When Kari Yuers’ business development manager suggested exporting to the Middle East, the CEO of Kryton International could hardly believe her ears.
“I said, ‘Why would we go to the Middle East? We sell concrete waterproofing and that’s the desert.’ ” As it turned out, groundwater beneath all that sand is a major management challenge.
“There is actually a huge opportunity in the Middle East,” Yuers said. Indeed, the area has become one of Kryton’s fastest growing regions with 50 per cent sales growth this year contributing to overall corporate growth of 30 per cent year over year.
The Middle East isn’t an obvious market to most Canadian entrepreneurs.
“I suspect some would think that Saudi Arabia might be a difficult market to get into due to culture differences, distance, and other perceived barriers,” said Axel Christiansen, growth and transition capital managing director at the Business Development Bank of Canada (BDC).
But lately Yuers, who’s been selling into the area since 2001, has noticed more diversified opportunities in the region. Opportunities are moving beyond oil-and gas-related businesses and it’s getting easier to do business overall, she said.
BDC business consultant Swami Sundarrajan agreed.
“Middle Eastern economies are looking for partnerships in multiple industry sectors,” Sundarrajan said. “There is significant demand in food and beverages, consumer goods, industrial equipment and mining sectors.”
Mo Amir, general manager at SPF Precut Lumber, ships Canadian softwood to Saudi Arabia, United Arab Emirates, Jordan, Kuwait, Bahrain, Israel, Iraq and Qatar.
The Middle East “is very easy to overlook when you have the U.S. as your next-door neighbour and China a stone’s throw away,” Amir said.
At about 100 million people, the market isn’t especially large, but for a 10-employee company like SPF Precut, “it’s perfect,” Amir said.
Both the United Arab Emirates and Saudi Arabia are priority emerging markets for Canada.
Merchandise exports to the UAE are growing annually, totalled $1.755.3 billion in 2014, making it Canada’s 18th-largest merchandise export market, according to Foreign Affairs, Trade and Development Canada. Merchandise exports to Saudi Arabia, Canada’s 23rdlargest merchandise export market, totalled $1.245.8 billion in 2014.
Here are four snapshots of companies that target the Middle East market.
Iplayco’s unusual story began when Franco Aquila and Scott Forbes, senior managers with a now-defunct playground manufacturer, left to start their own business.
The indoor playground manufacturer and installer went public in a reverse takeover (TSX Venture: IPC) in 2003. But in 2011, the company was struggling following the 2008 financial crisis. Its 40 employees were on a reduced work week. Sales were $8 million and declining.
That’s when Forbes met a Saudi group at a trade show. One job turned into half a dozen with the prospect of 100 more, but the client wanted better payment terms and Iplayco needed the working capital.
Iplayco solved the problem with trade financing from HSBC Bank Canada for its larger contracts, which are insured with Export Development Canada. Iplayco gets up to 90 per cent of the value of financed contracts before shipping, while clients can hold off payment for up to 180 days from shipment. Iplayco also received BDC financing, which helped with working capital for mid-tier customers.
Many customers return repeatedly, with dental chains and fitness clubs buying 100 to 200 playgrounds each. “The last three, four years, churches have been huge. I just estimated two today alone,” said Aquila, a former Fernie heavy equipment operator who got into the playground business by chance and never left.