What effect did the embargo have on the company?
We landed a solid number of jobs in 2017 and met close to 40-50% of our targets, though things subsequently slowed down. By 4Q2017, we had done about 50% of what we had planned for the year. The main reasons for missing our targets were the embargo and the low oil prices. The entire situation impacted our business. Initially, with the embargo there was some panic, and it took a few weeks for people to settle down. In 2018, we looked at the opportunities that were emerging and the high priority jobs that we wanted to chase. We expected 2018 to be a truly busy year; however, not much happened in the first three months. Many of the jobs that were supposed to be awarded in 1Q2018 were postponed. We have some projects finishing, and we hope new projects will start soon. Looking at the bids and offers we have submitted, we know projects are imminent. Likewise, from the meetings I have had with the major players developing these projects, I know it is just a matter of time before the market bounces back.
Are government projects more lucrative than private?
We have not stopped pursuing private sector work completely, though we became selective due to the lack of timely payments by clients. Unfortunately, we ended up financing some projects due to late payments. We focus more on government jobs because we know when we will get paid. Things are getting tough in the private sector. It is getting harder to get financing from banks, which is why project owners are struggling. This is partly due to the embargo and oil prices, as well as the current market. Developers are still building towers and new cities, though there are not many people moving in. People need to move with the market and are not doing so. Even if developers can get the financing to build, they cannot get their money back through occupancy or sales to repay the bank. This is where the struggle lies.
How do you work to develop a competitive advantage amidst the strong competition between contractors?
Now is the perfect time for developers to build because prices are low, and there is a price war ongoing. Unfortunately, clients only look at the price, and not at what the contractor offers. Often, we see a gap of 30-40% between the lowest tender and the next bid, which makes us wonder how the contractor put together such a low bid. Clients typically select the lowest bid. We have had a few cases of being asked to come in and finish a job two or three years later. There are certain companies that are extremely desperate. It does not make sense to put in a tender when they know they will lose money, no matter how desperate they are to win work. Medgulf Construction has not reached a desperate point; we still have jobs, though if nothing changes in 2018, we will reach a difficult point.
Will these economic conditions help clean up the sector and get rid of the weaker players?
Yes, that is happening currently. In addition, many non-Qatari companies have left the market. This helps Qatari companies like us, though nevertheless there is still a great deal of competition and a strong price war going on.
Is the government more objective in viewing the correlation between higher price and better quality construction compared to the private sector?
The problem in the construction industry is that every entity, whether public or private, always think developers are ripping them off. We do not do so, though we have to survive and are in the business to make money. Margins are extremely low in today's market. We will be lucky if we break even.