Solid IT to support continuityMay 18, 2020
Ahmed Al Barwani, CEO of Muna Noor, talks to The Energy Year about how the company is tackling the Covid-19 challenge and how rate reductions are affecting the manufacturing sector. Omani-registered and owned by Kuwait’s Boubyan Petrochemical Company, Muna Noor manufactures piping products.
What steps has Muna Noor taken to prepare its workplace and sites for coping with the pandemic?
Just like everyone else around the globe, we were forced to take quick actions in response to the rapidly escalating pandemic. We had a solid infrastructure in place and it took us a day to transition to remote work. It was a smooth process, thanks to quick decision making. We have a very stable IT infrastructure that has allowed all of our different departments to shift their work seamlessly from the office to their homes.
We have been trying to minimise the exposure of our employees to Covid-19 and we came up with our own set of protective measures in addition to the ones rolled out by the government. We have doubled the available accommodation for our staff and also encouraged our subcontractors to stay at these facilities, so that we have better visibility and control over the health and safety of all the people working with us. Our factories are sanitised before and after every shift, and twice during each shift, and we have been doing temperature checks. We have provided masks, gloves and other protective gear for our workers.
Fortunately, as of now we have not had any cases. We started to do some drills to simulate what would happen in case we had a Covid-19 case reported on our production site. We also encourage all of our employees to come up with new ideas for producing medical kits and protective equipment.
How do you expect the company’s sales activity to perform in the current climate?
We did see a minor reduction in our sales activity, mostly because we have less face-to-face interaction with our clients. Reductions mostly appeared in the retail sector because many of the retail outlets have simply shut down. That represents about 10% of our business. Everything else seems to have continued and we have actually been awarded some more projects during this period.
From an infrastructure and sales perspective, we are well positioned to ensure business continuity in Q2 of this year. The sales projections for May and June still look promising, with a small drop of 5-10%. However, we expect Q3 to be much more challenging.
How have rate reductions affected the manufacturing sector?
Oil and gas companies tend to ask for rate reductions of up to 30%. We simply cannot accommodate such high discounts in our pricing because 70-80% of our costs are related to obtaining raw materials. If prices of raw materials also went down, we would be in a better position to meet rate reduction requirements, but that is not the case. We expect to see the real impact of the plummeting oil prices in the coming weeks in Oman, as the government has already made the announcement to cut budgets by at least 10% amid the coronavirus. They did not clarify which particular areas of the economy will be affected by these reductions.
We must review expenditures, salaries and benefits, but it is not entirely clear what additional cost optimisation practices will have to be put in place. If oil prices start climbing in the coming weeks, then we will all be in a better position to work with reduced rates.
How can diversification into new markets help manufacturers navigate the crisis?
Because of the nature of our business and the demand for large-scale and bespoke pipes in the region, we are always looking at new expansion opportunities outside the country. Our target is to have our export sales account for at least 30% of our total sales volumes. Oman is still a priority for us, but we have an edge in the UAE and Qatar because of the quality we produce and we have already managed to sell to East Africa. Other countries such as Yemen and Iraq also present attractive opportunities to us.
Will the advances made in localisation continue during the downturn?
The sultanate’s oil and gas sector has done an excellent job in enhancing ICV [in-country value] and maintaining a productive dialogue on Omanisation between the public and private sectors. Plenty of local businesses have emerged in the past decade and they have managed to position themselves to serve the energy sector. This is also thanks to the incentives introduced by the government.
However, advances made in Omanisation in the oil and gas sector have not been replicated in other areas of the economy. Pricing scenarios have not been properly developed. Several oil and gas companies managed to produce Omanisation rates of up to 70%, but this is not the case for other sectors.
Unfortunately, some companies only use Omanisation to obtain better prices and favourable business conditions. From a government perspective, you need to introduce black and white rules about the expectations linked to developing local content.
We have some 2 million expatriates living in the country. Omanis are very smart and they can lead complicated endeavours. For me it is about finding the right talent and making sure that proper development programmes are put in place. At Muna Noor, 60% of our N-1 and N-2 leadership staff are Omanis.
What values can set Muna Noor apart from the competition in today’s difficult climate?
As a company, we continuously display flexibility in our decision making and maintain productive discussions with our clients about their needs. We can adapt easily and we feel comfortable developing tailor-made products that fit our customers’ needs.
The only budget we did not slash when the dual shock hit the market was the one dedicated to R&D, and we are not planning on doing so. Developing new manufacturing technologies will remain at the core of our company’s growth strategy. We have a clear vision and we remain very flexible in our approaches. Most importantly, we have set out clear objectives as to where we want to be in the coming years.