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Tue 1 May 2007 12:00 AM

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Strength in diversity

A broad market base and capacity for growth are helping Gates Fleximak expand in the Middle East.

Consistent growth is important to any business, but for Gates Fleximak consistency is being accompanied by regularity too.

The company, which provides hydraulic hose assembly and power transmission systems, as well as mobile service and repairs, is planning to open four new service centres this year. Two will be added to existing company operations in Saudi Arabia, while two others will be establishing new operations in Kuwait and in Johannesburg, South Africa.

Gates Fleximak managing director Neil Ferguson is bullish about the growth ahead.

"Kuwait's service centre should be open by July, with Johannesburg opening in the third quarter of this year," he said. "New Saudi Arabian service centres will be in Yanbu and Jeddah. We then hope to open a branch somewhere in the Middle East or Africa every quarter from then on.

"Our business has doubled in the last two years, and we forecast that in the next two years it will double again; in the first quarter this year we're already 30% up. We expect to see double digit growth for at least the next five years."

While the company can piggyback on the GDP growth of the region, it is also benefiting from a boost to the money it has available for investment. Gates Fleximak was formed in August last year, when the Gates Corporation bought ENZED-Fleximak. The last vestiges of the ENZED brand connection will go by 1 June this year and Gates Fleximak is working hard to ensure that its market is familiar with its naming changes. This shift from being a private company to a public one has brought a lot of change, increased financial transparency for example, but it has also given the company greater freedom for capital expenditure.

"We have more to invest in the business thanks to the increased availability of capital that comes from being part of a publicly listed company," said Ferguson. "So where we didn't have a strong presence in the Middle East and Africa markets, we now have a nice footprint to expand around the world from here."

While the acquisition has brought an injection of development funding it has also allowed a change of business model.

"Previously we worked by selling our products to distributors; now we are a service business," said Ferguson. "Margins are always under pressure from distributors and we couldn't always get to the end user and give them the technology they needed. We found our products weren't necessarily specified for the right markets, or applications, at the right time. Now we deal directly, we can control that aspect of the business.

"We supply a broad spectrum of products and don't restrict ourselves to any particular market segment. Everywhere there is rotating equipment our product can be used. For example a timing belt in a Toyota Camry can also be used in an elevator to open the doors."

The strength of the company's growth in the region has led Gates Fleximak to start work on building a new regional head quarters for its business in the Jebel Ali Free Zone.

"We have never been here on this scale before," said Ferguson. "Developing the head quarters shows Gates Fleximak's commitment to the region and is a serious step. The significant investment in the Middle East is a serious attempt by Gates to enter a market that has been underdeveloped for us in the past.

"The new service centre head quarters will be complete in about 18 months, though I'd be quite happy if it was quicker. The 50 000 ft2 space will act as more than just a distribution centre. Since developing the service model and looking to expand all over the world, we've opted to create a core centre of excellence for global training in the new facility."


While the start of global training programmes in the new facility is still some time away, the company already has regional trainees in the pipeline. It maintains a constant flow of four people being trained as service technicians. The company sees this as a key element in its strategy to adopt a more consultative relationship with its customers. Part of achieving that is to get more technical people on the ground.

"They come to us green as green," said Ferguson. "We educate and train them and help them develop a skill set that turns them into capable service technicians after 12 months. As soon as training is completed we start on another four. This way we don't have to try and attract people from within the industry, we like to start people from scratch."

While the company has a diverse market base and its products and services can be put to use across a wide range of applications, in the Middle East region roughly 70% of its business is derived from the oil and gas sector. This factor led to the development of a product specifically for oil and gas applications, helping Gates Fleximak to keep pace with developments in drilling technology.

Companies providing hydraulic products and services have to meet stringent performance standards, monitored by organisations such as the American Petroleum Institute (API). These standards are a baseline for product performance. Gates Fleximak has developed hoses for use in drilling operations that go beyond the official required standards.

"Gates offers a high performance API 7K rated rotary drilling hose that far exceeds the minimum standards," said Tony Rogowsky, Gates Fleximak's sales and marketing manager for oil field products.

"The Gates system has a swage-attached coupling with no seals to leak; no set screws to loosen with operational vibration; or epoxy to weaken with working temperatures above 180 degrees Fahrenheit."

Swage-attached couplings are literally pressed onto the hose under 280 tonnes of pressure, allowing them to withstand higher operating pressures and reducing the chance of failure. In dynamic pressure assembly burst tests, hoses created by Gates using this method have withstood 160 000 lbs of force at 5 000 psi before rupturing.

"Our burst test results significantly exceed the API 7K minimum standards," said Rogowsky. "Performance has been consistently proved in the field with our products in use with drilling contractors such as Nabors Drilling, Rowan and Pride International."

While this product was developed to meet market demand, being able to produce it locally has helped Gates Fleximak set itself apart.

"We used to have to get the couplings built in Kansas, which could lead to a delay of twelve weeks for delivery," said Ferguson. "Now with swaging we can create a customised product within 24 hours. We use Dubai as a central hub for this high-pressure work to make sure we retain a high standard of quality control and safety."

Gates Fleximak is looking to continue its pattern of growth, drawing on the corporate resources made available since the acquisition to drive expansion and take advantage of the opportunities in the region.

Gates Fleximak

Regional service centres

8

New service centres opening this year

4

Employees

96

Approximate % of turnover from oil and gas industry

70%

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