Yogesh Mehta said that low margins and stiff competition mean that unprofessional 'fly-by-night' operators will disappear
The world is ‘oversupplied’, forcing companies to excel in an era of stiff competition and diminished margins, according to Petrochem CEO Yogesh Mehta.
In an interview with Arabian Business, Mehta said “there is enough of everything”.
“Competition is so much that it’s very difficult to survive just on the merit of giving timely service,” he said. “You have to give the customer real value, and that comes from timely service, good price, good quality and also matching the market prices, which means giving them [customers] a lower price.”
In the case of Petrochem, Mehta said that margins have eroded largely because of an oversupply in chemicals coming from China beginning in 2014.
“We used to operate on a 12 percent gross margin. We’re now at 8.5 percent, and we’re lucky if we make even a 2 percent net margin on our term,” he said.
Because of the low margins and oversupply, Mehta added that he believes “it is only the strongest and the fittest who will survive”.
“The fly-by-night operators will leave the scene,” he said. “The old order is changing. The unprofessional people and companies are already going away, and companies like ours, that add value, who give value and who have been there for many years will remain.”
Mehta added, “What is happening in the Middle East is that people who just came were unprofessional and they are now suffering.”
According to Mehta, Petrochem generated approximately $1.3 billion in turnover in 2018 and expects approximately $1.5 billion this year.
Over the next few years, Petrochem plans to embark on a string of acquisitions of chemical manufacturing companies in Saudi Arabia and is exploring opportunities to produce chemicals both there and in the UAE.