AMMAN – The family business that grew into the conglomerate that is Nuqul Group started more than 60 years ago, trading imported goods from Europe. Nowadays, Nuqul Group is one of the largest companies in Jordan, with multiple operations across the region. The company’s most successful venture is their landmark brand “Fine Hygienic Holding (FHH)”, which manufactures, converts, sells, and exports all sorts of sanitary products ranging from facial tissues to diapers and jumbo rolls.
Today, Salim Karadsheh, CEO of Fine Hygienic Holding, has a considerable challenge on his hands to uphold a successful brand given regional political turbulences, oil price decline, and a global market still recovering from recession. He tells METissue how Fine has evolved from one small converting plant in Amman’s Souq Al Sukkar, to a word that is synonymous with tissue paper in regional households.
Elia Nuqul, the founder of Nuqul Group, first set foot in the hygienic paper products industry by importing toilet paper from London in the 50’s. Originally a refugee from Palestine in 1948, Elia started a food trading business in downtown Amman called Nuqul Bros. In its infancy, the company traded imported household goods and an assortment of foods from Europe.
On one of his business trips to London, Elia found out that the toilet paper he was importing to Jordan through England was actually manufactured in Sweden. This logistical ineffectiveness bothered Elia and forced him to take matters into his own hands: what started out as a modest trading operation soon expanded into Elia deciding to buy his own toilet-paper manufacturing and converting machine.
“It was the first one in the region,” Salim Karadsheh said, speaking about the toilet paper machine in Amman’s Souq Al Sukkar, adding that “the regional demand did not justify a need for selling raw material just yet, leading to the company selling toilet paper under its own brand”. A few turbulent years of losses followed, but on another business trip abroad, Elia defiantly came back with three new machines, and tried again. In following years, the company had installed two mills in Jordan, and two in Egypt, and converting lines in Lebanon and Kuwait.
What started out as a toilet paper machine experiment soon expanded into mass production and conversion of hygienic products such as kitchen towels, coasters, table napkins, diapers, feminine sanitary items and the staple Fine facial tissues. By the mid-1980s, this operation had expanded into all regional markets, and included all of Elia’s children, of whom Ghassan Nuqul still runs the business as Chairman today.
The Business Today
Elia – who is currently in his 80s – remains the Godfather of Nuqul Group, while Ghassan and his brother Marwan sit on FHH board. Little over a decade ago, the company’s family-run business model gave into a family-owned business model, and today, the CEO of Fine Hygienic Holding is not from the family itself. At the time of the decision in 2004, almost all privately held Jordanian businesses were family owned, but the group’s expansion required that each company hired talent with fresh approach towards corporate governance, while maintaining a firm commitment to the company’s core values.
Most family-run businesses simply cannot expand past a certain point, explains Karadsheh, as they “lack the accountability, experience and subject matter experts” needed for medium sized firms to grow into multinational businesses.
Corporate governance has unquestionably been a driving factor in the company’s stability and momentum towards the global market. Decentralization of roles has allowed the company to protect the interests of stakeholders, clarify the overall group strategy, and even facilitated loan processes with banks, who were more comfortable in dealing with outsourced management than a family-run business. Delegating authorities down the ranks expands accountability, creates faster speed, reduces cost and removes bottlenecks. It further enhances the ownership level and generates loyalty and makes a better work environment.
The head office in Amman currently employs over 100 professionals who “are responsible for setting the strategic direction and following up on the performance of all FHH companies”. Globally, the group employs some 4,200 staff members, located across the Middle East and North Africa. In 2014, FHH launched a new 5-year business plan, with a vision set on further growth both regionally and internationally.
Karadsheh explained how the company takes pride in their work environment and the company’s diversity. FHH has employed professionals from 33 different nationalities working across their MENA facilities, with an average age of 37 years old. FHH prides itself in the job market for the fact that their code of conduct enforces equal opportunity for employees regardless of gender, ethnicity or religion. In fact, working mothers who have been employed with FHH for more than 5 years are allowed to work a reduced number of working hours per day to enable them to enjoy a better home-work balance. Education and training granted to FHH employees enable them to grow and follow their dreams. On top of all of that, it is one of the few companies with mandatory safety inductions and employee training courses.
Current FHH products have expanded from facial tissues, napkins, and baby diapers, into commercial, industrial, and medical sectors through their Fine Solutions brand, which provides “superior products engineered for uncompromising hygiene, optimized cost, and performance efficiency”.
The company is not limited to hygienic tissue converting; FHH has also dabbled in the realm of non-woven manufacturing via their Specialized Industries Co. Ltd. (SPIC) operation, and currently also runs a packaging and printing press called Perfect Printing Press (PPP).
Against All Odds
When asked about how he came to be the CEO of FHH, Salim Karadsheh mentioned that it was pure coincidence.
“I was actually educated as an Electrical Engineer, and worked in that field for 6 months, but was not enticed by it. I then had a career shift and diverted into Oil & Gas in the GCC to gain experience for a short while, but did not find myself there either.”
In 1986, Karadsheh came across a job opening in operations and maintenance. “Like the vast majority of regional companies at the time, there were no specific departments or job roles and descriptions. My first impression is that I would try it out for a couple of years, and it’s been 30 years since then.”
At the time, employees simply did their routine tasks day in, day out. The company simply reacted to the market’s needs as they came along. That was the area where Karadsheh saw an opportunity to be proactive, and as he became more and more involved with the company’s affairs, the higher-ups gave him an opportunity to grow. “One job led to another, and at one stage, the leadership decided to separate the management from the ownership, which is when I was invited to lead the core business, and here I am today.”
Karadsheh goes into detail explaining how the ability of business to grow today has changed dramatically since it had been before the 2008 crisis. “Earlier the banks played a role that fueled the growth of companies such as ours. We had the ability to replace a loan with another loan, and as the business grew and profits skyrocketed, we had the ability to shrink the debt margin, allowing us to take another loan and grow.” Banks, having learned their lesson from 2008, no longer operate under such a relaxed model, and newer rules and regulations have caused companies to look for alternative paths to drive their development.
The company’s cash generation ability was eroded around that same time, when the Jordanian government changed its policy regarding fuel, and hiked up the prices of energy. The price of energy soar was triggered by the disruption of the gas line from Egypt, which provided over 80% of Jordan’s energy at the time.
FHH faced yet a third major obstacle in 2011, due to the Arab Spring, which the regional market has yet to recover from. “The political and civil unrest in Syria, Iraq, and Egypt caused unexpected major disruptions in FHH’s growth in these regions, and across the Middle East as a whole.”
Despite all of the above, tissue consumption in the Middle East has been growing steadily over the years. Given these circumstances, and in a bid to meet the group’s former growth expectations, investors were invited to hold a stake in the company led by Standard Chartered Private Equity.
A strategic approach to the relation between FHH, its suppliers and customers created a “Growing Together” mentality. “Collaboration between two-entities in the modern day market is a no-brainer,” describes Karadsheh, where companies the size of FHH often might require even three, or four-entities to collaborate along “the supply chain of hygienic paper production all the way from the forest to the toilet flush.”
Time and time again, FINE was the first to introduce brand-new technologies to the region. In 1991, the company introduced the first fully-automated paper mill in Egypt. “At the time, it was also the largest capacity machine in the Middle East,” added Karadsheh. Around 1996, FHH founded yet another paper mill, which surpassed the size of the first one, becoming the new largest paper mill in the Middle East. The need to meet consumer demand was followed by introducing yet two more paper mills in 2005 and 2007. Every time a mill was built, older ones were rebuilt to bridge the gap in technology. At the moment, there are four major virgin pulp tissue mills, two in Egypt and two in Jordan.
The company’s fifth major tissue mill, Al Nakheel, is currently being built in Abu Dhabi with a cost of $90 million and estimated production of 60,000 tons of tissue paper per year. Planned to start operation in 2017, the machine used issupplied by Valmet, who will also handle setting up the machine, from stock preparation to rewinder.
The Valmet Advantage DCT TS machine will feature cutting edge technologies such as ViscoNip press, AirCap hood and a SoftReel reel. With a width of 5.6m, and design speed of 2,200 m/min, the new line will be installed in the FHH grounds at Al Nakheel mill in Abu Dhabi’s industrial area. The tissue machine also comes armed with an OptiFlo II TIS headbox and a cast alloy Yankee cylinder.
The rationale behind building a mill in Abu Dhabi resolves a serious logistical challenge the company is facing: “The Egyptian mills cover North Africa, and our mills in Jordan produce paper for the Levant,” elaborated Karadsheh, “Our manufacturing model requires us to produce closely to where we are converting, as opposed to have goods taking a long time on the way”
FHH revolutionized the industry with its own sterilization methodology called SteriPro™. The innovative technology is utilized in their manufacturing process using ultra violet sterilization, by methods of fully automating the manufacturing process, thus drastically reducing the hazard of contact with germs. They were the first to also introduce the WetPro™ technology to the Middle East. Karadsheh describes WetPro as a technology that allows end user tissues to handle substantial quantities of water and remain intact, but fully disintegrate when flushed, thus eliminating the need for a toilet dust bin, and enabling the use of the product in western type and squat type toilets for cleaning and drying purposes.
FHH also has a system called Idea-T, which is an Arabic-English play on words translating to “My Idea”. The concept behind Idea-T is to allow employees to innovate by proposing new ideas that the company could utilize. These ideas are then presented to a senior committee, and if accepted, the employee gets rewarded and the idea is taken into the next stage of execution.
When asked about the company’s research and development side, Karadsheh said that “we don’t need any more inventors here. We need innovators. Inventors can come up with solutions for a problem, but innovators are the ones who create radical technologies by addressing the consumer needs and challenges”. He elaborated on the fact that FHH’s size and market influence in the region do not allow them to conduct pure, independent research.
“What we do, instead, is collaborate with research entities, suppliers and consultants to adapt to new technologies; it’s like a jig saw puzzle where we fill in the pieces we have and engage partners to fill the ones we do not ” adding an example of how FHH would take inspiration from the methodology chemical plants depend on to sterilize their products, and then modify them to suit the tissue conversion industry. These adaptations, according to Karadsheh, allowed FHH to stand out among its peers in efficiency resulting in “less downtime, value creation, more efficient use of capital, and enhanced ease of maintenance.”
Regarding innovation in terms of energy, Karadsheh mentioned that FHH had brought three existing parties to create a self-sufficient model, which has become a new standard in power cogeneration in the industry. According to Karadsheh, the power generation capabilities are so competent, that global firms visited Egypt to see how it works.
The Business Side
Despite all of the variables the regional economy has gone through in the last few years, FHH has remained buoyant as a business, recording a total revenue of $688 million in 2014, down from $701m in 2013 – the drop comes from exiting disrupted and sanctioned markets and divesting the feminine care business. The governmental taxation laws and regulations have fluctuated as well, where government’s growing budget deficits are leading them to encroach more and more on the private sector in this politically charged and oil price challenged time.
Following the $175 million investment for significant minority stakein Fine, Standard Chartered Private Equity (SCPE) was granted two seats on FHH’s board, marking SCPE’s second investment in a Jordanian-headquarted company. This move was meant to allow FHH to expand into Africa and lead to an eventual IPO for FHH. An independent member of the board was also invited to add industry knowledge to the board. The change thus created is adding value to operations by offering challenge to old set norms in FHH and questioning attributes that otherwise may have passed unquestioned.
Fierce International Competition
In the wake of lower-quality East Asian – mainly Chinese – hygienic tissue products flooding the market at absurdly cheap prices, many regional companies had to cut corners and reduce costs as well as quality to match their competitors. Some measures, which Karadsheh considers questionable at best, included tissue producers “selling two-ply 150 tissue boxes labeled as 300 sheets, along with other debatable measures like actually delivering lower counts, or copying successful brands”
When asked about how Fine handles this challenge, Karadsheh seemed unaffected. “It’s all about the brand quality at the end of the day. We are long termers and not seeking short cuts, and finally the proof is in the pudding. Our customers know what they are buying and the last moment of truth is when a consumer experiences the product. Also, Fine sells a plethora of products under different brands with multiple levels of excellence for all segments of the regional markets,” he adds that FHH follows certain ethical and sustainability, responsibilities that other companies might not have the luxury of considering. “There is a legacy to our brand. Even our products of similar price range as the Chinese ones follow the strictest manufacturing and environmentally friendly requirements.”
Karadsheh is proud of the financial direction the group has taken under his lead, but ask him about his most important decisions, and you’ll get an answer about sustainability. As Fine is the Middle East’s largest tissue manufacturer, the responsibility of FHH in preserving the world’s forests is one with the group’s brand value. Having started their Sustainability Report in 2008, the company has academically studied all environmental and social aspects of the business from sustainable forestry to efficient sizing of products, energy consumption and water use.
At the cost of hampering profits, Karadsheh tell us that Fine relies on pulp that “is sourced from well managed forests, which follow tough third party forest certification systems such as the Forest Stewardship Council (FSC) or the Program for Endorsement of Forest Certification Schemes (PEFC).” In 2014 alone, 38.4% of the company’s purchased pulp was FSC/PEFC certified, seven times more than what it was in 2012. All comes from sustainable forestry.
Last year, FHH in Egypt acquired the capability to use 100% Eucalyptus pulp, a feat the company presented at the Tissue World Conference 2014. The reasoning behind using Eucalyptus as opposed to other sources of pulp is because Eucalyptus has a much shorter life cycle – almost 1/4th that of a soft wood tree. This allows FHH to streamline the process of tree reforestation at a quicker pace, while generating higher volumes of end-product with a peace of mind.
In an effort to become more efficient and reduce their carbon footprint, the company followed the ISO 50001 in its Egyptian and Jordanian mills. The ISO certificate represents efficient energy management systems, and has since then reduced their total operation and distribution fuel consumption from almost 2 million Giga Joules in 2013, to 1.6 million Giga Joules in 2014, effectively cutting greenhouse gas emissions by 8.25%.
The Future of the Industry
If the past 8 years have been challenging for regionally based companies, the next few years might require the most delicate forecasting the region has faced to date. Oil price volatility and currency deflation put aside, the region’s geopolitical disruptions have resulted in new target audiences of varying needs, priorities and budgets.
When asked about his estimations for the future of the industry, Karadsheh paused and then said truthfully that “nobody knows. All of the forecasts of yesteryear are being challenged today. For example, when preparing our budget plan for this year, our reports and forecasts assumed the price of oil would be $60 USD, this was then revised to $50 early January, only for January to average below $35 a barrel. The Euro parity to the dollar is not going towards the convergence people expected – or is it, and the American economy did not jumpstart the way everyone thought it would. All major corporations have over-built, over-consumed and over-borrowed, and we’re still feeling the consequences of that until now.”
Despite all of the odds, Karadsheh is hopeful. “The world is changing fast. We will always be ready for worst-case scenarios with proper expectation management and adapting to the consumer needs at all times. Flexibility, adaptability, speed and lean management commands more significance than at any other time”.