It's not every day that a real industrial giant enters into a collaboration with an Israeli company. Even rarer are the occasions when an upright US giant agrees to deviate from its successful modus operandi worldwide, and place its full confidence in an Israeli partner. One notable exception to this is US aluminum giant Alcoa Inc. (NYSE: AA), which in June signed a collaboration agreement with Israeli aluminum Klil Industries Ltd. (TASE: KLIL). David Schlendorf, president of Aloca's building and construction systems division, talked to "Globes" during his visit to launch the collaboration at the end of June.
Globes: Why Israel, and why now?
Schlendorf: "Our goal is to reach a 20% share of the curtain wall market in Israel by the end of 2008. We're looking for interesting markets, and as far as we're concerned, the Israeli market has some interesting growth opportunities, with a relatively low level of competition, and Klil can help us enter this growing market. It has strong local support which will make an excellent platform for Alcoa's penetration of Israel, because of its extensive and longstanding contacts within the local real estate market, and with key authorities, investors, architects, aluminum specialists and so on. In addition, Klil will create a convenient and professional logistical supply and production chain. The added value that Alcoa brings to the Israeli real estate market is its vast experience in curtain wall systems for luxury high-rises worldwide, and the global reputation of the Alcoa and Kawneer brands."
Schlendorf repeatedly praises Klil's performance and its CEO Arie Richtman during the interview, and stresses that this is the first collaboration of its kind in the world. "We're not talking here about importers or agents that buy our products, but full partners in development and production." During the interview Schlendorf mentions a few of Klil's unique inventions, such as the first sliding blind with a hinge than enables it to be opened inward for cleaning.
Which products will you be focusing on in the Israeli market?
"A lot of our products are designed for universities, medical centers and similar institutions. We have a special department at our subsidiary Kawneer that designs all the special systems according to the project or architectural specifications, and these are the systems that will be introduced in Israel and produced, in part, on demand, for curtain walls, among other things."
$30 billion turnover
Alcoa ended 2006 with sales of $30 billion, of which more than $1 billion was from aluminum building products. The company's sales have grown by 30% over the last two years. Aloca is competing with a Russian rival for the prestigious title of the world's largest aluminum producer. Among the solutions its subsidiary Kawneer will offer Israel's building sector are, for example, state-of-the art curtain wall systems with hidden ventilation that enables the circulation of air inside a room even when the windows are shut.
Asked if the collaboration between the two sides will be limited to the local market, Schlendorf replies that he intends to leverage the platform in Israel, and the local market's familiarity with Alcoa's products, for the benefit of the many Israeli developers operating overseas. "Alcoa views the entry into Israel and the collaboration with Klil as a good platform for creating contacts with Israeli developers who develop, design, and build projects outside Israel. Through the entry to the Israeli market, and the creation of direct contacts with leading real estate companies in Israel, the Israeli companies will get to know Aloca and Klil's products and capabilities, and this will also lead in the future to the integration of both companies' products and capabilities in Israeli projects overseas."
What have you learned about the high-rise market in Tel Aviv? How will your plans affect the city's skyline?
Klil CEO Arie Richtman answers in place of Schlendorf. "Alcoa has singled out the luxury high-rise curtain wall market in Israel as a strategic and interesting one in the Europe and Middle East sector. This market is likely to experience sharp growth over the next five years. Our assessments have revealed that the value of raw materials for the aluminum used in each high-rise in Israel is an estimated $1 million. Considering that 140 high-rises are slated for construction in Tel Aviv in the next two years, sales of raw materials alone will amount to $140 million, while sales of aluminum products to the luxury high-rise market will reach $500 million. I believe that together, we can meet the 20% target."
Battling for first place
Both partners believe that as a consequence of the entry by a company of Alcoa's size to the Israeli market, every residential, commercial, or office project built will benefit from an additional valuable factor carrying considerable leverage on top of the options they currently have. The curtain walls, and unique doors and windows that Klil will produce and market under the agreement with Alcoa, will be tailored to meet the stringent requirements for products used in high-rise construction. Additionally, Klil employees will undergo specialist training at Alcoa factories in the US and throughout the world.
"Aloca has been operating for more than 120 years, since 1886, and our situation has never been better," concludes Schlendorf. "Sales are constantly rising, and I expect the demand for aluminum to double within as little as 20 years, so we have a lot of work ahead and a great future. The quantity of aluminum per capita worldwide is rising consistently. And if you think how far this demand could reach thanks to developing countries like India, China, and Brazil, it's amazing. The aluminum industry is in the best situation ever in its 130 year history."
Published by Globes [online], Israel business news - www.globes.co.il - on July 12, 2007
© Copyright of Globes Publisher Itonut (1983) Ltd. 2007