Abu Dhabi Ship Building's Majed 01 speedboat. Victor Besa / The National
Abu Dhabi Ship Building's Majed 01 speedboat. Victor Besa / The National
Abu Dhabi Ship Building's Majed 01 speedboat. Victor Besa / The National
Abu Dhabi Ship Building's Majed 01 speedboat. Victor Besa / The National

Economy

Abu Dhabi Ship Building expects revenue growth in 2021 on higher exports

The company will target countries that border the Indian Ocean, chief executive says

Fareed Rahman
Fareed Rahman

February 25, 2021

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Abu Dhabi Ship Building, listed on Abu Dhabi's Securities Exchange, expects higher revenue this year as it focuses on exporting its vessels to different markets, its chief executive said.

The company which recorded revenue of Dh254 million last year, will target markets in countries that border the Indian Ocean, David Massey told The National in an interview. It also plans to boost its presence in the luxury boat market.

“ADSB has only exported to GCC countries till now and we are going beyond GCC to East Africa, North Africa and the Indian Ocean,” Mr Massey said.

He added, however, that the UAE's navy and the country’s Critical Infrastructure and Coastal Protection Authority (Cicpa) will continue to be its primary customer.

The company, which is part of defence conglomerate Edge, manufactures corvettes, offshore patrol vessels and fast patrol boats. It also provides a full range of maintenance, repairs and refits as well as upgrades and conversions.

“Margins are better on export business than they are on selling to the domestic customer,” Mr Massey said.

“Last year was the absolute bottom of the cycle for ADSB and in 2021 will see a modest increase in revenues but there will be a much more significant increase in revenues in 2022.”

Earlier this week, the company showcased two rigid-hulled fast patrol boats of 16 metres and 12 metres in size aimed at coast guards.

“We’ve seen a huge amount of interest from coast guards. All of them have the same requirements and have problems with piracy, smuggling and fisheries protection.”

ADSB, which posted losses of Dh21.8m last year, does not expect to return to full-year profitability until next year.

“The company will return to profit sometime this year (in the fourth quarter). In 2022 we are projecting a full year profit.”

It is also planning to sell an “uneconomic” floating dock at Mina Zayed to cut costs.

ADSB is one of 25 entities that make up Edge – a defence conglomerate formed in 2019 that specialises in developing advanced technology for weapons systems, cyber protection and electronic warfare.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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Economy