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Pakistan Cables – from strength to strength

Pakistan Cables – from strength to strength

Giving the industrial sector in Pakistan a much-needed boost, the renowned Fortune 500 company, General Cable Corporation invested Rs. 600 million in Pakistan Cables Limited, acquiring 25% shares in the local cable manufacturing company. This investment by General Cable comes at an interesting time for Pakistan when foreign direct investment has been particularly slow.  The US-based General Cable has a global presence with over 11,000 personnel operating in over 100 countries. General Cable has a tremendous product portfolio and is involved in the development, designing, manufacturing and distribution of products for the energy, industrial and communications markets. General Cable President & CEO Gregory B. Kenny was in Karachi for the signing ceremony held on September 25, 2010. He expressed his confidence in Pakistan Cables and his vision to expand General Cable’s footprint in the region.  Pakistan Cables, the premier cable manufacturing company of Pakistan, has been a listed company on the Karachi Stock Exchange since 1955 and is a major contributor to the development of the existing infrastructure of the country. Pakistan Cables has continuously received awards for excellence and is committed to innovation and quality control. Under Kamal A. Chinoy’s leadership, Pakistan Cables has increasingly reported profits and continues to expand. With this new agreement between the two companies, plans for infrastructure development, expansion of product lines and the sharing of management best practices are well underway. Kamal Chinoy and Gregory Kenny, both visionaries in their own respects, share their views about this landmark alliance.    

Q&A with Kamal A. Chinoy, Chief Executive of Pakistan Cables Limited

 What led Pakistan Cables Limited (PCL) to sign on General Cable as an investor?

Kamal Chinoy: “PCL is always looking for opportunities to improve. Given the current difficult economic conditions in Pakistan, we felt that injection of additional equity as well as expanded opportunities as a result of the foreign collaboration would be beneficial to PCL. Furthermore, this would bring us back to being a multinational, as was the case when we were partnering with BICC between 1953 and 1991, and we feel that there is merit in that.  Also, even though we are positioned well ahead of our competitors, this would add another dimension and improve our image in the market.  The advantage of partnering with General Cable is that they are truly an international company. About one-third of their revenues comes from each: 1) USA, 2) Europe+North Africa, and 3) Rest of the world (mainly Far East, Oceania and Latin America). Thus, they are geographically diversified – as well as being complete in their product range.”

What other kind of assistance is Pakistan Cables expecting from General Cable?

KC: “We feel that we should be able to benefit from their considerable expertise in Lean Manufacturing approach, their management practices, sources of material, manufacturing efficiencies, benchmarking, plant visits, maybe exports, machinery selection etc. We also hope to benefit from having their senior personnel on our Board of Directors, as they are truly knowledgeable and have international experience. The financial benefit (of receiving their investment, around Rs. 600 million), will result in savings in interest cost as well as a stronger balance sheet.”  Are there any plans for expansion, generally, and in product lines, specifically? KC: “While there are no expansion plans predicated on this tie-up, we are always looking to expand our product range. For instance, we introduced automobile cables just a few years ago.”  Are there any other plans for more collaborations or import of technical expertise and such? KC: “At this point, no plans for more collaboration.”

Pakistan Cables has an impressive clientele, supplying its products to a large number of domestic and industrial customers. How does Pakistan Cables set itself apart from its competition? Is it a competitive market out there in this regard?

KC: “The market is highly competitive. We promote ourselves as being an ethical company and thus offer the customer reliability in quality. We use the best quality raw materials in our cables and have stringent quality assurance and control procedures in place. Our motto is: “Trusted not to compromise”. It describes us very well!”

You have been at Pakistan Cables for almost two decades. What are the kinds of challenges you have faced in this time?

KC: “Well, the first challenge was when BICC divested their equity and the Chinoy family took over management (in 1991, after almost 40 years of being a multinational).  We had to ensure that the company’s image remained as the market leader, rather than be seen as a ‘seth’ company. That reflects on the product reputation as well. Then we had to make sure that quality was given the highest importance as it had been given during the BICC days. Other challenges include remaining honest in a market that is often defined as corrupt. Let me give an example: some of our competitors offer customers that they will sell their products without sales tax (which is 17%)! And I am not talking about a small cable company either. And honesty is not uni-dimensional; it includes the need to be honest with all stakeholders – such as the employees, bankers, suppliers, dealers, consumers etc.  We wanted to improve upon BICC’s management approach. And we were successful in doing so. For example, we went for the ISO 9000 certification in 1997 not because we were looking for better marketing positioning, but because we wanted to bring about efficiencies in our production. We were the first cable company to be certified. Then we built on such successes.”

Pakistan Cables has continued to hold its position in the Top 25 companies as rated by the Karachi Stock Exchange. How have you managed to sustain this position?

KC: “That’s easy: because of our employees. We feel very proud in saying that we have a talented and dedicated team of professionals. Thus, it is easy to decentralise and devolve responsibility and decision making. Also, we feel that we are successful in adopting a ‘professional approach’ to management. And last but not least, we have high standards of corporate governance (which we have always had), and look to keep improving upon that.”

Are there any plans for increasing exports? How much of Pakistan Cables’ production consumed locally? KC: “Almost all our sales are local. Exports are something that we are trying to build.”  What are your views on the investment climate in the country presently and what do you feel needs to be done to bring about improvements? KC: “For improvements in the investment climate to be brought about, we need good governance, consistent policies and financial stability. Our economic team should be strong and consistent – we need to avoid too many changes.  Law and order plays a very big role. No one wants to put their lives at risk by coming to a country where there is poor law and order – and I am not only talking about terrorism – we need to control ethnic, political and religious clashes as well as cellphone and car robberies and kidnappings.”

How has the recent political and economic instability affected Pakistan Cables?

KC: “Yes, we have been affected by the downturn in our economy. Cable sales can be viewed as an indicator of the economy as infrastructure spending, industrial investment and house building tend to go up and down based on economic confidence. Political instability tends to have a negative effect on the economy.”  What is your vision for the future? KC: “The vision is to have a world-class company which is diversified geographically as well as product-wise.”

Q&A with Gregory B. Kenny, President & CEO of General Cable Corporation 

General Cable has an established global presence. What led General Cable to want to invest in a Pakistani company, specifically? 

Gregory Kenny: “A lot of what we do as a company is very focused on the wire and cable industry and we look at what’s happening around the world – so, we’re attracted by infrastructure that’s being built for the first time as well as high population growth, and Pakistan has both. We saw Pakistan as a story that was developing as the country industrialises and looks towards the future and it’s been our criteria in terms of where we see opportunity in a $150 billion industry. We were attracted to Pakistan Cables because of their excellent reputation, their long history of doing things right and making quality cables, and the linkage they had with one of our companies, BICC, some years ago. Even though the conditions are difficult in the country in terms of the issues, politically and economically as well as the flooding, but we are looking at this as a long-term investment.”

General Cable recently announced ventures and acquisitions in Oman and Egypt as well. What do you seek to achieve from these recent investments?

GK: “They’re very much the same. Egypt again has a growing population and is also a regional trading hub. We’re trying to take the free cash and the capital that we have and leverage that into developing regions so Egypt was important for much of the same reasons as Pakistan will be over time.  Oman was more aimed at getting a distribution business started in the Gulf area and is more logistics-based than manufacturing at this point.  We also bought a factory in Durban, South Africa, which is again, a country with natural resources and a growing population.”

What are the kinds of returns that you’re expecting from these investments? 

GK: “Obviously, the wire and cable industry is a top industry and return on capital can be pretty good when the markets are strong. We have a tendency to work for these to be lucrative to our shareholders. In the near term though, the industry worldwide is in a tremendous downturn but may be beginning to stabilise so the returns will take a little longer. We expected Egypt to be profitable quickly and it is. Oman is a little slower – we’re profitable in South Africa as well – and getting a return on capital is one of our benchmarks.”

Is General Cable going to extend its expertise in various areas (manufacture, management, infrastructure, processes, etc.) to Pakistan Cables?

GK: “We have 48 factories around the world and we’ve won award after award for manufacturing excellence. In the US, a magazine called IndustryWeek looks at the best manufacturing plants in the US and Canada and we’ve almost always been in the top 10.  We’ve had a very good culture of continuous improvement. We’re bringing to Pakistan Cables, best practices that we’ve learned through our 48 factories around the world. We suspect we’ll learn some things from them as well. The market’s beginning to grow and we’ll bring products from elsewhere in the world to Pakistan Cables in case they want to sell it into the Pakistani market and at the same time, as the market grows, we can bring them the designs of what they’re not currently making. They’re one of the strongest manufacturers in the industry and with our know-how and with their market expertise; it should be a good combination.”

The energy and the communications sectors in Pakistan are critical sectors that are developing at this point and need further development. Is General Cable interested in wanting to further develop these or invest in their development?

GK: “Pakistan Cables is already involved in the electricity sector. A lot of the designs that we use around the world – our cables that can carry a lot of current on the same transmission lines without building new ones, to the underground cables, to all the cables used for generation – we will bring those here to Pakistan Cables. This is one of our core areas and as a company, about 50% of our revenues are aimed at electrical generation, exploration of energy, transmission and distribution, as well as submarine cables. Pakistan Cables is a player in the utility sector – not as big as some – but we’ll bring these to Pakistan Cables and there is obviously a huge need in Pakistan for reliable electricity so we think we can help.”

Are there any other plans of expansion in the region, apart from Pakistan? 

GK: “We’re also building a wholly-owned factory in northern India which should be operational next year. We also export a fair amount into the region from our Thai facility.  We are active in South East Asia and we do around half a billion dollars of revenues from the Pacific islands through New Zealand and Australia. We’re in China as well.”

Pakistan and the US have a very sensitive relationship when it comes to defence, military and nuclear issues. Is there going to be production of nuclear and military cables as well? If yes, is it going to be for local consumption or export purposes?

GK: “There’s been no discussion. We’re only doing a business plan now where we can help each other in the market, which we expect to finish in the next few weeks. There haven’t been any discussions around military or nuclear cables so it would be premature to comment. We know how to make those products but there hasn’t been any discussion as yet for a requirement for them or the issues in supplying them.”

Does the violence and political unrest in Pakistan pose as a concern for General Cable? Keeping this substantial investment in mind, what would be your hopes for the future of Pakistan?

GK: “During my visit, I was impressed by the diversity and the open nature of society. I was warmly received and I think people were open to investment by a US company. I have hope and faith in the Pakistani people and I think they all want the same things for their families, job opportunities, etc. In a small way, we can contribute as a company by bringing in global know-how. Yes, Pakistan is in the news and not always in a favourable light, with things like natural disasters to struggle in the north and terror in all parts of the country. It’s hard, from a security standpoint, to feel absolutely comfortable. But we operate around the world and things are always better than the media would have you believe.
During my time in Pakistan, the people were very gracious and very interested and I felt warmth at all levels. I spoke to the employees and many people in the government and business and that’s not all of the country, but it’s a great start. I’m not afraid to return and I think it’s important to be involved in everything we do around the world and travel freely. We will send people to Pakistan as we need to work on different projects together and we expect that the Pakistanis will travel to our facilities and exchange best practices.”

You have been with General Cable since 1992 and ever since becoming the CEO in 2001, you have managed to accomplish phenomenal growth in a short time frame. What inspired you to take this company to such great heights?

GK: “It’s always a team effort. If we look at the industry, which is a tough business, we had the view as a board and as a company, 10 years ago, to celebrate this industry. Not everybody wants to be focused on this business but we said it’s our business and we thought about the company…we’re very strong in the US and we realised the growth would be elsewhere – we’re very strong in communications which is still a strength for the company – but we thought that we ought to be involved in the energy infrastructure because we had a sense that the world would be energy-short, which would be a requirement for economic growth and prosperity. So, we looked at where the opportunity was going to be, and decided to get into those businesses. Then we thought about where the high growth will be, and that would be the countries that are building their networks for the first time and those with high population growth. Also, in the developed countries, there’s a rebuilding of networks going on.
I was in the diplomatic service as a young person so I think I was comfortable building businesses around the world. Then, we bought BICC in England, which is a global wire and cable company and Silec Cables in France, and NSW in Germany and about 19 other acquisitions.
Pakistan is just a continuation of this view. We’ve found a great partner and we’re delighted that Pakistan Cables has welcomed General Cable and we’re looking at a lot of good things to be done together. This is a great chance to participate in the market and we hope we can create opportunity for the Pakistani people.
Pakistan is a very big and important market and as I said, we’re building in India and we see opportunity in South Asia generally. We thought we couldn’t ignore Pakistan and in some cases, when times look the darkest, is an opportunity to come in and be part of the recovery which we think will happen.”

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