Sipchem CEO Ahmad Al-Ohali says the key to the company’s phenomenal growth is heart. Advanced, progressive and socially responsible, Sipchem has been making international waves since its conception. A leader in its industry, Sipchem produces a wide range of petrochemical, chemical and polymer materials that are used as feedstock for manufacturing products, including plastics, paints, textiles, pigments and dyes.
Starting from humble roots, Sipchem’s dexterous administrative, professional and technical capabilities, saw its swift rise to recognition as an important player in the petrochemical industry in both a regional and global landscape. The company generated a revenue of more than SR4 billion in 2017 and provides employment for more than 1,100 people all over the world.
Growth strategy and challenges
Ahmad says Sipchem’s present corporate strategy focuses on a custom blend of current and future products portfolio, allowing it to increase domestic output, in line with the government’s vision for diversification of Saudi Arabia’s economic growth. The strategy consists of four parts.
First comes operational excellence. The company aims to examine its business efficiencies and build and improve its capabilities. Second, Sipchem wishes to continue its growth, especially in Saudi Arabia, the US and South East Asia, where it already has a standing. Since 1999, it has built a major petrochemical plant every other year, totalling 10 today. Third, Sipchem needs to see where it can add value to its shareholders. And fourth, the company wants to see sustainability incorporated into the business, overflowing into its environmental awareness, safety, customer service, and corporate social responsibility.
Over the next three to five years, Ahmad sees Sipchem powering ahead to grow on all fronts, and sustainably. He believes that with the current economic conditions and the shift of the market to the US and China, the challenges are growing for the company. And that Sipchem may have grown too quickly, which while providing good integration and products, did not assist in building a strong balance sheet.
Thanks to the many hurdles he encountered when starting Sipchem, Ahmad is no stranger to challenges. Most will agree that building a globally recognised company is a daunting task, but Ahmad saw it as an exciting challenge. "It was thrilling to start a company from nothing; to strive, build resources and a recognisable name in the international petrochemical industry. When Sipchem was born, SABIC was the only one in the Saudi Arabian petrochemical market and we were up against them.
"It was thrilling to start a company from nothing; to strive, build resources and a recognisable name in the international petrochemical industry."
"During the summer of 1999, I presented the company’s concept in each of the Gulf Cooperation Council (GCC) countries," recalls Ahmad. "I would hold these huge work shows that were way over-subscribed. More than 70 investors came from all over the GCC countries, from institutions and large businesses to interested individuals." Ahmad’s work shows were a roaring success and Sipchem was officially born the same year, and he was appointed as the president of the company.
"Yes, it was a huge challenge, but I had a deep passion for the business and wanted to excel," he explains. "I desired more of everything for Sipchem. I wanted to create more jobs, bring in new technologies, tackle financing challenges and execute projects – all so we could sculpt the company with our own hands. After all that, we succeeded in negotiating joint ventures. "When we incorporated the company, we had to look for licenses, partners and financing, and we had to do the engineering, designing and construction. We didn’t have the support that SABIC had. During the company’s first 15 years, the passion was so amazing that it truly inspired phenomenal growth."
Indeed, Sipchem’s success means it now manufactures 2.7 million tonnes of petrochemicals a year. The company has also started manufacturing ethylene vinyl acetate, low-density polyethylene, ethyl acetate, butyl acetate and cross-linkable polyethylene.
Sipchem’s headquarters is in Al Riyadh, with an administration building in Al Khobar, while its research and development centre is in Dhahran Techno Valley. The main industrial complex is in Jubail Industrial City for production due to the availability of basic infrastructure, raw materials and supply of petrochemical feedstock in the Eastern Province. Jubail Industrial City is used as the primary transportation hub, enabling efficient export through the King Fahd Industrial Port.
Further, there are two plants manufacturing diversified products, and the Sipchem Marketing Company (SMC), a wholly owned affiliate, functions independently in the sales and marketing of Sipchem’s products. SMC has an ever-growing diversified product portfolio and markets more than 65% of its total merchant volumes on a global scale.
People and community responsibility
With impressive progress delivered year-on-year, Ahmad attributes Sipchem’s continued success to its employees, and how their capabilities have overflowed into the company’s focus on CSR and sustainability.
"From day one, it was clear that Sipchem could not just be hardware, steel and controls. The company needed to be a living organism, with a heart at its centre," says Ahmad. "I mean, business excellence, delivery and shareholder care are all important. But we must never forget the human part."
Ahmad feels the most difficult part was the initial building of the company and its capabilities, and selecting the right employees. He recalls he was very fortunate to be able to hire efficient and honest people. And impressively, most of his employees have chosen to stay with the company to this day. For Ahmad, the common traits running through all Sipchem’s employees are passion and courage, which have resulted in the company’s decision to bring more to the market than its main product, methanol.
Now, Sipchem has a flourishing reputation for often being the first to introduce new products to the region. Ahmad says it’s all thanks to his employees’ courageous nature. "Everything was a first. We say first because we had no technical expertise in the region. So, it took a lot of courage, but we brought new technologies and products. We had to build the capabilities in the organisation as well as in individuals. That mix of courage also led us to ask ourselves ‘What can we do for our employees and their families?’ and ‘What can we do for the community?’."
Ahmad is proud that Sipchem places great value on people and community responsibility. The company’s contribution to society is obvious – through job creation, community outreach programs and environmental awareness. And from the start, Ahmad ensured that the board cultivated a strong sense of humanity in the organisation. So, two or three years after the company was founded, there was a natural shift within the organisation from CSR to voluntary work.
Sipchem was the first chemical manufacturing company in Saudi Arabia to achieve a Responsible Care certification, and in 2010, Sipchem was awarded the Best Work Environment in Saudi Arabia. In 2011 and 2014, it won Best CSR Organisation in the Arab World. The company allocates 1% of its net profit to run a selection of CSR programs, spending up to SAR9 million a year. These programs, such as Orphans, focus on supporting women and children in need, to help them become self-sufficient. Sipchem has also aided in the construction of 30 residential units for Syrian refugee families in Jordan’s Zaatari camp.
"The real joy is when we hear positive feedback throughout the kingdom; it’s when we hear about our involvement in the CSR area," beams Ahmad. "It shows that beyond the hardware and software, there is a vital heart at the core of Sipchem. When we look at our employees’ voluntary donations, the numbers are increasing year-on-year."
"The real joy is when we hear positive feedback throughout the kingdom… It shows that beyond all the hardware and software, there is a vital heart at the core of Sipchem."
From the very beginning, Sipchem has emphasised the importance of a sustainable CSR program, prioritising this over once-off donations. Ahmad takes pride in the constant generosity that is responsible for fostering a healthy culture of CSR.
"Sustainable CSR is part of our promotion requirement, sustainability and credibility building," says Ahmad. "I really believe that human capital is the most important. I’m talking about the people who work hard, do good in the community and have a strong desire to see positive impact – they are the true assets."