Forming futures

What strategies are formwork companies implementing in order to counteract the economic slowdown? Construction Week investigates.

As a product that is intrinsically linked to construction, the success or otherwise of the sector essentially determines the level of demand for formwork. So with the global recession now in full swing, how have formwork firms been affected to date and what methods and new techniques are they implementing to counteract the issue?

Containing economic issues

In short, formwork is the term that describes the temporary or permanent mouldings that are used to contain materials, such as concrete, during construction to form structural elements of a building like floors and walls. As such, any reduction in construction activity will automatically affect the formwork sector.

"The construction industry is one of the most affected sectors in the UAE. Some customers lost nearly all their work as the projects they were working on were stopped; some have been postponed and some are going on; some of our customers are still getting projects awarded. It's a complete mix," reports Peri marketing co-ordinator Ina Juenemann.

"It's an unexpected situation for everybody in the world and especially after the last three to five booming years in Dubai, the situation is new and needs adjustments," adds Juenemann.

But reports from those formwork firms operating in the Middle East are showing that not all the changes taking place during the current economic downturn are negative. While losses in revenue and jobs are expected during 2009, re-evaluations of company operations, moves into other markets and the launching of new, more efficient technologies are just some of the ways that the firms are fighting to stay at the top of their game.

"Last year was a record year for us, so [in 2009] there is obviously the reduction in revenues which comes with Dubai's temporary slow-down, which is exaggerated somewhat in its severity due to last year's record activity," explains Aluma Systems Middle East business development manager Daniel Taylor.

"Knowing that revenues and therefore bottom-line margins are going to be reduced in volume, it becomes just a case of ensuring that the overhead cost-base of the company is not so inflated that it consumes these lower margins, so some cost-cutting is required," he adds. The firm has undertaken some cutbacks in non-engineering and non-sales staff to date, but has also taken positive steps to avoid further job losses, by redeploying staff to areas where work is still ongoing, such as Abu Dhabi, Saudi Arabia, and Qatar.

Offering services to a wider spread of industries can also make a difference to a firm's overall profits. "We have been affected like others by the present downturn, but the extent to which we are affected is comparatively less as we are not only focused to one segment of construction, vis-à-vis building works, but in to other civil construction activities," explains VSL sales manager Shemi PS. 

The firm has also opted for a change of focus to counteract the issue, as VSL deputy general manager Stephen Burke explains: "During the height of the [construction industry] boom we were really in ‘order taking' mode; now we have to concentrate on marketing our product range, hence we have invested in an additional marketing engineer."

Pricing issues

The push to minimise contract prices on construction projects is reaching across the board. While this brings to the fore issues such as competitiveness and product quality, a reduction in materials prices and the potential to offer rental services both appear to be offering relief to formwork firms. The prices of both steel and aluminium have reduced worldwide, bringing lower manufacturing costs for formwork.

However, as products have become relatively cheaper, contractors should beware of opting for the cheapest available simply to cut costs in the short-term.

"Some of the contractors look only at the cost of materials, but forget to look into the cost-benefit of the product they purchase," states Shemi. "I'm firmly convinced that when you're investing in new formwork equipment, it's not enough to only look at the purchase price. What counts is a convincing price-performance ratio," stresses Doka Group executive director Josef Kurzmann.

"The formwork only accounts for a relatively small proportion of the total investment costs for a construction project, but has a big impact on daily construction progress, as well as on the important related issues of workplace safety and the quality of the concrete results," adds Kurzmann.

Factors such as the manufacturing quality and durability of the formwork equipment and the capability of a firm's formwork technicians are important as they can reduce both maintenance needs and the costs incurred for finishing work on the concrete. But is the market recognising these differences in products available?

"There are price-sensitive customers and there are cost-conscious ones - and there's a big difference between the two," reports Kurzmann. "With the price-sensitive customers, the important thing is to argue from the total-cost point of view and not just look at the purchase or rental prices," he adds. "You can get any quality of material in the market, but for quality and safety in construction and to complete the works on time without reworking on bulged or failed concrete structures, many customers are now aware about the need for qaulity and durable products," explains Shemi.

READERS' COMMENTS

MORE FROM ARABIANBUSINESS.COM