Lay of the Land – Dr. Khater Massaad Interview with TBY

TBY talks to Dr. Khater Massaad, CEO of AL FORSAN Global Industrial Complex (Forsan Ceramics), on production capacity, working in the Kingdom, and expectations for the future.

How has Forsan Ceramics’s performance been so far?

I have been in the ceramics business all my life. We have invested about $186 million (SAR700 million) in the company, and have a robust management agreement and local Saudi partners. We expect 2016 will be a full production year and we will do well because we are already established in the international market. Forsan Ceramics started operations in 4Q2015. We started construction about two and a half years ago and now operate out of three factories. We have one sanitary ware factory that started operations in January 2015, and we also have a tile factory producing monoporosa tiles that started operating in April 2015 and produces 12 million sqm of tiles per year. We also have a porcelain factory that manufactures polished floor tile technical ceramics, and that produces 8 million sqm each year. In 2016, that factory will be in full operation with production of 20 million sqm, representing 10% of the Saudi market. In the sanitary ware segment we will be producing 1.2 million units, and this represents 10% or more of the domestic market.

What are the advantages for Forsan Ceramics of being based in Saudi Arabia?

The first advantage is that we have a large and growing market here. Second, we have natural gas available at a reasonable price. Third, we have access to manpower. The market here is 30 million and the population of Saudi Arabia is increasing by 1-1.2 million people per year. Around 500,000 apartments are being constructed per year just to keep up with that growing demand, and on top of that there is great demand for rebuilding and maintenance work on existing properties. This means Saudi Arabia will continue to be a major importer and consumer of ceramics tiles and sanitary ware. You can see there are many projects planned in the government’s budget, and these will have to go ahead as they are needed. In any case, there are numerous public projects currently under way, and added to this are all the private sector projects. There is a demand for housing, and as long as there is construction going on there will be a requirement for ceramic tiles and sanitary ware too.

What are the main challenges facing Saudi Arabia’s industrial sector, and how are they being addressed?

Saudi Arabia is trying to implement Saudization and industrialization policies, and it is a young country. It requires time to cope with and digest this strategy, and in order to establish a robust industrial tradition the country has to stabilize. The adoption of Saudization policies will definitely go ahead; however, this will take time. The other challenge is to liberalize the economy more. At the moment, we have excess regulation and state interference in the economy. To be on the safe side, Saudi Arabia is trying to adopt the most stringent standards, for example in terms of safety, security, and equipment. Saudi Arabia wants to be a regional leader in terms of standards, but I believe this is a somewhat complicated matter for industrialists. By comparison, industry in the UAE is not as heavily regulated as it is here. Even Europe is not regulating the ceramic factories as strictly as here. The government is definitely working to attract more industries, however, and to diversify the economy away from reliance solely on oil revenue.

Looking at 2016, do you have any specific goals or expectations for Forsan Ceramics?

In 2016 our goal is to produce at full capacity and to sell all of our production. We also want to stabilize our staffing and consolidate our CSR program. It is important for us to create a team of people and create a workforce that is loyal, dedicated, and committed to this company. We want to satisfy our clients to create a good base so that they respect us and appreciate our products and services. If this year is as full and profitable year as expected, then we will expand our operations going forward.

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