|21 May, 2017

Danube Group expects business to grow by at least 5% in 2017

Dubai-based company uses credit insurance to protect against payment issues

By Megha Merani

May 21 (TRPN) - Dubai-based Danube Group expects its building materials business to grow by at least five percent in 2017, despite challenging economic conditions, the company's chairman said.

Several construction projects in the United Arab Emirates and across oil-producing Gulf Arab states have suffered delays following the plunge in crude prices in 2014, slower economic growth and tighter bank liquidity.

Rizwan Sajan, Danube Group's chairman, told Thomson Reuters Projects last week that he expected his business to grow despite market challenges.

The company's total business turnover in 2016 was about 5.4 billion dirhams ($1.47 billion) and the chairman called the outlook for 2017 "bright".

"(The) Building materials (business) has been good," Sajan said during an interview last week.

"I wouldn't say it's gone up but it's not been bad. We have been able to maintain the same figures as 2015 in 2016, in spite of the market being slow."

"We should be able to do 5 to 10 percent more than 2016," he said, but added that the company adopts a cautious approach in light of payment delays.

"There are lots of projects but there's always a liquidity concern in the market so we have to be very careful about whom we're supplying the material to."

Companies in the UAE and wider Gulf region have struggled with late payments as low oil prices have prompted governments to conserve cash flow.

Credit insurer Coface told Reuters in February that the rate of payment delays in the UAE increased between the first quarter of 2015 and the third quarter of 2016, due to the liquidity squeeze and a lack of funding from banks.

Sajan said his company purchases credit insurance to protect against the risk of non-payments. This protects the company against losses arising from unpaid invoices and insolvencies of buyers.

"We don't want to just jump in and then wait for our money, that's the reason we're very cautious," he explained.

"Today, if I want to double my business I can do it, but I don't want to do it, I want to be sure that I'm collecting the money on time."

Danube Building Materials FZCO has grown into Danube Group, with multiple subsidiaries including furniture division Danube Home, real estate development arm Danube Properties, and Alucopanel Middle East LLC, its manufacturing facility for non-combustible A2 Aluminum Composite Panels.

Danube Properties has three billion dirhams worth of projects under construction, with four projects worth about 1.1 billion dirhams due to be delivered this year.

(Reporting by Megha Merani) ((megha.merani@thomsonreuters.com;))

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