Smooth operators

Ironically, the one major market where the brand remains relatively unknown is the UAE’s consumer market. We talk to the company’s CEO, Mohammed Ibrahim, and Co CEO, Biju Nair, to discuss their strategy for breaking into the consumer market on their home turf.

Tell us a little about Armor Lubricants. What is the history of the company and what do you do now?
Ibrahim: Armor Lubricants is a lubricant and grease manufacturing company which was started back in 2012. The company started as an SME company and is a partnership of 4 people; the chairman Mr Juma Abdalla Almansouri, board member Mr Jassim Alhamadi, Mohammed Ibrahim as CEO and Mr Biju Nair as Co CEO.

The four of us began thinking about developing this company in 2010. It took us two years of preparation and studies to look in to the market and in 2012 we kick started the company.

Nair: Since 2012 we have produced a range of automotive lubricants, industrial lubricants, marine lubricants and specialty products such as coolants and all different grades of speciality greases.

Your website states that you are one of the fastest growing companies in the Middle East’s lubricant sector. Could you give us an idea of the levels of growth that you are experiencing? Is that growth in terms of profit, production or workforce?
Nair: This is only our second year, so when you consider that we are a new company, we are experiencing 100% growth year on year. In the first year we had revenues of $14mn and this year we have already reached sales of $30mn. We expect to reach figures of around $36mn by the end of the year.

We have also doubled our number of employees since 2012. In the first year we were running only one shift of workers, but now we run two shifts.

We won some prestigious companies who we produce our products for. Also we are producing private label products for government companies and large volume distributors in Saudi Arabia, Qatar and Libya.

With exports being such a huge part of your business model how is the current security threat in countries like Iraq and Libya affecting you?
Ibrahim: All in all our exports account for around 90% of the business we do, so it is vitally important to us. There are a number of countries that are difficult to export to such as Libya, Iraq, Syria and Yemen. The ports get congested, clearance is not easy, and moving the products to their warehouses is not safe.

Sometimes we are able to find alternatives, like for our Iraqi customers. We couldn’t send the product by road through Syria because of the current security situation so we shipped it through a port in Turkey and then by road from there.

It’s more costly to do it that way but we try to keep our customers happy. Technically speaking it’s a force majeure which is out of our hands, but they have been our customers since the beginning and we would like them to continue to stay with us. We hope that the situation will relax soon in all of these countries.

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What is the rationale behind setting up the business here in the UAE?
Ibrahim: Number wise, the UAE has been ranked as the fourth largest base oil hub in the world. Some people find that surprising because base oil is not really produced here in the UAE, but the main factor at work is the ease of business here. Business is very easy to be set up and the country is very helpful to new businesses. Also, being UAE nationals, we wanted to set up the business in our home country.

It’s interesting that last year there were around 1.2mn tonnes of finished lubricant products produced here in the UAE while consumption in the country was only 120,000 tonnes per year. If you look into neighbouring countries, for example Saudi Arabia which is the largest oil producer in the region, they consume about 900,000 tonnes of lubricants per year, while the production levels are only 690,000 tonnes per year.

Why is it that a country like Saudi Arabia, which has so much oil, doesn’t produce more of its own lubricants?
Ibrahim: It’s because of the regulations and the ease of doing business here in UAE compared to Saudi Arabia. The UAE’s strategic location and its free economy policy have helped it to become an international export platform.

Do you have any plans to grow your exports and tap into new markets? If so, which markets are particularly important?
Ibrahim: Yes, we certainly do. Next year we are looking at developing exports to South East Asia. Countries like Vietnam, Myanmar, Thailand, those are the countries that we are looking to get into. We are putting together our first order for the region now and consequently we expect more orders to follow in due course.

Tell us about your plans for the future. Do you see the company pursuing growth in the domestic market or will it focus on exports to drive growth?
Ibrahim: The big plan for 2015 is to launch our retail sector here in the UAE. Up until now we have been doing only direct supplies to the government and corporate sectors here in the UAE. Direct supplies to companies that have their own workshops. From that sector we have a number of big names, such as Nestle Group, National Paints, AliMoosa. These are the premium customers that we have in the corporate sector.

We are also the suppliers of the Sharjah RTA as well as a number of other government transportation bodies. They have been with us for the last two years and we supply them with the full range of lubricants, i.e. engine oils, hydraulics, break fluids and so on.

Until now we have not had a presence in the UAE consumer market. We delayed getting involved in the retail sector because it required a lot of logistical organisation and support. Hopefully by mid-2015, the retail business will be launched in the UAE, so we will be able to serve consumer customers in the UAE. It’s funny that our product is being sold in over 16 countries around the world but it is not yet available in shops in our own country.

Being a manufacturer who exports to other markets, it’s a volume based order based sales pitch. In the retail sector it’s a much smaller volume to lots of different locations. It could be 10 or 20 pieces of each product to various locations, whereas with the export business people would be ordering in bulk, for example 2,000 units of any given product.

What are your targets for 2015?
Ibrahim: Our main target is to have placed our products in retail outlets in the Northern Emirates by the end of 2015. The product has a well-known name in the government and corporate sectors but when it comes to consumers we are not really at the forefront of their mind.

Thankfully the Emirates Authority for Standardisation and Metrology (ESMA) have really raised the bar in terms of product quality in recent years. Now most of the products need to obtain a quality certificate, so there is a good standard of competition within the UAE consumer market. We hope that we will get the opportunity to be there on the shelves of the UAE’s shops.

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What trends are you seeing developing in the lubricants sector at the moment?
Ibrahim: I guess that would be with regard to the type of lubricants. Most of the customers are moving from mineral based lubricants to semi synthetic or fully synthetic products. These give higher drain intervals, 15,000 or even 20,000km. This is the big change that we are seeing in the Middle Eastern and African markets.

Nair: At last year’s base oil conference in the UAE the main point was that there are three groups of base oil – group one, group two and group three, also known as synthetic oils. The speakers at the conference were saying that group one usage will disappear completely in the coming years. Everyone will be using group two and group three base oils.

Newer, cleaner engines are driving this development. The countries are changing their environmental rules. Here in the UAE for example, you can’t use a vehicle that is older than 20 years old, they won’t be able to get certification for road worthiness.

How is the Middle East doing in terms of sustainability and HSE compared to the rest of the world?
Ibrahim: The trends are changing and companies here in the region are really starting to take note of sustainability. It used to be the case that companies would just follow the rules and do the bare minimum that was legally required. Nowadays companies are taking care of things and are trying to improve their impact on the environment.

At Armor we are currently involved in a couple of environmental initiatives with the Sharjah local government by recycling the plastic waste that we have. Instead of dumping the waste products, we now send them to the government waste management company and they manufacture some plastic tubes from it.

In 2015 we are also going to develop a new product container that is more environmentally friendly. It will reduce our usage of plastics by about 60%. That’s still in the R&D stage at the moment.

Do you think the UAE is taking a lead in this within the region?
Ibrahim: Yes. We’ve been in regular meetings with the Ministry of the Economy and they are really taking care of the industry. They have run a number of seminars and talks on sustainability within the industry and have offered one on one workshops to companies to help them get up to speed on sustainability.

I haven’t seen this kind of initiative anywhere else in the region. Companies here are really going beyond what the rules say that they have to do and are becoming very serious about sustainability.