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Abu Dhabi, UAEMonday 18 June 2018

Exclusive: Strata eyes Saudi Arabia, Far East to build global supply chain

UAE aerospace manufacturer in talks with Saudi Arabia’s aerostructures firm Taqnia to build supplier ecosystem, expects revenues to be Dh500m this year, same as 2017

Strata CEO Ismail Abdullah at the Global Aerospace Summit. The company is seeking to expand. Chris Whiteoak / The National
Strata CEO Ismail Abdullah at the Global Aerospace Summit. The company is seeking to expand. Chris Whiteoak / The National

Strata, Mubadala Investment Company’s aerospace manufacturing unit, is evaluating expansion in the Far East through another plane-parts supplier and is in talks with Saudi Arabian firms to outsource work to the kingdom as it seeks to build a global network of suppliers.

Strata, which has $7.5 billion worth of orders from Boeing and Airbus until 2030, is negotiating with companies in Malaysia and China, where it has identified and visited suppliers, Ismail Abdulla, the chief executive of Strata told The National. The company will pick the companies and locations within 18 to 24 months before deciding on the form of partnership ranging from acquisitions to new facilities, he said.

“We want to build a network of suppliers that are part of Strata ecosystem which will facilitate Strata delivering on its commitments,” Mr Abdulla said. “Some will be closer to OEMs [original equipment manufacturers], some will be far, depending on their competitiveness.”

Strata is the Arabian Gulf’s only producer of aircraft components and is a key part of the UAE's efforts to diversify its economy from oil by building up its manufacturing industry. It started operations in 2010 and makes composite parts for jet liner wings and tail fins for Airbus A380 and A330 models, vertical fin ribs for Boeing 777s and 787 Dreamliners. It will also supply empennage ribs for tail planes the 777X, Boeing’s latest generation aircraft, in a contract announced Monday.

Strata is still evaluating partnerships in US and Europe, to be closer to its customers Boeing and Airbus, but has yet to make a decision. The preference will be to acquire an existing supplier rather than buy a new facility, Mr Abdulla said.

“Why shall we go reinvent the wheel?” he said. “Its better to partner with someone and just hit the ground running.”

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The company is also in talks with Saudi Arabia’s Taqnia to outsource work on aerostructures production to the country in two years and avoid duplicating efforts of the neighbouring countries’ aerospace sectors, Mr Abdulla said. Taqnia is a technology development and investment company owned by the kingdom's sovereign wealth fund, the Public Investment Fund.

Taqnia Aeronautics is building a facility that will begin operations in 2020 with production capabilities including fixed-wing and rotary-wing structures for commercial and military use and unmanned aerial vehicles (UAVs), according to its website.

“The strategy is that when we support them, we will have an agreement where some of the parts that we manufacture today or we buy from Europe and States can be manufactured in Saudi Arabia because it’s close to us,” Mr Abdulla said. “We complete each other, we do not compete.”

Strata would benefit by diversifying its supplier base, being close to its suppliers and creating an “ecosystem” of regional aerostructure makers to deliver on requirements of the aircraft manufacturers, he said.

The firm is targeting to maintain revenues at Dh500 million this year, unchanged from 2017, as the industry faces “challenging” conditions with a “slow-down” in plane orders by airlines in the short-term that is lagging behind forecasts of aircraft manufacturers, Mr Abdulla said.

Boeing, one of Strata’s main customers, is caught in the midst of a looming trade war between the US and China in which the Asian economic giant is threatening a 25 per cent tariff on aircraft.

But Mr Abdulla said Strata is “not concerned” about any potential impact on its production rates because of its diverse portfolio.

The company’s first-quarter sales reached Dh106m, and is on track to achieve its target of Dh1 billion in revenues by 2020, Mr Abdulla said declining to reveal when it will break-even.

The aerospace company will not seek to raise funds this year and is not considering an IPO at this stage, he said. It is not currently in talks with other plane manufacturers but is “keeping a close ear” to the industry for potential opportunities as they arise.

Strata said on Tuesday it completed the manufacturing process of an A330 flap track fairing that was redesigned by a team of Emirati engineers.