Industrial gases manufacturer Gulf Cryo plans to expand production capacity in Kuwait which generates half of its group revenues and where it enjoys a commanding market share.

The Gulf Cryo Group has annual sales of over $100 million across 12 affiliated companies in 10 countries including all of the GCC, Jordan, Syria, Pakistan and Iraq, the biggest revenue earners being oxygen, nitrogen and argon which together contribute 60 per cent.

“Fifty per cent of our revenue is generated by Kuwait and we have a strong leadership position in the country with around 60 per cent market share,” Gulf Cryo chief executive officer Naji Skaf, tells Gulf Industry in an interview, adding that the company was anticipating 15 per cent turnover growth there and that its ability to service the Iraqi market remains a key growth driver. The group as a whole has been growing at a similar rate.

When Gulf Cryo was originally founded as Kuwait Oxygen and Acetylene Company in 1953, it was the first gas manufacturer in the region to provide industrial gases such as oxygen and nitogen to the local petroleum industry, he says, adding that Kuwait still holds the group’s largest plant with over 250 staff.

“We plan to expand the Kuwait production facilities for future growth,” says Skaf, who previously held the position of chief operating officer of the group and general manager of Gulf Cryo’s UAE subsidiary Arabian Gases during his eight-year career at the company.

Skaf, who holds a BSc from McGill University in Montreal and an MBA from the University of Houston, has been fundamental in leading Gulf Cryo’s growth by implementing a number of major initiatives and improving bottomline results.

He started his career at one of the largest industrial gases companies in the industry, where he held various positions in Houston, Paris, and Cairo. His first role was based in Houston where he was in charge of analysing competitive information.  He eventually joined the group’s headquarters in Paris where he was a key member of the team developing its presence in the Middle East and subsequently, after taking part in the successful acquisition of five local companies, relocated to Cairo to be Egypt’s deputy general manager before joining Gulf Cryo in 2004 as the general manager of Arabian Gases.

Excerpts of the interview...

What was the total output from Gulf Cryo’s facilities across the group, and what are the output expectations for 2012?

We produce more than 2,000 tonnes of gas a day from 12 subsidiaries across 10 countries in the Middle East. The revenue split is categorised as follows: 35 per cent liquid bulk product, 35 per cent packaged gases, 15 per cent trading gases, and 15 per cent pipeline sales.

We anticipate volume growth of 10-15 per cent in 2012 across the Gulf Cryo Group.

What was the total sales turnover in 2010 and 2011 across all your group production facilities? Which product accounted for most sales in 2011?

The Gulf Cryo Group has sales well over $100 million and growth rates have been around 15 per cent per annum. The biggest revenue generators are oxygen, nitrogen and argon, typically accounting for 60 per cent.

What was the total sales turnover from your Kuwait production facilities?

50 per cent of our revenue is generated by Kuwait and we have a strong leadership position in the country with around 60 per cent market share. We anticipate similar growth rates for Kuwait as we have seen for the past two years – around 15 per cent. 

One of the Kuwait plant’s key growth drivers is the ability to also service Iraq. Opportunities in Iraq began a couple of years ago when oil field service companies in Kuwait started to request product for Iraq. We have also strengthened our distribution capabilities by relocating several storage tanks.

Busy times at Gulf Cryo’s facilities in Dubai

We now have leadership in one of the fastest-growing markets in the region, managing the supply of liquid nitrogen, oxygen and argon into the country.

Would you like to comment on Gulf Cryo’s contribution to the oil and gas industry in Kuwait and the Gulf?

For over half a century Gulf Cryo has been supplying gases and developing new gas mixtures for applications in the oil, gas and petrochemical industries. Originally founded as Kuwait Oxygen and Acetylene Company in 1953, Gulf Cryo was the first gas manufacturer in the region to provide industrial gases such as oxygen and nitrogen to the booming local petroleum industry.

Kuwait is still our largest plant with over 250 staff. We have installed an 18-km connecting pipeline in the Shuwaiba region which serves all the refineries in the area with natural gas in addition to supplying the petrochemical plants.

We also sell gas products to KOC (Kuwait Oil Company) and leading oil and gas service providers.

The Middle East is abundantly endowed with oil and gas. However, as the demand for energy increases the drive to improve efficiency, cost effectiveness and environmental stewardship has become a key driver in decision-making.

We understand that finding an industrial gas partner willing and able to invest in plant, equipment and human resources is a must for any oil and gas company. We provide a full portfolio of products and services including on-site supply of gases as process feedstock, bulk gases for safety and maintenance, EOR solutions for carbon capture and packaged gases for lab use and welding applications.

What is important to our customers in the oil and gas industry is our excellent distribution capabilities, our reliability and the quality of our gases. Our engineers can implement a total gas management service handling the operation and maintenance of gas plants, assuring a 100 per cent guaranteed source of high-quality gases in the pipeline with an additional back-up bulk gas service which is essential for the oil and gas industry.

What is Gulf Cryo’s growth strategy?

We are assertive in our approach to sourcing opportunities and winning contracts in the region. This is based on our know-how and technical expertise for most industrial gas opportunities. 

We know our core strength is in bulk and packaged gas segments, and we know the economy is driven by the oil and gas sector and government infrastructure projects, so naturally these are areas to concentrate on. We also have the local expertise to understand the different requirements that certain sectors may have for industrial gas depending on where they are situated in the GCC. 

These requirements vary depending on whether the GCC country has a high population and/or high oil wealth. For example, high demographic countries have a greater requirement for industrial gases within the healthcare and food and beverage sectors. The longevity of Gulf Cryo is a result of knowing our target markets, knowing what we are good at and how to leverage our position to win new business.

Are there plans for setting up other facilities or expanding existing ones? Are you contemplating any diversification?

It has been a busy time at Gulf Cryo. Geographically, we recently established a footprint in Saudi Arabia with the opening of a new fully integrated fill facility in Dammam which builds on the successful geographic expansion we made in Qatar in 2009.   First-year sales in Saudi significantly exceeded our projections and this was enhanced by the acquisition of a local cylinder company in Riyadh in February this year. Beyond Qatar and Saudi, we now make controlled deliveries of liquid product to strategic customers in Iraq from our Kuwait plant that we envisage will grow in scope in 2012. Overall, we remain committed to expanding our geographic and product reach and continue to see a rich stream of both greenfield opportunities and potential acquisitions. 

We have also significantly increased the Gulf Cryo distribution fleet across the region which has resulted in improved delivery efficiencies and increased asset utilisation. This reliable distribution capability is unmatched and allows us to offer cost savings to our customers and also to redirect our ISO container fleet to third-party business. Our onsite production capacity at ArC International in the UAE has doubled and we have just signed a long-term agreement for a steel mill in the region. This, together with many new bulk and package gases projects, suggests the scene is set for another successful year.

We also plan to expand the Kuwait production facilities for future growth. These plans will be announced as soon as agreements have been drafted.

Could you comment on your equipment rental and technical support business?

The core business of supplying industrial gases and equipment rental go hand-in-hand. We pride ourselves as being a pure player focusing on core business to business requirements. We foresee growth in auxiliary businesses in the industrial sector such as the medical industry and the cutting and welding industry which is by far the largest consumer of industrial gases.

Overall, how did Gulf Cryo fare in 2011?

During the economic crisis years prior to 2011, our proactive and planned response enabled us to exploit what little positive ground there was. We had strength in certain markets as an industry leader and it helped to have a healthy balance sheet. Following rapid growth during the hyper boom years, the bust years allowed us to step back and take an in-depth look at the internal business processes – at our structure, our operations, our cost cycle – and how all of these could be improved.

One of the principle reasons Gulf Cryo’s cash generation was resilient through tougher times was our ability to react and protect our profitability levels. Our surplus culture that evolved through the boom years was recognised as an operational shortfall that required improvements. Some tough decisions were made, however we regained control of our financial and operational health by shifting our focus to continuous efficiency and optimisation.

In 2011 we registered double-digit growth mainly driven by strong volume increases. We were able to capture the benefits of top-line growth and together with the cost saving programmes launched prior to 2011, the combination has offered satisfactory earnings growth.

2012 does have its own set of challenges but we are optimistic for the year ahead.

Founder’s vision
Gulf Cryo was established by Salim Huneidi, the father of the current chairman, Amer Salim Huneidi, in 1953.

The company expanded into the UAE during the 1970s, with the formation of Arabian Industrial Gases Company in Sharjah. Driven by Amer’s vision of building a ‘group’, Gulf Cryo has expanded in the Gulf, the wider Middle East and beyond in Pakistan. 

The group last year relocated its headquarters from Kuwait to Dubai, a move it says “brought together a critical mass of resources that had previously been split across two countries.” The Middle East is Gulf Cryo’s core market.