Azerbaijan 2013 | ECONOMY | INTERVIEW

TBY talks to Ahadpur Khangah, Chairman of the Az Group of Companies, on the FMCG sector, a new packaging business, and road construction projects.

Ahadpur Khangah
Ahadpur Khangah was born in Tehran in 1952 and graduated from university in the UK specializing in engineering and road construction. Between 1975 and 1986, he worked in road construction for a family-owned business in Iran, and later worked on projects including the modernization of the Iranian Social Club in Dubai. He has lived in Azerbaijan since 1993 and is currently Chairman of the Az Group of Companies.

What is the history of the Az Group of Companies?

My motivation while building Az Group was the rapid development of Azerbaijan. I identified in which sectors Azerbaijan was seeing growth, and which sectors were the most important for the future development of the country. I began the company in 2006, and I am still building and adding to the companies that have come out of this project.

The President has expressed a desire to see more investment in non-energy sectors. Do you agree that this is the best way forward?

Absolutely. One area that is crucial is agro-industry. This is because the agro-industry sector can be developed to the point where it generates more revenue for Azerbaijan than oil and gas. A developing country always needs new technology, but in terms of true growth in the next few years, agro-industry will grow very rapidly.

How would you describe the FMCG sector in Azerbaijan?

It is growing well. The main reason for this is growing household income. People can now afford better goods and more quality foodstuffs. This will continue to be the source of growth in the FMCG sector.

“People can now afford better goods and more quality foodstuffs."

You have recently added a new line of plastics production. What impact do you expect this to have?

We were importing packaging from Turkey for use with dairy products and ice cream, but we always had transportation issues. I therefore decided to invest in a modern, state-of-the-art packaging facility to the tune of €22 million. By the end of February 2013, we will be producing all the packaging we need for our own dairy products and other products. I hope to supply one-time-use plastic packaging products to all dairy producers. This will be good for the country's packaging industry, and it will mean we never have to import packaging products again.

What is the strategy behind the duty-free shops you operate in Azerbaijan?

AZ Duty-Free Shops operate along the borders and include the Astara Duty-Free border store. We also recently opened a new diplomatic store in Baku's business district, which consists of 400 sqm of retail space. It is only for the foreign diplomats in Azerbaijan, as well as officials of UNESCO, the Red Cross, and the World Bank. We will also be building a store on the Georgian and Russian borders. They will be operational by mid-2013.

Baku is experiencing a huge construction boom. What impact is this having on AZ MDF, your furniture subsidiary?

In 2006, due to rapid growth in the real estate sector, I realized that medium-density fiberboard (MDF) was being imported from across the world, from countries such as Turkey and Iran. I decided to establish an MDF factory, bring the wood in from Russia via rail, and produce MDF here. This is then bought raw or customized by our customers. Later, in 2009, I decided that this was not cost effective. I decided the best way to cover the cost of my investment was to produce high-density fiberboard (HDF), which is thinner. By investing around €25 million, we will be producing laminated flooring, parquet flooring, doors, and windows from March 2013. With new lines coming into operation, we will be producing, for example, all the parquet flooring that Azerbaijan needs and exporting the excess. The same is true for doors, windows, and kitchen cabinets. By making this investment, I hope to make enough profit to ensure that my investment is returned. We will, one day, export to Iran, Turkey, and Georgia. However, for now, the Azerbaijani market is sufficient.

Az Group of Companies has become very successful in construction, and especially the construction of roads. To what do you owe this success?

Lots of materials are required to build roads. Today, we are the largest producer of concrete aggregate and asphalt. We have situated our plants all over the country, and we now supply the entire market with our products. We are capable of producing 72,000 tons of aggregate and 42,000 tons of asphalt per day. We now supply aggregate to every construction firm in the country, including highway construction companies. Our products were used on Gabala Airport in Azerbaijan, including the highway that goes there.

What is your involvement with Aztech Group?

Az Group also runs a facility to distribute Volvo trucks, Mack trucks, and Volvo construction equipment, and is also a world leader in aggregate and asphalt plants. It is also the exclusive distributor of Aztech Group's products. We run the largest Volvo equipment service center in the whole CIS, Eastern Europe, and the Middle East region.

How would you describe the current economic outlook in Azerbaijan in 2013?

Everybody in the world sees that this country is growing rapidly and it is both politically and economically stable. Oil and gas revenues are also growing. I see the country growing every year for the next decade and maybe more.

What are your medium-term goals for Az Group of Companies?

At the moment, I am happy with how things are going. From 2013, my main concentration will be on agro-industry, which means vegetables and fruits and other sectors. We will be directly involved in planting, growing, and harvesting, as well as exporting across Europe and the Middle East. Azerbaijan boasts high-quality fruit, but there weren't enough cold storage facilities in the past to benefit from this. We have facilities for 10,000 tons of fruit, which is not small. We will also build a few more facilities in agricultural areas in order to cut down on transportation costs.