A SOLID ACHIEVER
TBY talks to Mohammad Reza Montazeri, Managing Director of Fars & Khuzestan Cement Company (FKCC), on the company's strategy to emphasize work in producing blended cement, increasing market share, and distinguishing FKCC from the competition.
BIOGRAPHY
Mohammad Reza Montazeri has a Bsc in Civil Engineering from Texas A&M University, and received his MBA in Management locally. He previously worked in the Ministry of Roads and Transportation in a variety of managerial positions. Most recently, he worked as a Board Member and Vice-President of the company responsible for the construction and development of transportation infrastructure as well as a Director for the construction of freeway projects. He also served as the Director for the Bam Reconstruction Office and participated in plans for a World Bank loan from 2003-2005. Montazeri is a Board Member and the Managing Director of SSO Cement Holding, which includes subsidiaries Tamin and FKCC.You've been in the business of cement production for over 60 years now. What are some highlights from 2011?
Fars & Khuzestan has been in the business for 62 years—since our first plant was established in Fars. Throughout that time, we have been continuously growing. In 2011, our production grew at a rate of about 6%. In that same time, overall cement production in Iran has grown from 56 million tons to 66 million tons annually. We are still the number one cement producer in Iran, with 17 plants all over the country. Currently, we are focusing on productivity and increasing the capacity of the machinery in our plants. We are also following a strategy of focusing more on producing blended cement.
Taking this into consideration, what are FKCC's current objectives in terms of growth?
There are a number of companies under Fars & Khuzestan Holding, some of which are active in areas such as consultancy and cement plant construction. However, the Board of Directors has now decided to sell a number of these companies so we can focus solely on cement production and trading. Many of the companies in Fars & Khuzestan Holding were founded to provide specific services that were needed to support the work of our main cement business. However, in recent years, it has become easier for us to obtain these services more competitively from outside providers. Our focus now is on maintaining and growing our market share in cement production. We are also looking to increase our share of the export market. Right now, about 14% or 15% of our production is exported to other countries. We own 55% of all production plants in Iran and shares in 55% of the cement market. Our goal is to increase our market share. We are in negotiations to purchase shares in a number of other producers, which would bring our market share up to about 60%.
How is the growth of the construction sector affecting your business?
The construction industry is mainly divided into two sections. The first is government infrastructure projects, which are very important for the cement industry. The second is the housing industry. For the last 10 years the construction sector has been growing at about 5% to 10% annually. As a result, local cement consumption has been increasing every year—in 2011, at about 6%. Our strategy for now is to increase our exports so that we can adjust to changes in local cement consumption each year.
Do you work mostly with the government or the private sector?
It varies from year to year, depending on the amount of investment from both the government and the private sector. Through 2010 and 2011, the government has been involved in housing projects all around the country, so for the past few years we have been working primarily with the government. However, in 2012, as these government projects have been completed, we have begun to work more heavily with the private sector.
How would you assess the cement industry's future growth prospects in Iran?
Iran is still a developing country. That means that construction and infrastructure projects are still active. This will translate into strong demand for cement for at least the next decade. With our wealth of raw materials, Iran has the capacity to easily produce more than enough cement to meet domestic demand.
That said, I don't know how much more scope there is for further expansion of the cement industry in Iran. There are 15 plants under construction right now. Once they are completed, cement production capacity in Iran will increase to 92 million tons per year, which should meet domestic consumption needs. Instead, the future may lie in blended cement, which could increase existing capacity by a further 150%, bringing our future capacity to 135 million tons. That's a huge amount of cement. Instead of building new plants, we should focus on productivity and capacity, both of which can be increased by producing blended cement. Blended cement also has environmental benefits because it saves energy. That is why it is important for us to move in this direction. Switching to blended cement production will lower costs and be more environmentally friendly. In my opinion, it is the way we should be producing all cement right now.
You mentioned that your exports vary across different years. Which countries are the main recipients of your cement?
Iran is in a strategic location. Not only do we benefit from oil wealth, but also neighboring countries all have massive construction plans. For example, Qatar is planning to host the World Cup in 2022, and has a 10-year construction plan in place. Iraq, Afghanistan, Azerbaijan, and Turkmenistan also all have big construction plans. In addition, we are seeing increasing demand for cement in Africa, although at this point we are not in a position to export massively to that continent.
Currently, the cement industry in Iran is dominated by local producers. Do you see room for foreign investors to enter the market?
Holcim, which produces about 10% or 11% of the cement in Iran, is the only major foreign producer in the country. There is not necessarily room for new plants, but there is certainly the scope for foreign companies to invest in increasing the productivity of existing cement plants.
How has the cement industry changed over the past two years, and how have you adapted in order to maintain your market share?
Two years ago, cement demand was higher than production; Iran faced a shortage of cement. Now, supply has surpassed demand. Two years ago, there was no need to expand or diversify production. Now, you have to spend money on introducing your brand to the market. It is more difficult to sell cement now than it was two years ago. If you want to be competitive, you need to distinguish yourself from the competition with quality and variety in order to meet customer demand. That is why we are now focusing on building our brand—something that didn't mean anything three years ago. Branding, packaging, and quality are the major factors that determine whether or not you will be able to compete in the Iranian cement market.
What are your expectations for the next three years?
We are focusing on following our strategic plan. We have doubled our capacity in the past eight years, so I don't think we need to invest in more plants. Our focus now is on quality, branding, and costs, all of which will help us stay competitive and maintain our market share. Our goal is to ensure that our investors are earning more than long-term bank deposit interest rates.
A SOLID ACHIEVER
TABLE OF CONTENTS
Year In Review
Bearing Changes
While having cemented itself as a prime investment destination on the apex of major trade routes, the Iranian economy is in a transition period that is expected to lead to renewed growth rates and long-term self-sufficiency under the fifth Five-Year Development Plan (FYDP), a part of Vision 2025.
read articleInside Perspective
Dr. Ali Akbar Salehi, Minister of Foreign Affairs, Islamic Republic of Iran
TBY talks to Dr. Ali Akbar Salehi, Minister of Foreign Affairs of the Islamic Republic of Iran, on regional cooperation, relations with Latin America, and his country's support for stability in Afghanistan.
read articleInterview
Seyed Shamseddin Hosseini, Minister of Economic Affairs and Finance, Iran
TBY talks to Dr. Seyed Shamseddin Hosseini, Minister of Economic Affairs & Finance of the Islamic Republic of Iran, on the expected benefits of key reform plans and the steps the Ministry is taking to bridge income gaps and utilize foreign and domestic investment.
read articleInterview
Dr. Behrouz Alishiri, Vice-Minister of Economic Affairs and Finance & President, OIETAI
TBY talks to Dr. Behrouz Alishiri, Vice-Minister of Economic Affairs and Finance & President of the Organization for Investment, Economic, and Technical Assistance of Iran (OIETAI), on Iran's foreign investment outlook.
read articleFocus: North Point Iran Food Industrial State
The Full Package
Banking on the growth of the food-processing industry and the abundance of resources in northern Iran, the North Point Industrial Food Processing and Packaging Complex is set to play a significant role in the development of the local economy.
read articleInterview
Kazem Doost Hosseini, Chairman & CEO, Export Guarantee Fund of Iran
TBY talks to Kazem Doost Hosseini, Chairman & President of the Export Guarantee Fund of Iran, on the important shift to focus on non-oil exports and tourism in Iran and the fund's available services for risks associated with exports.
read articleInterview
Mohammad Reza Farzin, Chairman of the Managing Board, National Development Fund of Iran (NDFI)
TBY talks to Mohammad Reza Farzin, Chairman of the Managing Board of the National Development Fund of Iran (NDFI), on the country's plan to reduce its dependency on oil and gas revenues by investing in a variety of sectors domestically and abroad.
read articleInterview
Abbas Memarnejad, Deputy Minister of Economic Affairs & Finance (& President of IRICA), Islamic Republic of Iran
TBY talks to Abbas Memarnejad, Deputy Minister of Economic Affairs & Finance & President of the Islamic Republic of Iran Customs Administration (IRICA), on the benefits associated with investing in Iran and trends in the country's exports.
read articleInterview
Abdol Hossein Bayat, Dept. Petroleum Minister & President, NPC
TBY talks to Abdol Hossein Bayat, Deputy Petroleum Minister & President of the National Petrochemical Company (NPC), on the strengths of the Iranian petrochemicals sector, attracting foreign investment, and long-term targets.
read articleInterview
Gholamreza Shafei, Deputy Minister of Industry, Mine & Trade, Islamic Republic of Iran
TBY talks to Gholamreza Shafei, Deputy Minister of Industry, Mine & Trade and Chairman of the Board at the Industrial Development & Renovation Organization of Iran (IDRO), on industrial development, investment focuses, and support for local private companies.
read articleInterview
V. Sadoughi, CEO and Member of the Board, the Mobile Communications Company of Iran (MCI)
TBY talks to V. Sadoughi, Managing Director & Member of the Board of Directors of the Mobile Communications Company of Iran (MCI), on staying competitive, areas of investment, and key telecoms services.
read articleInterview
Mohammad Reza Montazeri, Managing Director, Fars & Khuzestan Cement Company (FKCC)
TBY talks to Mohammad Reza Montazeri, Managing Director of Fars & Khuzestan Cement Company (FKCC), on the company's strategy to emphasize work in producing blended cement, increasing market share, and distinguishing FKCC from the competition.
read articleInterview
Dr. Hassan Abolghasemi, Chancellor, Shahid Beheshti University of Medical Sciences
TBY talks to Dr. Hassan Abolghasemi, Chancellor of Shahid Beheshti University of Medical Sciences, on the focus of the university's investments, the international branch of the institution, and the importance of research centers.
read articleInterview
Seyed Hassan Mousavi, Vice-President & Head, Iran’s Cultural Heritage, Handicrafts, and Tourism
TBY talks to Seyed Hassan Mousavi, Vice-President & Head of Iran's Cultural Heritage, Handicrafts, and Tourism Organization, on the significance of domestic tourism and investments expected in the sector over the coming two decades.
read articlePhoto Essay: Destination
Isfahan
When Shah Abbas I decided to move the Safavid capital to Isfahan in 1597, he was tasked with returning a derelict city to glory. The city has been located at a major crossroads of trans-Asian trade since 2700 BC and was incorporated into the Achaemenid Empire under Cyrus the Great in the sixth century BC. Alexander the Great's invading armies led to the rise of the Parthian Empire, which continued Cyrus the Great's fabled example of religious tolerance. The Zoroastrian religion then enjoyed a revival under the Sassanid Empire. During this period the city housed a standing army. One etymological theory contends that the Pahlavi word Aspahan, or “place of the army," is where the city got its name.
read article
