A shift in focus for expenditure in Kuwait

Kuwait

Mohamad Sahyouni, CEO of KDDB, talks to The Energy Year about the state of Kuwait's construction market and the company's involvement in various market sectors. KDDB is a Kuwait-based, multi-disciplinary contracting and professional engineering, construction, fabrication and maintenance company.

What is your assessment of Kuwait’s construction market?
In the past four years and especially since Covid-19, the market in Kuwait has become more competitive, with margins being increasingly low. The number of projects has dropped, and several companies have gone out of the market or are on their way to do so. Moreover, in addition to being small, the market in Kuwait is complex. You need to develop specific skills to stay afloat.
Against this backdrop, KDDB has been working to reinvent itself and stand out in Kuwait’s cutthroat market. In addition to bidding on all projects within our current approvals with the K companies, we have focused on repositioning ourselves in the market guided by a clear vision: to vertically integrate as much as possible. This way, we can be more competitive, and we can provide our clients with the best rates possible.

What steps have you been taking to integrate the company vertically?
We are pursuing this strategy through two courses of action: acquisitions and the establishment of support services companies under KDDB. Regarding the former, we have recently discussed the purchase of one of Kuwait’s most significant companies. The acquisition of this company will complement KDDB’s current capabilities and enable it to obtain approvals that would otherwise take us ten years to gain.
With this in mind, we are also ramping up our collaboration with international companies that are leaders in their markets, adding on multiple principals that have the expertise we do not yet possess. Among these are design and engineering, fabrication and heavy equipment manufacturing, which are highly required in the upcoming projects in Kuwait and of which there is a shortage in the country. We have been targeting niche principals rather than more general ones, concentrating primarily on South Korean companies because of their capabilities and trustworthiness. We have already concluded agreements with two companies specialising in earthmoving equipment. They have two different price tags, meaning we can cater to the needs of companies of various sizes as well as our own needs. We are also tabling discussions with Eastern European truck manufacturing companies.
For the service companies, we have already established four different ones under KDDB that carry out various activities, from moving diesel to ready-mix concrete to electrical and electronics works. These sustained efforts have already yielded results. KDDB has not only managed to reduce costs and restructure but has also grown threefold.

What is your involvement in the water treatment sector in Kuwait?
The potential of the water treatment segment in Kuwait is enormous. That is mainly due to the significant number of upcoming infrastructure projects in remote areas, as contractors and their workers will need water treatment facilities to use when carrying out their activities. KDDB is well positioned to meet this demand because of the aero-rhythmic systems (ARS) technology for wastewater treatment that we developed in-house 15 years ago.
At the same time, Kuwait’s Environment Public Authority (EPA) continues to change the environmental requirements for these projects to improve environmental protection. While this is undoubtedly environmentally beneficial, it is also a hindrance for companies. To keep up with these changes, developing better technology and scaling up operations is necessary. To this end, KDDB has already had discussions with two potential international principals that are giants within this field to start working with them and to cater to even larger projects that those currently pursued.

Which are the new approvals you want to obtain?
Today, Kuwait is increasing its expenditure in areas outside of oil and gas compared to previous years, especially towards infrastructure projects. In line with that, KDDB is therefore gearing up to get approvals for these new projects while maintaining its approvals within the K-companies. This allows KDDB to diversify and expand beyond the highly competitive and limited oil and gas field.
Nonetheless, the petrochemical complex is certainly the most important project that will be put out for bid soon. It is technically challenging and therefore extremely interesting. Our goal is also to obtain the approvals to participate in it and play an important role as a construction contractor through our principals, and not just as a subcontractor.

Which projects are you targeting going forward?
In the short term, we aim to take at least a portion of the projects available within our existing approvals. We are targeting services and maintenance projects, pure mechanical projects and specialised manpower-supply projects. While these are not challenging, they are the safest bets for the coming period, because the market is still struggling from the repercussions of Covid-19. After that, we aim to undertake EPC projects along with some of our principals from outside the country.
In contrast, we are not interested in bidding in the housing sector, which was previously in our portfolio, as we do not find this sector profitable.

Where do you see your company in five years?
We want KDDB to become an umbrella organisation with a number of complementary companies working under its belt. We have already opened four of them, so we are on the right track.

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