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‘Growth has doubled every year’

Interview - May 7, 2013
Representative of the high quality products for which the Turkey brand has become renowned, Kingspan Izopoli makes the only FM-approved fire resistant panels and insulation products in the region. In fact it is one of only 40 countries worldwide providing this insurance industry-preferred know-how. Dr Suat Kıroğlu, Vice-Chairman of Kingspan Izopoli, discusses the rapid expansion of his company through building good working relations and providing expanding markets in North Africa, Eastern Europe and Afghanistan with superior quality, readily assembled products that ideally fit their needs.
DR SUAT KIROGLU, VICE-CHAIRMAN OF KINGSPAN IZOPOLI
DR SUAT KIROGLU | VICE-CHAIRMAN OF KINGSPAN IZOPOLI
Turkey is going through an exciting time. During the global economic recession, Turkey has been the fastest growing economy in Europe for two out of the last three years and GDP (Gross Domestic Product) growth is projected at 4% for 2014. What impact has it had on Izopoli and your operations here?

For us, one of the main triggers was unfortunately the unrest in the Middle East. Our fire safety and insulation products are widely used in quick prefabrication and construction, which you needed after the war in Iraq, Libya, Egypt, Syria, Palestine and anything over the past fifteen years in the whole of the Middle East. Another aspect that had an effect on us was food preservation and storage of food at these war zones by 3rd parties to help people. People are getting more knowledge about it. Secondly, Africa. People are starting to invest more and more in housing, and there is a need for insulated panels for anything prefabricated.

The other issue is that 25 years ago in Africa, people probably used to just live in tents or caves, but today, everyone wants their own little house and they would like to protect themselves from the heat, the cold or fire. All of these recent developments helped us.

Turkey currently has the 16th largest economy in the world. One of President Erdogan’s priorities for the Vision 2023 is to make Turkey one of the top ten most developed economies. What do you think are the obstacles to this, and what solutions are there to these obstacles?

I think the main obstacle here is that I always look at nations based on their history. We have an repeat history, because whenever we become rich, people suddenly become lazy, corruption, increase in political stress and spoilt environment at elections, so the economy declines again. If the young people and the next generation continue to work like us, we can be in the top ten, no doubt. This is the only thing I am very sensitive about, because I have seen in our history that whenever we become rich, the people suddenly become lazy. This is the worst thing, because in our country, we do not have petrol, gold or high-tech industries. We have agriculture and intermediary industries, which are in high-demand from developing countries around us. That alone can bring Turkey into the top ten, but we need to do a lot in order to achieve this. As well as politically and diplomatically, we should be with zero problem with our any neighbor and almost at all Arab speaking countries + near east.

Can you tell us a little about your company’s history and its genesis?

I graduated from Strathclyde University in Scotland with a degree in Polymer Chemistry, and then I did a doctorate in Explosives in Germany at Troisdorf Dynamit Nobel. During that time, I met a very famous Turkish businessman, who asked me why I didn’t start thinking about insulation in Turkey. This was in the 1980s. I bought my first machine after borrowing some money from my father, and I started to do insulation in Turkey. Since then, the growth has doubled every year. I think I joined the sector at a very good time because everything was booming in the 1980s.

Secondly, the unrest in the area surrounding Turkey and the states gaining independence from the Soviet Union such as Kazakhstan and Azerbaijan also helped us a lot because wherever we went, we were welcomed when we supplied our prefabricated units, as people needed to build things quickly. People had no time to do everything using concrete, and at that time, those countries did not have a lot of potential for cement plants.

What differentiates you from your competitors? What is your competitive advantage?

Fire mainly. Our panels are FM (Factory Mutual) and LPCB certified from the US and UK, and very few companies has this in the region. This is the only certificate that is preferred by insurers, and we are the one of the company in this region that supplies products with this certification. This was the reason for our ‘marriage’ with Kingspan. Kingspan has forty plants around the world using this know-how, from the US to Australia.

The main other differentiator for our company, is customer service where we support our clients fully with all technical details needed at architectural stage of project drawings as well as during construction period our supervision section at customer service department with clients own mother language is very unique among all panel companies.

Our company almost finalized new revolutionary era at insulation R&D field in which Q2-2015 we will be announcing our new Nano-IPN Foam with %20 better insulation (Lambda value). Where it means 80 mm thickness of insulation equal to 100 mm thickness insulation which means %20 better transport costs and %20 more space gain and high efficiency at civil construction.

Can you tell us a little about the relationship you have with Kingspan Ireland?

In 2004 when we had the economic collapse in Turkey, I started to look at real differentiation factors for my industry. I have a doctorate in Chemistry, so I said OK Suat, you must do something related to fire safety. I was investigating all these things, and then I found out that somebody before us did it, Kingspan. We had good chemistry with the owner of Kingspan, so we became partners in 2005.

How much of your operations are currently for the international market?

We are doing 50:50 domestic and exports. Exports take place in Adana, which is almost on the Syrian border where there is a free zone called the Yumurtalık Free Zone. Then we have another plant in Bolu where we usually supply the Turkish domestic market. We export 50%, and out of that, we probably export 75% to the Middle East and Eurasia, and 25% to ex-Turkish Republic countries of the Soviet Union, not Europe.

Do you have any ambitions to enter the UK market?

No. We have an agreement with Kingspan not to go there because that is their territory.

What are your top priorities for 2015? What are your growth strategies for the region?

In our business, we are concentrating on specifying our product. If you specify your product, during the tender stage, contractors come and ask for your product. Ten years ago, specifying our products probably amounted to 5% of our business. But today, it is almost 50%. Now, we are exceeding 50%. When we exceed 50% that means that we have totally secured our business forever. As well as we are increasing our marketing offices in regional countries. In addition to, Baku, Cairo, Erbil, Baghdad, Tehran, Alma-Ata, Dubai, Jeddah, Mumbai, Karachi.

Our other main growth strategy beside specifying our product is to create new products, and invest more on R&D with needs of today’s architectural steel construction based projects saying that these products are under finalization stage at R&D Department: Ballistic Panels for security hubs, labyrinth joint self-standing jambo wall panels with omega profile inside for strong pre-build storage and warehousing, high span products to make economy on steel structure, etc.

I know that social responsibility and the use of environmentally friendly materials are very important. Can you elaborate on this briefly?

We are currently putting a lot of emphasis on using solar energy for electricity production. We are the only party in this region producing special panels applicable with photovoltaic cells on them, which we are intensively supplying to rich markets, such as Saudi Arabia, UAE, Qatar which prefer to get their electricity from solar energy.

Also our company one of Montreal agreement party where we use N-Pentane as bellowing agent instead of any CFC involved bellowing agents. So we are Ozone-friendly company as well.

How important is your relationship with the Government?

I am not a political person or a businessman holding the flag for any party in Turkey. I am a liberal Turkish guy, and a very oriental Turkish guy coming from an anatolian family. I think in our country we have always had good relationships with any minister at any time, because once you are in the industry, you always welcome the minister when he visits the plant or the city. All the ministers know each other and we all intend to be number one in 2023(100th Year Anniversy of Turkish Republic). We promised this to President Erdogan as all industrialists. We are working on this with everyone at the company– even at home with our kids.

How has the increased diplomacy and prosperous foreign relations impacted Izopoli and how do you think it has an effect on Turkey’s international reputation and brand?

I think I am the only company in Turkey that sells products to both Azerbaijan and Armenia, or Israel and Palestine. We are not doing this illegally obviously, but we are using our commercial power and saying that there was a need for a dairy plant in Palestine, but the only way to go through is via Israel. So we reached an agreement with our partners, and they got the permissions and we shifted our panels to Israel. Then the panels went to Palestine. If you tell people this, they would never believe it. But it happened. There is a need for our panels in Armenia, but maybe you don’t sell it directly to Armenia, but to Georgia instead and the Georgians sell it to Armenia instead. So commercially, you will find solutions much easier than you would politically.

The same thing goes for Iran for example. Although the world is against Iran and there are a lot of embargos against Iran, people would like to control Iran or see what is going on inside. I think that is a huge agreement for us. The only agreement that is valid between two countries is the $50,000 border trading. Bank transfers are forbidden, which is OK as we are not doing that, but we are doing border trading, which is permitted. So we are using everything that is left to do business in this area saying that with recent developments Iran and Western World we believe banking concept will have some improvements so as exports to Iran our budget for Iran as 2015 is minimum 100.000 m2 Insulated panels.

There is also a lot of support from the Turkish Exim Bank, and I think you should do an interview with the Eximbank MD. I think we owe at least 50% of our turnover to them; not only me, but everybody in Turkey. For example, when you go to Ghana, someone will say that they like my panels and want to buy them, but they can only pay me a year later. So we go to Exim Bank, they pay us, and then they wait to receive payment from Ghana. This really supports Turkish industry. President Erdogan is 1000% behind Exim Bank and is giving funds to Exim Bank. In Egypt, last year we only did six big projects, including Procter and Gamble, because the investors in the country have limited capital, and the income is a little slow. So they need long-term credit.

Why is Exim Bank providing this? Why not AK Bank or other banks?

That is another issue that the people in Turkey are working on. There is a banking council, which is working on that issue. But Exim Bank is traditionally the leading bank in this area. For example, as a Turkish company, nobody believes it but we have done four projects for Tesco. We built four Tescos in Pakistan with Exim Bank’s support, and we also built two Tescos in Vietnam with Exim Bank’s support. Exim Bank can wait two years for their money, although obviously there is a percentage where they make money. Only the Government can support this bank, but they are not making a loss – they are doing this for benefits.

One of the secrets behind the success of Turkey is the Exim Bank, which Erdogan created. We have mutual trust between our partners. We do ten projects at least every year in Afghanistan, and nobody knows that Afghanistan has the second largest orange plantation after California.

Recently, Eximbank credits for exports started to be distributed among other commercial banks to support small exporters where this also will help Turkish goal of reaching maximum export budget.

As of 2014 our company is chosen as a pilot company by Exim bank to insure and credit our local domestic sales as well. And we have started with 10 chosen local clients.

So you must do an enormous amount of due diligence before you invest in these projects. What is the timeframe for this?

In every country, whatever you see on CNN is their problems. But there are people who are eating and not immigrating. On television, people are talking about Syrian immigrants, with 1,500,000 coming to Turkey and 500,000 to Jordan. So what? The country has a total population of 23.5 million, and only 3,500,000 people have immigrated, so where are the remaining 20 million people from Syria? They are there. I lost my two managers during the bombardment in Aleppo and I moved my offices from Damascus to Amman. I know the problems, and amazingly enough before the turmoil situation in Syria was highly investment base and our branch was doing 100.000 m2 panel sales to governmental institutions.

The same thing goes for Afghanistan, where there is conflict and people are being killed. But in Afghanistan, there are still 15 million people living there, although in poverty. They have to eat milk, cheese and oranges at least, and in order to eat, they need somewhere to keep food, such as cold stores. You need Izopoli. My base for Afghanistan is in Peshawar/Pakistan. Afghanis come here and we sit down and we show them how to build it as we do not go inside. After six months, we receive a yahoo.com e-mail saying thank you very much. Women cannot lactate for their babies because of the stress of raw and all the Iraqi boys are coming to Turkey for medical treatment. These are all the hidden aspects. Imagine 25 to 30 year old men and 70% of them cannot have a baby because the sperm dies. This usually happens after wars.

20% of rich families in Syria, Iraq, Iran and Afghanistan have accounts in Turkey, whereas they used to have accounts in London. But they cannot get a visa. They used to fly to the United States. So everybody comes to Turkey and leaves money here. This is another reason why we have plenty of cash. All of our neighbors are looking at why we are doing so well, and then look at democracy. We are 75% democratic with still uneliminated corruption models in Turkey.

I have been involved in Egyptian business for the past fifteen years, and any business you do there in big business, you must talk to the Egyptian officials!! But today investments are double that than in Mubarak times, but the television does not tell you this. We are signing contracts almost every week in Egypt because the money came out. In the past you used to have to go to the contacts!!, and without them you could not do any investment. It was the same thing in Libya. The fathers(dictators) were more relaxed, but all the turmoil happened because of their sons. They are all greedy.

Do you think that the political instability is making it a dangerous place to invest?

Obviously, people are hesitant. Turkish investors are slowing down their investments, but they also do not want to leave Egypt, because that means 80 million people, which is a huge market with resources and educated people. They all speak English and Arabic, and it is a young nation. They need everything. As my father said, if you sell shoes, you would sell 160 million shoes.

Are you actively pursuing a growth strategy in Egypt?

Yes. We have a very big office in Heliopolis, and I can say maybe this year we will earn 10% of our turnover there. Today we have 17 people working for us, whereas it was just 2 in 2008.

Turkey is gaining more of an international reputation for being high-quality because of brands such as Izopoli. What strategies do you have to continue to strengthen your brand? That is almost as important as your operations.

Dr. Suat Kıroğlu: We had a lovely lecture from Europe. Number one, not only in my company, but even my competitors are dealing with claims from customers, which has improved dramatically in the Turkish industry. Companies used to sell t-shirts, and if a customer called back and said that two of the packets were torn, the company used to just put the phone down and disappear. But today they will listen to the claim, ask the customer to send back the two packets, and they will get four new packets sent to them. Secondly, all Turkish plants have quality control departments, which we did not have ten years ago. Today we have quantity engineers and quantity control departments. This helps the Turkey brand, because in this part of the world, before 9/11, people in this part of the world were very used to buying German, French and English products. Although they are having difficulties buying from these countries for commercial and other reasons, they are still looking for the same level of quality. Today the whole of Iraq is buying from Turkey, because we are the only country where they can bring money in their suitcase. We are the only country where you can do that.

As one of the top international companies in Turkey and operations in the surrounding region, you are almost an ambassador of Turkey. Do you feel responsible for the Turkish people and the economy?

Absolutely. I was travelling in Iraq and I could see that the Turkish Government had sent all the syringes of were expired. I queried this with the Ministry of Health in Ankara and they just sent this letter today to say that they have received my complaint and that they will investigate it and let me know. It is about teamwork. I lived in Europe for eighteen years, and if we want to achieve the Vision 2023, we should do it all together – otherwise, it will not happen. I am also very crazy about what is happening in the region with all these fights and wars. I really do not understand what the problem is between Armenia and Azerbaijan for instance. It is so ridiculous. If everything is OK, there will be money. It is the same in the Middle East. What do you think Israel and Palestine have achieved over the past thirty years? It makes no sense. There is nothing to share. The same thing happened in Turkey – everyone thinks that Erdogan decided himself what was going on with the Kurds, but we did.

The east of Turkey has a lot of resources as well. Agriculture in Urfa is currently on par with agriculture for the whole of Belgium and Holland. Whatever I grow in Urfa equals the amount that is grown in the whole of Holland.

If you had to describe Turkey in five words, what would they be?

DYNAMIC, STRONG, COMMUNICATIVE, INVESTOR, PEACEFUL.

If we were to come back here in say five years, what achievements would you like to have made?

You will see another two plants built in the Middle East, at least. It is a growing market and turnover / profit became double.

What would your final message be to the 500,000 readers of the report and the 40 million readers online?

Dr. Suat Kıroğlu: I think we should increase the number of joint ventures in Turkey. Turkey is definitely a gateway to Middle east and Near East. It is a like a translator – if I bring you to Vietnam today, would you be able to communicate with a Vietnamese guy yourself, or would you do better with a translator? Obviously a translator. When my Irish partners are in Jeddah, everyone is sitting on floor and there is a certain atmosphere in the air because of the cultural differences. But when I go there, I sit on the floor with them, eat rice, talk with them and then I sign the contract with them and send an e-mail to the guys in Dublin saying it is done. When I have something to buy in the UK or in the western part of the world, they are much better than me dealing with their own people, although I am not discriminating. It is the same thing with India – we sent two Western managers to India and they said they could not stay there because the food smelled. But our two boys have been living there happily for the past two years.

Thank you very much.

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