JV Global lives up to its name

The Western Australian company, which also produces steel-framed houses and markets purpose-built roll forming steel production lines, now has factories operating in Sharjah (UAE) and India's Mumbai, and has built a groundbreaking steel-framed house in Jordan for evaluation.

As a result, JV Global, which listed on the Australian Stock Exchange in early 2005 and is capitalised at a little over $11 million, is cash flow positive with a maiden profit expected this financial year.

It is a much wiser managing director Terry Opie who reflects on his company's attempts to grab a little slice of one of the most rapidly expanding economic regions in the world.
"Two years ago, we went into the bottom end of the UAE building/construction boom,” says Opie. "We had good products in our steel doors and window frames, and a market that didn't have them and was looking for more cost-effective, innovative building techniques to meet an impending massive shortfall in affordable housing.

"We didn't have the chequebook to buy our way in at the top or anywhere near it.”

You get some idea of the size of the market from recent Australian research into major construction projects in the six member Gulf Co-operation Council (GCC). It says the UAE and Saudi Arabia each require about 150,000 new housing units a year until 2020.

Investment is also required for electricity, water, healthcare and education infrastructure. Governments have turned to the private sector by letting large numbers of contracts for freehold projects as well as government-assisted housing developments aimed at supplying affordable smaller houses for middle income families and workers.

Massive residential complexes the size of suburbs are also being planned for the same market, particularly in the UAE (Dubai, Sharjah and Ajman), Saudi Arabia and Kuwait.

Construction and real estate is now the fastest growing economic sector in Saudi Arabia, while the UAE continues to drive construction growth in the region with Abu Dhabi joining Dubai as a regional hotspot.

"I've no doubt about the long term benefits that will flow to JV Global and other similar smaller companies from this region,” says Opie. "The UAE is one of the fastest growing economies in the world, as exemplified by Dubai and Abu Dhabi, and then there are Saudi Arabia and India, enormous growth markets in their own rights.

"While the Gulf markets are big, they are very different from those in Europe and Australasia. The crucial difference is that they are traditional monarchies, run by kings, sheikhs and royal families. While English-based law and business practices predominate, the leader's word is law.”

JV Global opted for strong local joint venture partners and later, on the ground alliances with similarly-sized small companies, often Australian, also trying to break into the market by offering associated services and products.

The second part of this equation prompted a major switch in business strategy for JV Global.

"We were selling ready-made door frames, but found the big developers wanted the whole package – frames, the doors, locks, installation/fixing and painting,” says Opie.

"So we've become a subcontractor as well as door frame supplier. Now we sell the package.”

The upside is that adding the doors and associated components has pushed the overall profit margin up another 30 per cent.

JV Global's major joint venture partners include some of the biggest politically and financially influential companies in their respective regions.

Its UAE operations are run by Arabian Profile Global, a joint venture with Arabian Profile, a subsidiary of GIBCA, initially producing low cost steel door frames from its Sharjah production headquarters.

Company chairman is Sheikh Sultan Bin Saqr Al Qassimi, co-founder and managing director of the diversified international industrial GIBCA Group, controlled by members of Sharjah's ruling family.

Arabian Profile Global has surpassed its break-even capacity of 10,000 frames a year and is in final tender negotiations on two contracts for 26,000 and 70,000 frames.

The company's new subcontractor role will be enhanced by the finalisation of an agreement with Australasian company Trafalgar Building Products for its fire doors, specifications for which are before civil defence authorities and the relevant UAE municipalities.

Negotiations are also well advanced with Australian national CSR to establish a manufacturing facility for components of its Cemintel Urbanform wall panelling system at Arabian Profile Global's Sharjah factory.

Opie's son Jarrod heads up Arabian Profile Global and has been living in Dubai for about a year. "We manage the joint venture and it is Australian technology we are using, so it was natural that our partner and potential clients would want to see an Aussie JV Global guy driving it,” says Opie.

The company is expected to benefit greatly from Dubai's ruling that from January this year residential and commercial builders and developers must comply with strict internationally recognised green building standards.

In India, Sharus Steel Products is a joint venture with one of India's biggest companies, the Shapoorji Pallonji Group, initially producing steel door and window frames from the a 2.8ha manufacturing facility in Mumbai for the Indian market and Shapoorji Pallonji's own projects. Future plans include further manufacturing facilities in Chennai, New Delhi, Bangalore, Hyderabad and Kolkata.

These operations will underpin the introduction of steel frame housing to an accommodation strapped but economically expansive India.

Market researcher AC Nielsen says India is currently facing a shortage of 22 million dwellings, expected to rise to 90 million in 2015 with the overall Indian door frame market worth over $US900 million a year.

In Jordan, JV Global has a memorandum of understanding with Tuhama Investments, controlled by Jordan's wealthy Dahleh family, to establish a factory in Amman to produce light-gauge steel-framed housing and steel door frames.

Tuhama is associated with Tameer Holdings, Jordan's largest public company and its biggest developer, which ordered a steel-framed display home from JV Global's Component Homes.

Opie is proud of the fact that the two-storey house went up in 12 days, compared to over six weeks to build the traditional solid, security-conscious houses, and at about half the price.

The house is seen as a precursor to the introduction of affordable (40 per cent cheaper than those built presently) steel-framed dwellings in Jordan, where there is an anticipated demand for 100,000 affordable new homes over the next five years.

Both Terry and Jarrod Opie warn that the spoils come at a cost: the harsh UAE environment; traffic congestion that can result in a 14km trip from Dubai to Sharjah taking three hours; inflation at about 14 per cent in Dubai; and the rising cost of living (a comfortable, but not luxurious two bedroom apartment in the Dubai Marina costs about $A1150 a week compared to less than $A500 in Australia).

Building supplies, labour and land costs are also rising, putting increasing pressure on getting many UAE projects finished on time with the infrastructure they need to operate.

This article first appeared in the March edition of Contractor magazine

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