Mushrif Trading focuses on Kuwait's water sector
Mushrif Trading's focus on design and build is serving it well.
Contractors have had to take an innovative approach to keeping busy across the GCC in recent years, and nowhere is this more true than in Kuwait. Since approving its Kuwait Development Plan in 2010, the country has experienced a turbulent couple of years.
There have been several dissolutions of parliament and government which has caused delays to the approval of many large infrastructure and oil & gas projects, but as Mohsen Dehghani, CEO of Mushrif Trading & Contracting explains, the atmosphere has been much more stable since the election of the country’s most recent government in 2013.
“I think Kuwait has become much more stable in terms of their plans for growth and development and we see a lot of the projects which had been shelved or delayed coming on stream.”
Indeed, in recent weeks contract award announcements have included $12bn of deals for a clean fuels project aimed at upgrading two of the country’s oil refineries, a $700mn dredging deal to build a salt plain in preparation for the launch of a new $23bn refinery and a $160mn deal with supplier ABB to upgrade power transmission networks near other refinery sites.
Little wonder, then, that Mushrif Trading & Contracting sees some major opportunities in this part of the market. The company has been operating in oil & gas for over 10 years, but believes the recent float of several new tenders within this sector, alongside some major public works projects, will mean that it is “just a matter of time before that translates into backlog and revenue”.
“While we are not far from our targets, we see ourselves by the end of the year in a better position as a result of the current tenders,” says Dehghani.
The company is floated on the Kuwait Stock Exchange and its results are due to be filed within the next couple of weeks. However, figures for its 2012 financial year showed that it incurred a slight drop in profits to$5.7mn (KD1.6mn) from $7.1mn (KD2mn) a year earlier. Revenues remained largely flat at just below $133mn (KD37.4mn).
Mushrif Trading & Contracting was founded in 1968 by the local Al Wazzan family alongside Dehghani’s father and other members of his family. His father is now retired, and neither of the founding families retain control.
Indeed, the company floated on the Kuwait stock exchange in 2005 and two years later a 50% share in the company was bought by a fund controlled by Dubai-based private equity firm Ithmar Capital.
“The Ithmar Capital Fund that invested in Mushrif includes several prominent GCC citizens and companies from various countries, including Kuwait,” Dehghani explains.
Dehghani, who is now in his 23rd year at Mushrif, said that although his family is no longer the main shareholder in the company, he has been “fortunate enough to have the trust of the new shareholders”.
They appear to be being repaid for their faith. Despite difficult market conditions in recent years, its focus on shareholder returns means that it has continued to make profits every year, and the overall amount of shareholder equity in the business has increased from $89.2mn (KD25.1mn) in 2010 to $108mn ($30.35mn) by September 30, 2013.
“I’m excited about the market and the challenges,” Dehghani says. “The good thing about construction is that no two projects are ever the same. Boredom is not an issue.”
About Mushrif Trading
Size of Ithmar Capital stake: 50%
2012 turnover: $133mn
Size of workforce: 2,000-5,000
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Mushrif has evolved significantly over the years, starting as a general building contractor but then focusing on infrastructure in the late 1980s and early 1990s, which saw it pick up several contracts relating to rebuilding work following Kuwait’s liberation after the invasion by Iraq.
It continued to focus on projects for the Ministry of Public Works – primarily roads and infrastructure – but has evolved more recently to target specific niche projects.
“We started to target and become more specialised in water and wastewater projects.” Dehghani explains. “We were very successful in that.”
The firm developed a design and build capability through its own in-house team in the mid-1990s, which allowed it to target specialist projects that were typically awarded to Kuwaiti firms and then sub-let to international contractors. “And because of that, we were able to branch out and take similar design and build projects in the Emirates, Qatar and Bahrain.”
Mushrif now employs a core of around 200 senior staff and engineers, while contracting staff can range from between 2,000-5,000, depending on workload. The company has a deliberate policy of avoiding employing large numbers of people for specific projects, and has instead developed teaming agreements to supply manpower as and when needed.
Examples of the type of work it has carried out include the Tubli sewage treatment works in Bahrain, which was carried out for the country’s Ministry of Public Works, which Dehghani said was the first of its kind in the country.
Another key project in its home market saw it master plan and build a huge automated irrigation scheme using treated effluent. Prior to this, Dehghani explains, all of the major roads and highways were either irrigated manually or through water tanks.
The project involved a full water demand study, the design and build of reservoirs and pumping stations, and an automated satellite and telemetry system for operations. This meant that Kuwait stopped using water that had been desalinated at great expense for landscaping, as well as discharging effluent that had been treated out into the sea.
Two similar schemes were also carried out to provide treated effluent to huge farming areas at Abdali in the north of Kuwait and at Wafra in the south. “A notable project for me is not necessarily the size - rather the challenge of the undertaking and the complexity of the project,” he says.
This specialism has spearheaded the company’s drive into other territories – either through standalone projects with Mushrif as main contractor or as a joint venture with local partners.
“It all depends on the project and the client requirements, he says. “Today, we meet the pre-qualification criteria for most projects in the region, so we would not necessarily need to have a joint venture partner with us.”
Dehghani said that in the last year the market in the UAE has picked up considerably, while in Qatar problems that dogged the market a few years ago – namely rapid cost escalation and scarce resources – have eased. Add in the improved prospects for Kuwait and Dehghani argues that the company is “positioned extremely well” for future growth.
It is currently working on a pair of road projects signed last year with a combined value of over $210mn and a $300mn contract for the Kuwait Public Authority for Industry to create all of the required infrastructure for a 5mn m2 industrial estate.
It also recently won two projects in the oil industry worth around $100mn – one of which is a design and build project for new flares that Dehghani believes will allow Mushrif to participate in bigger projects for the client, Kuwait Oil Co, in the future.
Indeed, he argues that Mushrif currently has no need to tackle new markets like Saudi Arabia, Yemen or Iraq that would take a concerted effort to crack.
“We have the luxury today of being a bit picky because of our activities in the other countries in the GCC,” he says. “The country we are excited about and we are looking at is Oman, and with the improving political situation, Iran might offer an attractive market for water and wastewater projects.
“Oman, as opposed to Saudi Arabia, has been aggressive recently in terms of the type of projects they have been developing. Whereas in Saudi Arabia there are many large construction companies and international firms that have those capabilities, in Oman the number of local companies that will undertake a design and build project are limited, and that offers us an opportunity.”
He also believes that Mushrif fills a gap between local companies who are still exclusively favoured for some works, and international companies who often offer greater expertise but require local firms on the ground to carry out much of their work.
“We have more capability that most of the local companies and we are more competitive than the international ones. We are in a nice zone. If we can retain that, it will be good for us.”
By Mike Fahy, Construction Week