The family-owned construction business is keen to expand into Africa, Central Asia and the Far East.
Consolidated Contractors International Company (CCC) was founded as a civil engineering company in Lebanon in 1952 by the late Khalid Abdul Rahman, Hasib Sabagh and Said Khoury. In 2007, it had a turnover of $4.1bn, employs 170,000 people and operates on four continents. Its first project was the civil engineering and foundation works for US-based Bechtel on the BP Tap oil pipeline running from Iraq to Syria. In the following decade, the firm worked on a wide variety of major projects across the Gulf, such as the commercial harbour at the Jubail petrochemicals complex in Saudi Arabia and the 400-kilometre oil export pipeline in Yemen from Marib to Hudaiba port, and all of Qatar’s liquefied natural gas (LNG) trains.
Headquartered in Athens, CCC remains a family-owned business. Hasib Sabagh remains at the head of the company as honorary chairman, and Said Khoury is chairman and president. The company is run by their sons, who make up the remainder of the board. Tawfic Khoury is director and executive vice-president, Samer Khoury is director and executive vice-president for operations, and Suheil Sabbagh is director for group human resources.
In addition to the board, there is an executive committee that comprises Tawfic and Samer Khoury, together with five group vice-presidents. Vice-presidents for each region report to the executive committee. Also reporting to the committee are the vice presidents for key business activities such as construction management and estimation.
The contracting business is complemented by several group companies that provide related construction and development services, including CCC Underwater Engineering, CCC Oil & Gas, Acwa Services, Morganti Group, Sicon Oil & Gas and National Petroleum Construction Company (NPCC).
The contracting business, like the majority of contractors operating in the Gulf, has experienced rapid growth over the past five years. In 2003, total revenue was about $2bn but in 2008 it is expected to reach $5.6bn. Over that period staff have increased from 8,000 to 17,000, the labour force has grown from 67,000 to 150,000, and the replacement value of the company’s equipment has risen from $300m to $750m.
Although the real estate boom has allowed many contractors in the region to achieve record growth, oil, gas and upstream petrochemicals remain CCC’s prime focus and it derives 80 per cent of its turnover from these sectors. The three key countries in which it operates are Saudi Arabia, Qatar and the UAE. It employs about 100,000 people in these three countries alone. In Qatar, it is part of the consortium that was recently awarded the contract to build the Qatar-Bahrain causeway. That contract followed the award earlier this year of the $1.8bn contract to upgrade Ras Laffan port, its largest contract to date.
Away from contracting, the company has several smaller businesses. In the real estate sector, it has a 5 per cent stake in Saraya in Jordan and a 12 per cent stake in the Omagine project in Oman. In energy, the group’s CCC Energy division is pursuing oil and gas opportunities in Gaza with the UK’s BG, in Nigeria with the UK’s Centrica and in Yemen with the US’ Occidental Petroleum.
The company wants to build on its position in the Gulf and develop business opportunities in other regions so that its turnover is split equally between the Gulf and three key international markets. The first is Africa. CCC already has offices in 12 countries extending from Libya in the north down to South Africa. The second area covers the Central Asian states of Turkmenistan, Azerbaijan and Kazakhstan, and again the company is already operating in these countries. The third area, which CCC plans to target in a more opportunistic way is India, Pakistan and the Far East.
Operationally, CCC is keen to develop new business lines that it plans will account for up to 10 per cent of turnover in the coming five years. Operation and maintenance for the oil and gas sector is one area and utilities management another. The company has established a joint venture with the UK’s Wood Group to service oil and gas facilities, and for utilities management it has teamed up with the Erinaceous Group, also of the UK. This will enable it to continue earning revenue from the projects that it is currently building.
The company is also improving its environmental performance by installing solar panels and recycling waste such as batteries, paper and filters. It is also looking to invest in facilities that manufacture environmental products.
With operations in oil, gas, petrochemicals, real estate and infrastructure, CCC is not only the largest contractor in the Middle East but with close to 170,000 employees, it is also one of the region’s largest private sector employers.
With almost 60 years’ experience, the company has a long-term perspective on the market and is aware that contracting is a cyclical business. It has a strong reputation that has stood it in good stead in the past but it must ensure it maintains this position by delivering its projects on time. As Samer Khoury says (see box) this has been a challenge over the past two years.
Although delivery is an issue across all sectors, the problem is particularly acute in the real estate sector. With this in mind, CCC has to tread carefully in this volatile sector and is wisely only working on a handful of major projects, preferring to concentrate on oil, gas and upstream petrochemicals.
Strategically, CCC has been keen to diversify into new markets and businesses to insulate it from the shock of any market downturn. The developing economies of Africa and the Commonwealth of Independent States (CIS) offer long-term potential and new business streams could provide sustained long-term cash flow.
With this strategy, CCC should be able to overcome any obstacles and maintain its position as the region’s largest contractor.
Date established: 1952
Main business sectors: Construction
Main business regions: Middle East, Africa
Group revenue 2008 (projected): $5.6bn
Q&A: Samer Khoury, executive vice-president, operations
Will the sub-prime crisis have an impact on the Middle East project market?
Many people here in the Middle East are complacent. They say we are independent economies and we will not be affected by the sub-prime crisis. I totally disagree. If you look at the wealth funds and individuals of the region, most have their money invested in the US or Europe. So it will affect their finances and our projects because it will reduce the liquidity in the market.
Which sectors are the most vulnerable?
Real estate, manufacturing and tourism but not power or oil and gas.
Another economic problem is the weakening dollar. Is this a concern for CCC and do you think we should expect a revaluation?
The dollar is a problem, and it affects us because [Saudi] Aramco, Adnoc [Abu Dhabi National Oil Company], QP [Qatar Petroleum], everyone, pays us in dollars. We all know about inflation and the possibility of depegging or devaluing the dollar and local currencies. The countries say they are not going to do it, but to curb inflation and to protect themselves there has to be, if not a depegging, a revaluation of local currencies against the dollar.
You have been involved with several different forms of contract on projects in recent years. What have your experiences been?
One contract type is engineering, procurement and construction [EPC]. For us that is the preferred platform and we will work for the engineering firm as its exclusive contractor. In my opinion, it is the shortest, smartest and most economic option. Another type is the EPCM where the client awards the engineering, procurement and construction management to a firm. The client is involved in the award of every construction package, and CCC and other contractors bid for these packages.
The disadvantage of this is twofold, you do not know how much the job will cost because you do not know the value of a package until the order is placed. During construction, you have four or five contractors on site that interfere with each other.
The third is lump-sum turnkey (LSTK) convertible which is faster than EPC, but converting the lump sum is not easy.
We have had that experience with Bechtel and Technip on Khursaniyah.
It took us more than a year to convert and that was not a good experience. So my preference is the first option.
What are the challenges that lie ahead for CCC?
The short-term challenge is not to take on too many jobs. One bad job will eat the profit of all the others. So the challenge is to say no.
The second challenge is to meet our commitments with our clients. I am afraid to say that on many of our projects we are not doing them on time due to the abnormal market conditions. In the medium term we have to regain the confidence of our clients.
Over the past year-and-a-half we took jobs we knew we would not finish on time but we did not tell the client because we wanted the jobs. Now that the market is strong, it is time to tell the client I will take it but give a more realistic amount of time.
And in the long term?
The long-term challenge is new entries into the market. We have Koreans, Chinese and Indians that are aggressive in the market and we cannot discount all of them.
Some are delayed, some are not producing good quality work but they are learning.
So the long-term challenge is to see how these people perform and if they perform well maybe we have to join them. If you can’t beat them, join them.
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