Established in 1982 as a trading company, Abdullatif Industrial Investment Company (AIIC) has since diversified to become one of the Kingdom of Saudi Arabia’s leading manufacturers.
What do you consider to being the key challenges in developing manufacturing industry in the Kingdom of Saudi Arabia, and what from Al Abdullatif Industrial Investment Company’s perspective have been the key ingredients in your success?
The core issue in Saudi Arabia comes down to inputs. From our perspective as a manufacturer using man-made, petroleum based fibers the initial input cost is quite competitive. Our key inputs are derived from oil based petrochemical industries. There is a consistency of supply, competitive cost and other inputs such as energy are also cheap. However, at the same time the key issue for the development of industry is the development of local expertise. There is significant scope for the development of human capital in the Kingdom.
As a company, Al Abdullatif has taken up this challenge by setting up our own training centre. The purpose of this centre is to provide training to locals who can then take that expertise to develop their own responsibilities over the longer term. I think this is really the key to our success, our ability to take expertise from outside and then transfer that into our company effectively in the form of human capital and skills development.
Just to give an example of our success in this area, initially Al Abdullatif used to import and then trade finished products. Now we manufacture and export to some of the companies we used to buy finished products from – the value chain has been turned upside down in many ways. Today as a company we are exporting globally to East Asia, Europe, Americas, the GCC and Australasia.
Where did you get the initial idea to manufacture carpets?
Initially this came from a government initiative to develop the “Made in Saudi Arabia” brand. This first started around 3 decades back, the core aim was to develop a strong manufacturing base in the country. It was my father’s idea to develop our expertise in carpets further by expanding our manufacturing capacity.
Initially local manufacturers were supported by the government with a 10% price preference; this helped with the initial major step for manufacturers to actually start operating. Al Abdullatif commenced with the manufacture of carpets back in 1982.
A primary objective for the Saudi Arabian government is to further develop manufacturing in the country, how realistic do you consider this to be?
It has to be realistic, Saudi Arabia has such a huge young population that there needs to be multiple means found for creating employment opportunities for everyone. The oil sector can create employment to a certain extent, but for there to be really widespread employment opportunities created by the private sector, manufacturing has to play a key part in that. As far as we can see it won’t only be huge companies developing the manufacturing sector, it will also be small and medium sized enterprises too. Overall this can only be good for the wealth distribution system and long-term stability of the country.
Many family owned companies in Saudi Arabia have gone from being privately owned to being publicly listed on the stock exchange. How have your experiences been of this process?
When a company is just family owned, the levels of motivation to push for the maximum growth and develop the company to its highest possible potential are relatively lower than when a company is listed on the stock exchange. When you share the company publicly you feel more responsibility to improve returns and company performance as much as possible for your shareholders. I think overall that the company performance and the motivation of the management have increased significantly since the company was listed on the stock exchange.
At the same time, if there was a disruption in the family, there is a professional management team available to tale forward the business and move through any issues such as this. Business continuity plans are helped significantly by being a publicly listed company. Our brand image is improved and the company operates more efficiently; as well as corporate governance standards being improved.
The Saudi Stock Market is often cited as being too reliant on retail investors and over-emotional as a result. What are your perspectives on the dynamics of the Saudi Stock Market?
Al Abdullatif Industrial Investment Company benefits from being perceived as a very strong and reliable brand throughout the Kingdom of Saudi Arabia. Up until now, investors have held onto the shares as they see the value in returns from their investments and nobody has tried to manipulate the performance of the shares either. Our shares are trading in a median range, and very much reflect the overall performance and sentiments throughout the Tadawul itself. We are very happy that our shares are being traded responsibly and are not being used to speculate. I think what underpins this is our dividend policy; we have a strong commitment to our shareholders and have consistently paid a quality dividend.
What are your perspectives on the Saudi Stock Exchange opening up for international investment?
Al Abdullatif as a company is more than happy to work alongside international investors for the benefit of all parties concerned. I think that to begin with, we will just see major portfolio investors coming into the market and we are more than happy to share our success with such partners. At the same time, Al Abdullatif is a strong and stable company, we are by no means dependent upon external investment but are very open to helping with the success of this process as we see the long-term benefits for Saudi Arabia and the companies doing business in the Kingdom.
Al Abdullatif is a pioneering company having started as a trading company and now exporting many manufactured products to your original suppliers. What are your medium term strategic objectives for the company?
We originally started as a company for finished products, and then moved into vertical integration. What we have now identified is a huge demand for semi-finished products and to develop further into operating as a finished product manufacturer; but at the same time outstripping growth in the market by developing as a supplier to other carpet manufacturers. This is changing our export composition with a greater focus on other manufacturing locations; but at the same time bringing greater stability into the market as we expand throughout the value chain.
As it stands, Al Abdullatif presently exports to some 60 countries throughout Asia, Europe and the Americas. We are now starting to investigate potential markets in Africa as well such as Ghana, Nigeria, Ethiopia and Sudan. We are currently working on even furthering expanding our brand globally and our export partners worldwide.