A critic on the equipment holding company


Founded in 2002, Equipment Holding Company is envisioned to capture both local and international markets in the realm of construction and industrial equipment.  Under the leadership of Ahmad H. Al-Khadda, Chairman of the Board and Managing Director of Equipment Holding Company, the holding company’s operations based in Kuwait evolved from its start-up operations established in 1952 as Equipment Co. W.L.L. into the industry leader that it has become.

Today, Equipment Holding Company – through its subsidiary company, Equipment Co. W.L.L. –  is the primary distributor of construction and industrial machines and spare parts in Kuwait.  Through the years, the company has built a great name and has achieved a solid reputation for supplying high-quality products and excellent after-sales service to their customers.  (Equipment Co. W.L.L. website)

On top of its distributorship, the company carries out repairs for heavy industrial machinery.  Its range of construction products include construction equipment, road repair equipment, concrete pumps and mixers, cranes and lifting equipment, earth moving equipment, ground support equipment and power tools.  On the other hand, its range of industrial products includes boilers, cleaning equipment, electrical and diesel power-generating sets, fire-fighting equipment, machine shop and material-handling equipment, power protection utilities, communication equipment, storage equipment, marine equipment and fast boats.   (Google Finance website)

Thus, with the company’s menu of products and services, its customer base has grown year-on-year, with each prospective client becoming a loyal customer and then with new ones unceasingly coming in.  In Kuwait, the company exclusively represents world-class manufacturers of construction and industrial machines and spare parts such as the following:


Having built strong ties with these companies and with its half a century’s worth of goodwill, Equipment Holding Company sees years of continuing partnerships with these manufacturers.  (Google Finance website)  The company’s 55-year-old existence in Kuwait, therefore, coupled with its consistent commitment to the delivery of quality products and services, has enabled it to win the respect and preference of both its suppliers and customers.

It is not surprising, then, that Equipment Holding Company –  again, through Equipment Co. W.L.L. – stands to be an accredited Mechanical and Electrical Contractor with the Oil Sector, the Ministry of Defense, the Ministry of Electricity & Water, and the Fire Brigade of Kuwait.  The company has first-class facilities – new headquarters, showroom, and automated systems for its warehouses.

Its Central Workshop and repair facilities are fully equipped to perform overhauling and sophisticated repair works.  In addition, the company’s mobile workshops, all manned by fully capable and skilled technicians trained in the manufacturers’ facilities, are ready on the road for emergency repairs at the customers’ site.  (Equipment Co. W.L.L. website)

The company is geared for globalization.  It is ever dedicated to excellence in the quality and standards of the products and services delivered to its customers.  To solidify this claim for effective total quality management, the company worked for and received its ISO 9001-2000 certification from SGS Switzerland.  (Equipment Co. W.L.L. website)


Indeed, the company extended the borders of their operations to include territories beyond Kuwait and ventured into international business.  Authors Oded Shenkar and Yadong Luo describe international business as the outgrowth of domestic business.  It is a fact that most major corporations that are active in today’s international scene started their operations in the domestic market.  (International Business; 2004)

The same applies to the Equipment Holding Company.  It commenced operations in Kuwait with the Equipment Co. W.L.L. and launched its international business operations decades later, when it has become an unquestioned market leader in the place of its origin.  During an interview, Ahmad H. Al-Khadda has said that they made their way to success by starting with one company in their motherland, then by expanding internationally under a new name for each new country added to its operation sites.

Timing was critical, as well. Based on what Ahmad H. Al-Khadda further said during the interview, their success was largely due to the booming economies of the countries when they entered such international markets.  It was a matter of capturing the opportunities at the right time.  It meant going for and making the most of opportunities before were lost and wasted.  Ahmad H. Al-Khadda was a visionary who dared to plan and set forth for operations beyond Kuwait.  And he realized his plan and actually started the company’s involvement in various transactions involving international business.

“In each country we entered, we discovered that there are a lot of opportunities and potential for the business,” Ahmad H. Al-Khadda went on saying.  According to him, ISO certification helped improve their market position.  Capitalizing on their established name in the market, they also signed Memorandums of Understanding (MOUs) with companies in the countries in which the new companies of the holding group operate.

Thus, the once Kuwait-based presence and operations of the company are presently thriving in other countries as well.  These countries have been identified and targeted by management as critical and attractive markets for its menu of products and services.  Today, among the subsidiaries, associates and joint venture partners of the company – other than the pioneering Equipment Co. W.L.L. – are the Al Khadda International General Trading & Contracting Co., the Arabian Gulf Pearl for General Trading & Contracting Co., Alghanim Specialities Co., Chloride and the Future Ready Mix Concrete Co.

(Gulf Base website)  All these entities resulted from the company’s bid to forge alliances with other reputable industrial groups in Kuwait, as well as strategic joint ventures with co-related groups such as construction equipment dealers and construction contractors who all would, through their operations, bring additional expertise and value to the company.   These moves are all in tandem with one of the company’s current objectives – to invest in the growing local construction market.  (Equipment Holding Co. website)

The management deemed it a good move to participate at the international Trade Fair for the Rebuilding of Iraq. Then one of the company’s projects, the Kuwait Mall, has lately been completed.  Indeed, the company had a promising future in the construction industry.  It had plenty of chances to make it big in the industry, it was just a matter of managing the company’s resources and operations right.

Results and Conditions of Global Operations

The overall financial picture painted by the globalization of the company, however, is not as bright and satisfactory as probably projected by management. Though the company generated a net profit of KD 365,800 for the year 2006, such figure was a drastic drop of 92% from the 2005 net profit of the company.  To worsen the reported financial performance of the company, the quarterly results announced by its management during the year 2007 all reflected negative figures, as follows:

(Figures were taken from the gulfbasecom.siteprotect.net site)

a net loss of KD 192,000 for the first quarter (January to March 2007);a total net loss of KD 751,400 for the first half (January to June 2007), compared to a profit of KD 14,000 for the same period in 2006; and,a total net loss of KD 694,200 for the first three quarters (January to September 2007), compared to a profit of KD 48,300 for the same period in 2006.KD Million2003200420052006Total Income3.054.959.034.26Net Profit0.471.004.400.37EPS (KD)0.0060.0130.0460.0032003200420052006Return on Assets2.70%4.31%17.67%0.97%Return on Equity5.34%10.28%29.75%1.48%(Source:  Arab Stock Market Analysis)The figures above are totally alarming.  They talk of profit figure for the year 2006 that was much lower than the equivalent figures in the previous year.  Considering that 2006 was the year when the company ventured to invest in a lot of joint ventures and projects, this decreased net profit figure for the year is way below expectation.  It means the company’s capacity to generate positive income figures is deteriorating.

Consistent with the downward trend, all quarterly income and profit figures of the first three quarters of the year 2007 turned out to be negative figures.  While the official financial statements for the entire year 2007 are not yet published as of the time of this writing, there is a great possibility that the operations did not turn around during the fourth quarter of 2007 – the entire year 2007, therefore, probably will  be a period of financial operating loss for the company.

The management has to arrest the situation before it continues in such a disappointing pattern.  Otherwise, all the past abundant and prosperous years of growth and profitability will be offset by incoming years of operating losses and deficit.  This adverse result which will use up gradually the company’s reserves or worse, the company’s freshly infused additional working capital.

As it turns, the company’s investors have been pumping in additional capital during the past years, especially in the year 2006.

Balance Sheet DataKD Million2003200420052006Total Assets17.3123.2624.9137.69Total Liabilities8.5713.5210.1112.92Equity8.749.7514.8024.77Share Market Price (KD)0.4550.2360.4500.255(Source:  Arab Stock Market Analysis)

The company’s balance sheets for the years 2003 to 2006 show that the company’s assets have been increasing year-on-year.  In sync with the materially decreased net income yielded by the company’s operations for the year 2006, the assets and equity of the company increased by a great percentage in 2006.  This means that so much asset acquisition and so much additional investments were infused into the company and then were used in the company’s operations in the year 2006, only to result to income figures way below the levels of income and profits enjoyed by the company in the previous years.  Again, the management has to arrest the situation and change the trend that the company seems to be following before heavy losses of capital will occur.

What Went Wrong?

The Arab Stock Market Analysis on the Equipment Holding Co. details the principal activities of the company as follows:


In a nutshell, the company may have been spread itself too thinly, so focused as it was on the expansion of its operations to include international territories.  After its solid place in Kuwait as the major distributor of construction and industrial equipment and as the main repair and maintenance services provider for such items has been put in place, the company has ventured to include storage and construction in its menu.

From such point, it next launched its global operations, partnering with selected existing companies which Equipment Holding Co. bought into.  One big mistake committed by the company management was to use the company’s cash resources to issue loans and advances to its new subsidiaries.

While it is true that providing the needed financing for its partner-companies and acting as guarantor for the latter’s loans were all considered as equitable moves that should generate in the end returns for the use of the company’s cash and liquid assets, the more important concern was the management of the projects and ventures.

These programmed activities were supposed to be watched closely so that the resources expended for them to be implemented would be safely recovered and would yield reasonable returns.  With all eyes on look-out for the next project to launch, the next entity to partner with or the next company to invest in, Equipment Holding Co. may have failed to give adequate attention to what has been going on in its operations.

Recommendations for Operations Improvement

Former Chairman and CEO of General Electric (GE), Jack Welch, has written:  “Companies have a habit of sending expendable bodies to run new ventures.  The old manufacturing guy whose children have grown and is looking for added adventure in the two years before his retirement is sent to a foreign location to start up a new plant.  It’s nuts.  For a new business to succeed, it has to have the best people in charge, not the most available.”  (Winning; 2005)  This has been written in the context of an American conglomerate like GE, but this may have applied to the Equipment Holding Co. in their process of assigning managers to lead the international business operations.

This advice, if taken and used to improve the operations of the international businesses of the company, would mean better results in the next quarters and in the next years.  With the right manager assigned, the various projects of the company would yield positive earnings and will further enable the company to grow globally.

Regular monitoring and feedback systems will have to be set up.  Problems concerning one of the company’s foreign operations will have to be diagnosed at an early stage.  This way, it can mean timely intervention from top management – less damage and less loss will be incurred.

Thus, with keen-minded managers at the international sites and top management on the alert for even just subtle signs of a dilemma, the affairs in the individual expansion areas of the company abroad will run smoothly and profitably.

The company’s management may have already learned that international business is significantly more complex than domestic business and often requires different types and scale of resources and capabilities.  Although international business is often an extension of domestic business, it is significantly different from the latter.  Many firms have been successful domestically but failed to replicate that success abroad.  (Oded Shenkar and Yadong Luo; International Business; 2004)  If things do not make a turnaround for the Equipment Holding Co., then their story would sadly end with their failure to attain in each new territory the same success as they have in Kuwait.

The company, even before embarking on expansion moves in other countries, would do well to study the differences prevailing between its country of origin and the prospective site of its upcoming international business venture.  Among the differences to identify, explore and plan for are those pertaining to environmental dynamics and operational nature.

Environmentally, the diversity that exists between countries with regard to their currency, inflation and interest rates, cultures, social systems, business practices, laws, government regulations and political stability is one of the reasons for the complexity of international business. (Oded Shenkar and Yadong Luo; International Business; 2004)  It is never wise to assume that the conduct of things in another country will be just the same as the way things are done at home.  Launching an international business involves embracing the given environment elements in the expansion area.

They are either in agreement with the existing system and procedures the company has, or not at all.  The people assigned, the resources allotted, and the systems design for the company’s operations in a foreign place will have to agree with the circumstances there.  As an adage goes, “When in Rome, do as Romans do.”

Operationally, international business tends to be more difficult and costly to manage than economic activities in a single country.  Benefits might not be realized if an international firm cannot run a complex business effectively.  (Oded Shenkar and Yadong Luo; International Business; 2004)

The Equipment Holding Co. management should rethink the company’s plans, projected revenues and costs, and measures for addressing probable problems pertaining to the human resources, marketing schemes, financial matters and operational hitches in their international businesses.  With all these possibilities competently prepared for, then the businesses can run smoothly in their respective foreign territories and the company will have better chances for generating better and positive figures henceforth.


The year 2006 has not been a year of  impressive operating results and performance for the Equipment Holding Co.  The company has made moves for expansion in the international arena, and there is no turning back.  Making the company’s international operations profitable should be the management’s immediate goal and target.

The company would be prudent to consolidate its holdings and stakes in various companies and ventures – in Kuwait and abroad –  and focus foremost on becoming a strong and stable conglomerate.  Each of the various international businesses of the company should be independently profitable and sustainable.  Then and only then can it look forward to the further growth and expansion of its international businesses.


Equipment Co. W.L.L. website (www.equipcokuwait.com)

Google Finance website (www.google.com)

Shenkar, O. and Y. Luo.  International Business.  USA:  John Wiley & Sons, Inc., 2004.

GulfBase website (gulfbasecom.siteprotect.net)

Equipment Holding Co. K.S.S.C. website (www.equipmentholding.com)

Arab Stock Market Analysis (www.asmainfo.com)

Welch, J. Winning. New York: HarperCollins, 2005.