu Dhabi to make the largest available diameter size fibreglass pipes; but Makhzoumi says making pipes is no longer sufficient.
“EPC contractors, today, globally want a system. They want a reliable manufacturer indeed, but would prefer someone who can help with the installation, as well. Plus, when we come in as a package, we can cut about 7-10% of the associated costs,” he says.
So, where is new business coming for FPI apart from the obvious projects, and Makhzoumi says the convertible part of the steel pipe business is about 70 billion.
The company is also looking at making itself a manufacturing hub for major pipe brands across the world. “Most oil and gas companies specify the pipe brands required for the operation. So, our pipe business is going feed brands across the world and then the customers can rebrand the pipes accordingly. We just bought a new company for marine piping, as well.
So, I think today we have the strength to feed our pipes to some of the biggest brands globally.” With a market share today of 16%, FPI is eyeing an IPO for sometime now; Makhzoumi reckons, 2016 may just be ‘the year for them’ and is confident of capturing 20% of the market by then. With his ambitious past, that figure may not be far off the mark.
In Numbers:
– 80% FPI’s economic contribution to Future Group’s business
– 2016 Is marked as the year, FPI intends to go in for an IPO listing
