Austen-Peters: Local Steel Production will Boost Business for Companies

Interview 

Chairman and Chief Executive of Dorman Long Engineering Services, Dr. Timi Austen-Peters, spoke with select journalists on the successes recorded over the years and challenges militating against the company. Jonathan Eze reports.

So far, can you tell us the Dorman Long’s journey in Nigeria?

 Well, the story of Dorman Long is the same as the story of Nigeria. It has been in existence just before Nigeria existed as a country. We have been part and parcel of the development of Nigeria, starting with our fabrication of the bridge which is in Onitsha and Asaba- the first Niger Bridge. We have been involved in almost all of the warehouses that is constructed in G.R.A Ikeja.

When that decision was taken to turn Ikeja into an industrial hub, same thing in Port Harcourt, we were the same company making the bodies for steel and so on. As the companies and Nigeria itself got more confidence, we were invited into the Oil and Gas space and then we started producing more complex and high value steel structures in that space. We have been an integral part of the story of Nigeria, as Nigeria has developed confidence in stature, in value and complexity.

So far, can you estimate how much Dorman Long has spent or invested in the Nigerian economy probably in recent times?

It will be very difficult for me to put a number to it because the investments are in different ways. One, we spend a lot of money locally, we buy diesel to maintain our galvanising yard, we employ about 500 people but we train hundreds of people every year. You can’t put a value to some of these things.

What about in terms of Capital Investments?

We are in the process of restructuring our balance sheet, so that is a process, in which over a couple of years, we will see. In terms of capital investments, we haven’t done a lot recently because we have three yards already, we have excess facilities. If you come to our galvanising yard, you will see that we invested almost $6 million in there. It has never done 10% of its capacity, why? It was established in order to support the fertilizer plants, LNG plants and so on, none of them have taken off. So you put this beautiful facility down, so after doing that, the company has not had a lot of appetite to make further investments.

 I remember last year, Dorman Long talked about establishing a yard either in the South- South or in Lagos? So this means, it is not going to come up?

 That’s exactly the point I made, we are about to in the next couple of years but you are asking me what have we done historically. Historically, we haven’t done anything since that galvanising facility, going forward, we still fully intend to do so. We are likely to do so maybe middle of next year. But the truth is that we have three yards in Lagos and plenty of capacity to do anything that we need to do.

Aside Nigeria, do you have Dorman Long anywhere else like within Africa?

 Well, Dorman Long as you may know, is almost a franchise which was established by the British Steel. So if you go to Australia, and so many places, you will find Dorman Long but the truth is most of those companies no longer exists. It is Dorman Long Nigeria that seems to be the one that is thriving. With Dorman Long Nigeria, we are presently in the process of establishing operations in Ghana and we are looking to do the same in Cote d’ivoire and Senegal.

There has been so much emphasis on local content especially from that region. What do you think are the challenges of developing this and what is Dorman Long doing to drive local content besides the training you are doing?

 Well, we are the poster child of local content; we would not be where we are today if not for local content. We were given the opportunity to do complex steel structures like pressure vessels. We did them successfully. We are now doing them so well that you cannot import such things into Nigeria without first of all making sure that the capacity for the people like us has been exhausted that is number one. Number two, we have been able to in this recession, find cost savings of up to 30% so it is now been demonstrated to be a fallacy that local content is expensive. If we are given the opportunity to scale up and get jobs, get experience, get expertise, we can be as competitive as anybody else.

 

What are the challenges with steel companies in Nigeria.

Number one, we do not produce steel in Nigeria, so somebody like me that needs to be doing steel products, I still have to import and does not make sense as it adds to expenses. Also, we are held to ransom because of the people who sell steel at the prices they like. Once Nigeria can produce its own steel, I am able to procure steel locally at a sensible price, cheaper transportation cost and that makes life easier.

 

 

Lets look at the steel sector where you play, I understand that the prices of steel products is reducing by the day, so how does it affect Dorman Long?

In a way, it does not really affect us because we do not produce steel. Steel is not our commodity; it is what we turn steel into. It is the value that we add to steel, that is our bread and butter. So, in principle, if steel is cheaper, our clients should be more encouraged to embark on projects which see us getting more work but the reality is, Nigeria in particular, in the world has gone through very tough times, especially in the space that we primarily operate which is the Oil and Gas space. So there hasn’t been a lot of FID on capital projects in these last few years. In the last two to three months, there has been an appreciable surge in decisions, orders being placed with us. So you can see that there is a fundamental difference between the last two- three months and the previous couple of years.

I am also aware that your company is into procurement, fabrication and other services that you render. Amongst all of them which do you see as a growth area for your business?.

The growth area that we see is especially that of fabrication and for the very reason, I have just given you. Nobody has done any project in the last two to three years, not that we didn’t need the project,  we needed them but we haven’t been able to do them as a country, there was no money, uncertainty, no appetite all those things were needed. Now that there is a bit of certainty, a bit of confidence, some little money coming in, there are decisions being taking in and we have seen like i said, an appreciable surge in fabrication, orders and other activities.

What is the difference between Dorman Long and other competitors?

The difference, I will say, there are a couple of things. Number one we have a legacy and we have experience you cannot buy. Number two, our people, you know when somebody has served in a company for 20 to 30 years, it is not the same as somebody who has just started yesterday. You know the type of loyalty, the type of dedication, when I see the people. Even when things were at their toughest, I got involved in the company about 3 or 4 years ago. There were a number of issues I met on ground but you could see that fundamentally the staff were loyal and committed to the company. So it wasn’t just a job it was more than that for them. That sets us in many ways apart from other companies. Now, beyond our staff, our facilities and our capacity to do work is beyond anybody else in this country, we have three yards. You cannot compare us to the international companies, we do not have their type of balance sheets but as a proudly Nigerian company, nobody can ride by us.

 Looking at the challenges so far, I am sure you have had challenges with government policies. How have you been handling that?

Well it is the government policies unfortunately that have led to the fact that our galvanizing yard is only at 10% capacity. Then number one, government no longer follow through on various decisions to do fertilizer, brass LNG and so on. Then number two, in terms of fabrication especially of towers for telecommunications and power industry this is one of the main areas we are suffering. When we want to build a tower in Nigeria, we are paying between five and twenty-five per cent duty on some of the components because Nigeria does not produce all of these things. However, when somebody comes with a fully built tower from outside Nigeria, they get 100% waiver. That does not make sense and that is something we suffer from. We were at the  House of Representative public hearings on committee for steels and we have made submissions there, we have participated actively, we have written memos on this matter so it is something that we are pushing aggressively with government. You know because most countries, they look for how to protect especially this steel industry, the fabrication of towers and other people who bring in towers have to pay premium as opposed to getting a waiver.

 

Lets look at Dorman Long in an area of Oil price crash, how did it affect you?

The main way it affected us was that there was no work. People who are producing this oil cannot see a return on their investments, so they don’t invest anymore. They do not execute projects. Even maintenance work, they are struggling to do because they can barely afford to keep their businesses. And so we saw a collapse in our order. We could see that. However, as I say things have started to change a bit, things are getting better.

As the economy is recovering, what are the plans to expand?

  Dorman Long is a steel engineering company, it is not an Oil and Gas company, so we play not only in the Oil and Gas space but in power, telecommunications and heavy industry. As all of those areas begin to breathe, as there are projects in all of those areas, Dorman Long intends to participate actively in all of them and so we expect that those would be major growth areas but even in the area where we are concentrated in now there are FIDs of very significant capital projects. There is one that is likely to be announced in the next couple of weeks of which we are a major component. We are seeing a major surge as I say in the work of the company, so the company will expand its operations and it is because of this, our view of how the future is going to be that we are determined to rejig our capacity by having a new yard over the next couple of years.

 Recently, you had some graduates from your company, can you tell us about us?
You know Dorman Long as a company, was actually the first to train welders in Nigeria. So we have this long legacy of training youths and what we do is that we partner with some of our clients, the IOCs. Whereas, in this particular case I am talking about Hyundai and Chevron and then we have NCDMB, the local content regulator also as a stakeholder offering their support and so what we do is that we train these people with on-the-job training, so they learn to do it, they see it and they work with people who do this and by the time they finish, they are able to apply for jobs in confidence and many of them do go on and get jobs because they know they trained at Dorman Long where they did something tangible. We are also always on the lookout for talents, we actually recruited 7 of the welders. So whenever we see that there are people that are hardworking, talented and committed to their work, for us it is a thing of joy to give them an opportunity for their first step in life but also it benefits us because we are getting the good talented people to do our work.

 Looking at Nigeria itself, what do you think the government can do to help infrastructure in Nigeria?