TBY talks to Andrea Negri, Commercial Manager of Hempel, about major challenges in the sector, regulatory developments, and the long-term picture.

Can you walk us through the recent developments at Hempel?

2020 was challenging, but was also interesting because we utilized it to look at how we could streamline our operations and run our business in a more efficient and customer centric way. It has also challenged our flexibility as a team because we have been forced to work from home and adopt new technologies. It definitely changed the way we do business in many ways for the better. We finally entered the new millennium—embracing the technology that has always been in our hands but had never been fully utilized. We have certainly improved our digitalization, placing orders through digital portals and more. All this has contributed to generating a base from which to elevate our business for the next 10-20 years. As a company, we worked on a strategy in 2020 that will lead us to doubling our business in the next five years. It is our Double Impact strategy. 50% will be organic and internal growth, while the other 50% will come through acquisitions in the Middle East and Worldwide.

What are the main challenges in the industry right now?

In the Middle East, the greatest challenge is reduced government spending. The influx in various economies in the region is not as high as we would like it to be, which is influenced by lower oil prices. We will likely be facing COVID-19 for the next year and a half or even two more years. Traveling and closed borders are certainly challenging other aspects that puts a strain to general operations. Recovery is going to be long and hard since this last year has put a strain on many businesses and their savings. Right now, and likely for the next year, the lack of bigger projects will be a problem. The Duqm project will be completed toward the end of 2021, and we need to look at what next big project might be coming up next. Oman has an immense advantage compared to the entire Gulf region with its strategic location, and it should leverage on this greatly. Setting up business here is definitely more interesting than setting up a business in the UAE, due to the potential of Oman. Governments should approach the economy like a private enterprise and try to make it as competitive and appealing as possible in order to attract business and investments. Open market economy and liberalization can be two aspects that can greatly improve the attractiveness of a country. I still feel Oman has taken that road but there are still few roadblocks along its path. All changes need some time.

What actions should the government take from a regulatory perspective?

The government should implement more open market regulations. The Omanization process has to continue, which can also be done by implementing specialized schools to train the local labor force and help them reach certain levels of technical expertise. This would make them an attractive labor force for employers. I do not believe too much in pushing companies to employ; it has to be balanced between the two. Then, it has to open the country more to foreign investment and allow foreign owners to own land, not just in selected areas. Oman has to grow from medium-sized enterprises to eventually develop larger-sized enterprises. It will not attract multinationals here from one day to the next; business has to grow from here. If the country does not facilitate this or loosen up the labor regulations, it becomes even more challenging.

Is the market here competitive?

The market is divided into four categories that are extremely competitive. Powder coatings are extremely specific and commoditized. On another perspective you have marine business, where you have few players since it is highly technological and customers are fewer. Oil and gas use fairly high-tech paint with many components that are constantly being updated. Decorative is a simple market that is also highly commoditized. It is extremely price oriented and dynamic and depends on fashion and trends. If we compare it to the other products we are selling in the rest of the region, however, it is not yet very much quality-oriented but predominantly price sensitive. However, it is a growing process, and the demand for quality will grow over time like it did across the region.

How do new technologies impact your operations, and how will they help you become more sustainable moving forward?

As a group, one of our pillars is sustainability. We are looking to become carbon neutral over the next five years. We are also looking to refresh our fleet to hybrid cars, despite the difficulty in buying them in the Middle East, and will be working with the oil and gas segment to find sustainable solutions for PDO. We are implementing new technologies in order to move away from solvent-based products and into water-based ones. From a marine perspective, we have a silicon-based product used on the bottom of vessels that guarantees lower fuel consumption by 1.2%. As a group our aim is to reduce our carbon emission directly and indirectly by 7.5 million tons. We seek to monitor electricity and wastewater consumption, and we may look into implementing solar panels in some of our offices and factories. Being a Danish company, sustainability is forced on us regardless of whether it is a priority in any country since its part of our DNA. Thus, we want to be an example for the industry, setting some sustainable parameters moving forward. We also want to digitalize our orders more and increase the efficiency of our distribution network.

In what direction are you hoping to expand midterm, and how does that fit within your long-term strategy?

We are looking to address our ICV position during this year. At present, we are importing material from the UAE and Saudi Arabia. Our goal remains to double our sales locally in each country. In Oman, we will be targeting specific segments where we see scope for growth. In the protective and oil and gas sectors, we have a strong market share that may be difficult to increase. However, in decorative we have a small market share, and this is a key segment where we aim to grow and expand.