Made in the UAE: Ducon Industries founder creates his own path
Although Mohammed Al Farhan’s Dubai-based block factory may only be three years old, he says there is three generations’ worth of experience behind it.
The managing director of Ducon Industries says his father and grandfather had plenty of experience of working in the country before the UAE was even formed. His grandfather was a road contractor who first came to the region in 1938, and his father came from Baghdad via Loughborough University in the United Kingdom with a civil engineering degree.
“When he [Mohammed’s father] came here, he started off as a contractor. From the contractor, he opened up a block factory because he needed that for his construction business, and a ready-mix factory.”
A company was established here by Mr Al Farhan’s father, Mahmood, and his business partner Rashid Demas, in 1968.
Demas and Al Farhan Engineering & Contracting, or Dafco, achieved several firsts including becoming the first national company to use ready-mix concrete and tower cranes, and it became one of the first to open a factory making concrete blocks.
“We really grew up in block factories,” says Mr Al Farhan, 36.
He followed in his father’s footsteps by studying in the UK, first picking up a bachelor’s degree and then a master’s degree in manufacturing engineering, before completing a doctorate in which he specialised in block factory and ready-mix factory management.
“It was very focused,” he says. “I told them if I’m not doing this business, I’d be out of a job.”
Yet he says he and his brothers grew up in an environment around engineers.
“And I think it grew on us – visiting block factories, ready-mix factories. So I always loved it and I always knew that maybe one day I could have my own block factory. All throughout my education it was always the idea to end up running a block factory – but with a twist. Something different from how they did it.”
And so it has proved. While one of his brothers has shown more of an interest in the contracting side of the business, setting up BAF Project Management and Consultancy, and Tilal Al Wadi Building Contracting, Mr Al Farhan established Ducon Industries in Dubai Technopark in 2013. He says that although both brothers could have worked within the Dafco business, it was decided they would be better setting up their own companies and doing things their own way.
“My father realised that if he would put me in the old company, the heritage would pull us back. Heritage is a blessing. However, it does not cultivate innovation,” Mr Al Farhan says.
He admits the concrete blocks business is no hotbed of innovation. “The block itself is a very standard product. I mean, it’s a block,” Mr Al Farhan points out.
However, he says he and his team have tried to be more creative in their approach to commercialisation.
For instance, currently most contractors negotiate the rates they pay for blocks – a price that fluctuates based on a number of factors including the cement price, demand, supply and the quantity purchased.
Mr Al Farhan has moved away from this, offering the same fixed-price structure found in countries such as the UK where many smaller contractors used builders’ merchants – big warehouses stocked with the most common materials. It is a process Mr Al Farhan is more comfortable with. “I can’t stand negotiating, and I’m not too good at it,” he concedes.
He also believes, based on the feedback from customers, that many clients think a lot of time is wasted haggling over small amounts.
But “contractors – especially contractors who own their business – love it”, he says, arguing that all most people want is to ensure they are getting the same deal as their competitors.
Setting fixed prices also allows the company to ensure its own margins are fixed, which then also allows it to build in valuable extras. For instance, Ducon has built its own online ordering sites, 800Blocks and 800Pavers, for blocks and paving stones. Through these (or via phone), blocks can be bought at any time of the day or night and delivered to any site in Dubai within a guaranteed four-hour time period, with payment either made securely online or through cash on delivery. “The idea is that the contractor leaves the site at night. And all contractors seem to be having a lot more than they can handle on their plates. So, at 12am, the guy realises he needs blocks for the next morning.
“He then orders online, goes home and in the next morning he comes back and finds there are blocks on the site,” says Mr Al Farhan.
“But I think the 800Blocks [online process] is where the whole industry is going. All of my cousins are into contracting as well, and they say the worst thing we have in our business is the time we spend negotiating. Nobody enjoys the haggling.”
Ducon Industries set up shop on its 350,000 square foot site just three years ago, and Mr Al Farhan says the business has more than doubled in size every year since. He declines to give a revenue figure for the business, but says that it is currently producing about three million blocks per month. Block prices range from Dh1.70 for a four-inch hollow block to as much as Dh10 for a 12-inch insulated block.
The company already has a workforce of about 170 people, including teams of installers for regular and custom-made paving stones and Mr Al Farhan says the business has a youthful culture, which he believes is important.
“I think it hit me when I was watching a programme about Nasa,” he says. “When they landed the first man on the moon the average age [of the team behind the mission] was about 24.
“It’s always good to start a company with a young, energetic workforce. I’m 36 now, and I’m one of the oldest.”
The company recently bought another 150,000 sq ft plot adjacent to its factory, which will allow it to expand its site to 500,000 sq ft and add a second manufacturing line.
Its current line is running 24 hours, seven days a week to meet demand.
“Contrary to what I hear in the market, we seem to be in a very good stretch at the moment where construction is moving ahead full throttle,” Mr Al Farhan says. “We’re at full capacity. We’re really churning out every last block that we can.”
He says that meetings have already taken place with contractors about installing a new line, which he expects to be up and running by the end of the year.
According to Colliers’ UAE Cost Benchmarking Report issued in January, the price of concrete blocks here increased by about 6 per cent in the year to September 30, although the price of cement only went up by 3 per cent.
Despite Mr Al Farhan’s ebullience regarding the Dubai contracting market, the managing director of Colliers’ cost and project management division, Bob Flanagan, says the increase in block prices is more about input costs than demand.
“It’s not supply and demand that is moving building materials prices,” Mr Flanagan says. “With construction activity in the UAE, there has been pretty negligible movement [in prices] in the last couple of years.
“The only thing that is influencing, or can influence, is the other side – the input costs. Either subsidies, labour prices or utility prices,” he adds.
He says the growth in block and paving prices can partly be explained by cement price increases, but also by higher utility costs (as blocks and paving slabs need to be dried in ovens) following fuel subsidy cuts.
“It’s unlikely there are more blocks being bought now than there were six months ago,” Mr Flanagan concludes.
Follow The National’s Business section on Twitter
Published: March 15, 2017 04:00 AM