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Fri 14 May 2010 04:00 AM

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Managing the risks

Heading one of the Gulf's largest and most diverse industrial groups, Kanoo CEO Freddy Sherman shares his views on the role of finance and technology.

Managing the risks
SHERMAN: Keen on events in Saudi Arabia
Managing the risks
Lift machines such as this straddle carrier from Combilift form part of the Kanoo Machinery range.
Managing the risks
A Genie brand access platform on the Kanoo Machinery stand at the PMV show in Jeddah.
Managing the risks
A Combilift CB is displayed with the orange Aisle Master, both supplied by Kanoo.
Managing the risks
According to Sherman: ‘The market will find a level.’
Managing the risks
Communication links for telemetery systems are vital for a new and efficient way of managing plant, according to Sherman.

Heading one of the Gulf's largest and most diverse industrial groups, Kanoo CEO Freddy Sherman shares his views on the role of finance and technology.

Few people who are in the industry don't know of the Kanoo group. One of the largest, and of course one of the longest established Bahraini companies the group's reach extends to all of the GCC countries and includes banking, shipping, travel and of course machinery. Spinning all of these plates is the group CEO, a chap named Freddy Sherman who has the role of ensuring the operations across the Gulf run smoothly. We corner him just after he made a speech at the conference part of the PMV Show in Jeddah, a task he was well prepared for as he admits that he keeps a number of such speeches pre-prepared on his laptop, as he is often needed to give a talk on a number of different subjects at the drop of a hat.

In fact, Sherman is very keen on such events in the Kingdom, as opposed to other places in the Gulf. "I actually love exhibitions in Saudi Arabia because I think you get so much more ‘bang for the buck' We've had to look seriously at what we spend in places like Dubai on exhibitions because the cost is so enormous, and you are there because you have to be there, rather than you want to be there" he said.

"We come because we want to be here. We welcome contact with a new audience. We like to demonstrate our new products and perhaps show off a little bit. I think we get good value here and so we will continue to support them."

The ‘new products' he mentions is a reference to the telemetry systems offered in modern equipment, either as an add-on, or as original fitment. These devices allow plant managers to view exactly where their equipment is, what times it is operating as well as gaining more advanced data such as the way that the equipment has been used, whether it has been started out of hours and so on. However, the market for such electronics is very new, and many plant managers struggle to see the benefit of the system."Dubai is moderately sophisticated [market], but there is still a long, long way to go as it is..." Sherman pauses.  "I wouldn't say expensive, but it is a cost. However, the ‘Cranestar' system that we are implementing for Aramco is actually state of the art. It is well ahead of the simple tracking that we are using in the UAE. I think that it is something that we'll be able to use to optimise the fleet to keep up with the maintenance and so on."

Telemetry

Looking at the suitability of the equipment for being connected to telemetry, Sherman explains: "I would say that it is already there in some equipment, built in but not necessarily used. Hyster have quite of electronics built on to its machines, which can be used for diagnostics information. Perkins diesel engines also really have quite advanced electronics now for the complete management of the engine. These are just a small step away from communicating with a centre and that will be the next step. The basic electronics are in the engines already, or in the equipment. It is just the communications link that we are enabling and taking advantage of it."

He further explained: "At the moment we are doing it by a third party ‘box', or in the case of Grove, it has done its own especially for the cranes which will be effective and it includes the communication link" It is these communication links which are the biggest stumbling block to effective telemetry, particularly in the remote regions of Saudi Arabia, which ironically is the area which would most benefit from having an all-seeing eye monitoring the equipment, as sites are frequently to huge and inhospitable for a single individual to manage.

"At the moment we are looking for good communication links. Remember, Saudi Arabia is a very large country and the network doesn't spread everywhere. So you can't always rely on communications." Sherman explained, suggesting the situation would get better, at machines that would run using satellite-based technology, rather than just the mobile phone network.

Money

However, before we get too advanced with high technology, the elephant in the engine room is of course the lack of finance in the market. As Kanoo also acts as a bank for its customers, it also has to strike a balance between selling the equipment, but making sure the customer can afford the finance. Credit checks on customers are a regular occurrence, according to Sherman: "There isn't a week that goes by where there isn't some evaluation for one or other of the territories that we are in.There are some individuals that we won't touch because we don't think that we could manage the risk. There are protections here, it is quite standard, at least for us (and I'm sure for others), to register equipment in our name until it is fully paid for." This has worked well for the company, as according to Sherman: "We take effectively leasing contracts which we have never had to enforce a default on them, they are supported by the chamber of commerce who are working with them. Kanoo will do a certain amount of its own financing where we feel we can manage the risk, but finance houses are treated a little bit at arms length by a certain amount of customers."

He added: "If we are ready to accept it, I think they will get a better deal, but we are very selective which does limit our market to a certain extent. Frankly, I don't think we have been critisised for it."

The recent uncertainty surrounding the Euro must be amount of money available for borrowing, but Sherman doesn't see this as a long term situation "Ultimately the market will find a level, I think. Financing is available, it is just the cost of it that people are reluctant to take on."

He adds: "Obviously banks have had a difficult time and they are going to be very keen to make sure that risks are absolutely minimized, but there are a number of finance houses and so on that are available to customers. The difficulty that we have as dealers is that people fail to see the distinction between the cost of the equipment, the reasonable mark up that we deserve and the cost of finance. The lump it all together - and to them it is all one price - and I'm not suggesting that it is wrong. It ends up that we need to know how to handle the different sources of finance - and what we're ready to accept" he concluded.

 

Fast facts:

Kanoo Machinery, part of the Kanoo Group is one of the largest suppliers of machines in the region.

Recently, the group won a ‘distributor of the year’ award from Perkins Engines.

The group came first out of 132 distributors across 181 countries.

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