Zamil Industrial Investment Company, the fourth largest Saudi Arabian industrial firm by market capitalisation, may buy two companies in the Gulf kingdom's construction and building materials sector for as much as SAR300m (US$80m) in the coming year, the CEO said.
"We have two companies that we are in discussions with now," Abdulla Al Zamil said in an interview with Arabian Business. "We think expanding through acquisitions along with organic growth gives you the targeted growth that you aspire to."
If Zamil Industrial concludes the agreements with the companies it would finance the deals internally, Al Zamil said. Zamil Industrial, founded in 1998, sells its products in more than 90 countries with manufacturing facilities in Saudi Arabia, the United Arab Emirates, Egypt, Austria, India, Vietnam and Italy. The company employs more than 10,000 people in 55 countries. It derives about 40 percent of its revenue from outside the kingdom.
"We're one of the few companies in the region that almost did one acquisition per year over the past five or six years," Al Zamil said. "When we entered the insulation sector we didn't want to start from zero so we acquired the largest company in Saudi. I believe in the route of acquisition rather than greenfield."
Zamil Industrial posted a 39.4 percent increase in its third quarter net profits, which reached SAR46.8m (US$12.5m), compared to SAR33.6m during the same period in 2011. Sales increase 9.8 percent, but 16 percent lower than the previous quarter of SAR55.8m.
The company is likely to see similar growth next year as a result of greater demand in the kingdom spurred by Saudi Arabia's government spending heavily on infrastructure. Saudi Arabia's economy is forecast to grow by about 5.8 percent this year even as the recovery of the global economy stalls, as a result of higher oil production, according to Jadwa Investment.
"The first three quarters of this year we've seen nice bottom line growth because we've had two expansions in the insulation sector and concrete and we're now realising the benefits of those," Al Zamil said. "We will continue to grow positively in the year 2013 - the economy is still very strong, the government demand in the oil and gas sector is still very strong and we're a major player in that field."
Al Zamil, which has a presence in North Africa, was not impacted by the wave of protests that swept across the Arab world toppling leaders in Egypt, Libya, Tunisia and Yemen.
Al Zamil said of the countries that have witnessed upheaval Libya could be a potential market for further expansion into Africa beyond the company's existing presence in Egypt.
"Libya is quite an interesting place, we are watching it very closely. We have an office in Benghazi and have started receiving orders there," Al Zamil said. "Libya being a very much similar economy to the Gulf, being oil and gas based."
Al Zamil said if the company was to invest in the North African country, it would be in a steel factory that taps into the reconstruction process. Libya's economy is set to grow by 122 percent this year, according to the International Monetary Fund (IMF), as the country rebounds from a rebellion that overthrew the 42-year old regime of Muammar Qaddafi.
In India, where Zamil Industrial has invested about US$200m, there is concern about slowdown in growth in the world's ninth largest economy and Asia's third largest.
"The only concern we have is India because we have an air-conditioning plant in India as well as a steel plant," Al Zamil said. "But today we are in November our order book is quite strong in India - there might be a bit more competition so that might put pressure slightly on margins there. To us its important to fill up the factory because of the cyclicality there. It's an important market for us, we're investors in various sectors of the economy. But you cannot go wrong with India, it's an economy that will continue to grow, the demand will continue to be strong."
Like China, India's economy has been slowing down. The IMF last month revised its 2012 economic growth forecast for India to 4.9 percent from 6.1 percent previously. India had been growing between 8 and 9 percent before the 2009 global financial crisis. Growth has stalled on lower internal consumption in the country.