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Interview

with Francois du Plessis, Commercial Director, Almar Container Group

16.04.2012 / Energyboardroom

To start off, can you provide our readers with a brief introduction of the growth story of Almar?
Essentially, Almar opened its doors in 1998 with its foundation largely in the shipping industry, meaning standard ISO containers. Traditionally, we have had a focus on providing solutions to niche markets rather than big players such as Maersk and Safmarine. We specifically targeted one-way moves of cargo.
We have been combining container leasing and sales which enables us to make use of supply and demand to offer containers in certain areas, move them around the world, and benefit from price differentials.
We started with an office in South Africa but already expanded with an office in Dubai in the early 1990s, followed by India and Brazil in that same decade. More recently, we have opened up offices in Angola and Kenya as well. Personally, I have been particularly involved in opening our Mombasa office last year.
Over time, we have built up a lease fleet of around 5,000 boxes, a number that obviously fluctuates because of our trading activity. Over the last 5 years, we have also started supplying specific certified containers to the oil and gas industry on a lease and trade basis.

What were the new requirements you now had to take into account to enter the oil and gas niche?
The primary structure of an offshore container is manufactured to a higher specification. The key noticeable difference is that the containers are moved in a different way: ISO containers are moved either with forklift pockets or with a hyster, whereas offshore containers need to be moved with a slingset that attaches with a shackle to a lifting point.
We have got a manufacturing facility in Dubai where we build these boxes from scratch. Over the last two years, we have been looking at landing stock in Cape Town with the specific view that South Africa would become a service & equipment supply hub to meet the sub-Saharan oil requirements.

For the offshore containers you have obtained qualifications from classification societies such as DNV and Lloyd’s. Is it a challenge to obtain these certifications?
With our Dubai facility, we have been through the process to get the approvals for our designs. Our manufacturing facility in itself is also approved by DNV. It is a challenge to obtain these certifications, but ultimately they are a must have if you want to supply the offshore O&G industry.

Can such certificates still be a competitive edge, or is it simply a procedure everyone is going through nowadays?
At the moment, Africa is still a bit behind the Gulf and Europe. Within African trade, much of the required certifications have been pushed aside over time. Today, however, the requirements on the rigs are much higher as safety standards have become much stricter.
Therefore, it has been a competitive edge for us to be able to offer a fully compliant DNV certification. In the more mature markets, everyone already has these certifications so it is expected that this can only be a short-term advantage in Africa.

When we talk about container conversion, to what extent can a box really be customized and how far does this flexibility reach?
We land standard units in Cape Town and are limited to adjusting these to the extent that we cannot change the primary structure. What we offer out of Cape Town would be anything that therefore impacts the secondary structure, which could range from installing air-conditioning, power, insulation, workshops, etc. If a client is looking for a completely new design, we would tap into our Middle East office to draw up a new design from scratch that would subsequently need be verified by DNV.

You mentioned that the Almar business model relies on both leasing and sales. Is there an ideal balance between those 2 legs?
As a small family-owned and –run business, our biggest constraint remains cashflow in terms of growth. Therefore, we cannot simply put all our stock up for leasing. Finding the balance is difficult and we need to develop infrastructure in the areas where our equipment is being used to be able to offer our lease solutions. Our clients that are leasing in Angola and Mozambique are not going to pick up their containers in Cape Town. We therefore need the facilities in these areas of activity, which is a big capital investment. There will be a stronger focus on trading initially but our aim is to increase our leasing activity in the long run.

Rather than Durban, Cape Town is considered as South Africa’s oil and gas servicing hub. Is there still a need for Almar to expand its operations in Cape Town?
All of our offshore activity has been located in Cape Town to date. While our administrative head office is in Durban, all of our stock is kept and all of our customization is done in Cape Town. The Port of Cape Town is also much less congested than Durban. Here, we do not have the capacity to take on rig work, which is why it is more likely for the Western Cape –which also includes the Port of Saldanha Bay- to be considered as the oil and gas hub.

You briefly mentioned you have been personally involved in setting up Almar’s operations in Kenya. What can you tell our readers about this experience?
We set up Angola and Kenya at the same time, which made it quite interesting to see how both projects progressed in parallel as well as the different challenges encountered. Setting up the Angolan operations was also a much more challenging project than the Kenyan.
In Kenya we had a very good experience in terms of setting up an office and company from an administrative perspective. The entire process was rather easy and swift. We were not required to make significant capital investments and were allowed to have foreign shareholders.
From a support service perspective, we have also found good local service providers in Kenya that we can rely on. One challenge we have had is the moving of equipment through the ports. While we found good partners to handle local logistics, some of our processes were slowed down by the government and the local authorities in this regard. Other than that, developments have been very positive.
From a strategic mindset, we had already made the decision to move into Kenya back in June 2011. 6 months later, by January 2012, we were already trading our first boxes.

How do you see the role of these new places playing out against the future of the South African operations?
From a leasing perspective, you are required to have a footprint and equipment on the ground. The foundation of the company –which is still the standardized containers in a shipping context- will always remain in Durban. The thinking of moving into Angola and Kenya is to have a footprint so we can offer a local service. A lot of the companies we have spoken to are also keener to trade with local companies with registration in those areas.

Going forward, what positioning do you see Almar taking in the oil and gas sector in the long run?
We have invested into a specific facility to design and build in Dubai, which remains key for us. From a strategic point of view, we are therefore certainly looking forward to becoming more involved in this sector. At the moment, this sector contributes roughly 10 to 15% or our business which we aim to increase to 30 to 35% in the short to medium-term. We are specifically looking for this growth out of sub-Saharan Africa.

Where else on the globe can we expect to see Almar flags emerging?
At this stage, we are mostly looking at Mozambique, as well as Tanzania and Namibia potentially.

To end on a personal note, you made a shift from a marketing and advertising role into the maritime sector. How was this change and subsequent learning for you?
At first, I was not sure what to expect from selling and leasing boxes, and initially thought it could not be so complicated. However, the link between containers and global trade really caught me. Today, the vast majority of all global trade happens through containers which remains very linked to the global economic situation. Understanding the global picture helps you to determine and stay at the forefront of what the supply and demand will look like for containers. Becoming involved in oil and gas has presented me once again with a new learning curve. Being South African and knowing that Africa is going to be a key area in global development is a competitive edge.

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