06 April 2008

Pipe dreams

Future Pipe Industries is set to become the latest addition to Dubai's DIFX. Sean Cronin speaks to CEO Rami Makhzoumi to hear what investors can expect from the listing.

Rami Makhzoumi talks almost evangelically about the pipe business. The well-groomed CEO of Future Pipe Industries has reason to be excited. The world's largest fibreglass pipe manufacturer is preparing to sell shares to the public in what will be a global offering expected in early May.

"This is an emerging technology and material. Something like Google was to the research world or what the mobile phone was to communications," says Makhzoumi. "In order to do things like these great companies, like the Googles and the Nokias of this world, going public is certainly a fundamental component."

The shares will list on the Dubai International Financial Exchange (DIFX), which was opened in 2005 with the aim of becoming the Gulf's first bourse to open to issuers and investors of any nationality.

That plays to the company's desire to tap international institutional investors as well as the local players who may more readily grasp the opportunity presented by a company that makes pipes upon which much of the oil and gas, petrochemical and desalination industries rely.

"Regional investors are important to us, but at the same time we are a multinational. I would say people in the region are perhaps a lot more aware of what is happening here with infrastructure and oil and gas.

At the same time, people abroad in countries with, let's say, poorer economic conditions, are increasingly looking to markets like this," says Makhzoumi.

Future Pipe is the first new security to tempt investors since Nanodynamics Inc, pulled the plug on its planned DIFX listing in February.

It was intended to be the first US company to list its shares on the bourse, but one day before it should have listed its shares, the alternative energy company instead told the exchange that it was not going ahead with the sale.

This latest listing is also an alternative of sorts. Future Pipe uses fibreglass to manufacture pipes, instead of alternative materials like steel and plastic.

And so far it has made enough of them to circle the globe three times, says Makhzoumi.

Future Pipe will sell up to 35% of its shares to the public although the company is not saying how much it hopes to raise from the sale, pointing to a ‘book-building' process to determine the value of the offering.

The oil-fuelled economies of the Gulf are investing record budget surpluses into large-scale infrastructure and industrial projects. From Doha to Dammam, the construction boom is helping manufacturers such as Future Pipe boost sales to new oil refineries, desalination plants and district cooling facilities. The global pipe market is estimated to be worth about US$120bn.

"Oil and gas and water infrastructure is where the core of our business is. So if you look at the infrastructure explosion in oil and gas, this consists of about 70% of our sales," he says. Spending on pipes across the Middle East is soaring with construction projects worth US$1 trillion already underway.

Utilities are also investing record sums in building new power and water plants to cope with the rapidly expanding populations of cities such as Dubai and Abu Dhabi.

Dubai's state utility plans to spend about US$13.6bn through 2010 expanding power and water desalination capacity. Similarly large-scale investment programmes are also planned in countries such as Saudi Arabia and Qatar.

Outside the Middle East, the Future Pipe CEO points to the economies of Europe and the US, which he says have a pressing need for pipe replacement.

While the global pipe business may be worth an impressive US$120bn, the fibreglass market represents less than 3% of that with a value of just US$3.5bn.

Nonetheless, Future Pipe claims to have a market share approaching 12% in a business where the top five players control almost a quarter of global supply.

Makhzoumi also stresses the market is growing fast, helped by demand driven by the oil and gas industry, reinvesting profits accrued from record oil prices into new infrastructure.

When I first joined the business, our chairman used to send me to conferences in obscure parts of the world where they talked about gas lines running from Qatar to the UK - mega-projects that simply never materialised,"he recalls.

While such projects may have been in the realms of fantasy a few years ago, Gulf budget surpluses are encouraging governments to spend on projects that are only now stacking up commercially.

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Lebanon Time-Line

Introducing Lebanon

Coolly combining the ancient with the ultramodern, Lebanon is one of the most captivating countries in the Middle East. From the Phoenician findings of Tyre (Sour) and Roman Baalbek's tremendous temple to Beirut's BO18 and Bernard Khoury's modern movement, the span of Lebanon's history leaves many visitors spinning. Tripoli (Trablous) is considered to have the best souk in the country and is famous for its Mamluk architecture. It's well equipped with a taste of modernity as well; Jounieh, formerly a sleepy fishing village, is a town alive with nightclubs and glitz on summer weekends.

With all of the Middle East's best bits - warm and welcoming people, mind-blowing history and considerable culture, Lebanon is also the antithesis of many people's imaginings of the Middle East: mostly mountainous with skiing to boot, it's also laid-back, liberal and fun. While Beirut is fast becoming the region's party place, Lebanon is working hard to recapture its crown as the 'Paris of the Orient'.

The rejuvenation of the Beirut Central District is one of the largest, most ambitious urban redevelopment projects ever undertaken. Travellers will find the excitement surrounding this and other developments and designs palpable - and very infectious.

Finally, Lebanon's cuisine is considered the richest of the region. From hummus to hommard (lobster), you'll dine like a king. With legendary sights, hospitality, food and nightlife, what more could a traveller want?

Introducing Beirut

What Beirut is depends entirely on where you are. If you’re gazing at the beautifully reconstructed colonial relics and mosques of central Beirut’s Downtown, the city is a triumph of rejuvenation over disaster.

If you’re in the young, vibrant neighbourhoods of Gemmayzeh or Achrafiye, Beirut is about living for the moment: partying, eating and drinking as if there’s no tomorrow. If you’re standing in the shadow of buildings still peppered with bullet holes, or walking the Green Line with an elderly resident, it’s a city of bitter memories and a dark past. If you’re with Beirut’s Armenians, Beirut is about salvation; if you’re with its handful of Jews, it’s about hiding your true identity. Here you’ll find the freest gay scene in the Arab Middle East, yet homosexuality is still illegal. If you’re in one of Beirut’s southern refugee camps, Beirut is about sorrow and displacement; other southern districts are considered a base for paramilitary operations and south Beirut is home to infamous Hezbollah secretary general, Hassan Nasrallah. For some, it’s a city of fear; for others, freedom.

Throw in maniacal drivers, air pollution from old, smoking Mercedes taxis, world-class universities, bars to rival Soho and coffee thicker than mud, political demonstrations, and swimming pools awash with more silicone than Miami. Add people so friendly you’ll swear it can’t be true, a political situation existing on a knife-edge, internationally renowned museums and gallery openings that continue in the face of explosions, assassinations and power cuts, and you’ll find that you’ve never experienced a capital city quite so alive and kicking – despite its frequent volatility.