Arc gives Deanall Barnes a shot at running manufacturing company
Deanall Barnes, acting chief executive officer for Arc Manufacturing, one of Jamaica’s largest construction materials firms, wants the Government to pursue policies that give greater support to local manufacturers like his firm.
He notes that import substitution, by making more value-added products for the local trade and export, stands to significantly improve not just the financial bottom line of manufacturing companies, but also the country’s balance of payments.
“There has to be a strategic move by the Government, whether formed by the party in power or the one in Opposition, to identify certain strategic sectors or areas of the economy where there is significant available labour and direct policies to support those sectors,” he said noting that manufacturing, with its scope to absorb the country’s large unemployed labour pool, is more than ripe for special government attention.
The perceived absence of such special consideration from government, however, has not stymied the expansion of Arc’s manufacturing footprint over its 21 years of operation.
It has moved from being solely a zinc sheet-making factory in 1996 to adding to its production line a wide range of building materials, including roofing tiles, barbed wire, binding wire, chain-link fencing, nails, steel, treated lumber, and other products.
Going bigger globally
The private company, owned and chaired by Norman Horne, is said to be finalising preparations for ISO 9001 certification as it eyes a bigger slice of the global trade in construction materials. To grow foreign sales of its locally made products beyond the current five per cent of its gross sales, Arc has plans to go a step beyond the incremental addition of new light manufacturing plants that has been its growth model in recent years.
“We are looking at putting down a major multimillion-US dollar manufacturing plant, and both the chairman and I have been in intensive discussions all over the world to try to finalise that,” Barnes said. Asked if this would require new or expanded acreages for Arc’s current manufacturing base at Bell Road in Kingston, the acting CEO answered in the affirmative, but stopped short of saying if this would mean relocation or the buying up of adjacent properties.
“What I can say is the cheaper energy becomes, is the more likely it is that the project will come to fruition; and the project, if it comes on stream, is estimated to save Arc net US$4 million a year in importation,” Barnes said.
Already the company has seen huge savings in energy costs from the investment of some US$500,000 in solar technology about three years ago.
Plans for the expansion have taken the Arc leadership team to Singapore, Turkey, and the United States in the hunt for new markets to take off the massive output which will emanate from the expanded production line.
Barnes says Arc executives will be keeping plans for the financining of the venture close to their chests for now. However, it would appear that financing will be made easier as the company chairman and president, Horne, is principal of a financing firm in the United States that already partners with the Jamaican manufacturing plant in growing its business. The acting CEO has also let on that borrowing from local banks has played a major role in Arc’s accelerated production roll-out over the years.
“As a company, we borrow mostly in the domestic market at reasonably competitive rates,” he said.
Arc is contemplating an initial public offering that will see a still unspecified number of shares being made available to investors via the stock market. Barnes said preparations for the listing are under way.
Arc already produces audited financial statements within time frames that would be required for submission to the Jamaica Stock Exchange. The board is also being reconstituted in keeping with the best practices of a public company.
Barnes, 42, whose substantive title is senior vice-president for international business and marketing, but has been acting top executive for a month now, has a lead role in nearly all aspects of the business, including purchases, pricing, public relations, product development, sales and collections.
Strengthening export arm
The University of the West Indies graduate with a first degree in accounting and management, a master's in international business, as well as a law degree, is also leading the global sales push.
"We want to fully develop our export arm. Within the next three years, we want exports to contribute a minimum of a quarter of the company's revenues. It is very important that we expand outside Jamaica, as we now have a relatively small consumer base here. For us to be globally competitive consistently, we have to be producing at a level where we can compete with East Asia - China, Vietnam, Laos, Bangladesh - all these counties with significant populations and relatively cheap labour."
Arc now sells overseas to Guyana, the Cayman lslands, Grenada, Haiti, the United States and the San Andres island of Colombia. Barnes, who says he speaks some Spanish, is also leading efforts to develop the markets of Honduras and Nicaragua.
Another line of business is "foreign foreign trade", that is, buying commodities in a foreign country and selling to other countries without landing them in Jamaica. This constitutes some four per cent of gross sales and mainly involves primary cement, which it sources out of the United States. The company plans to broaden this business to include international trade in lumber and plywood. An initial shipment of these new products is said to be destined for Haiti by the middle of September.
Barnes, a former banker and university lecturer in financial management, is upbeat about Arc's future. While conceding that the company's growth has been assisted by the current relative stability of the exchange rate, he is convinced that the next chapters of the firm's expansion require continued focused attention on the intricacies of the global business.
An entire department of the 400-plus workforce across the Arc group, which spans companies in Jamaica, Panama and the United States, is said to study global trade patterns and seeks to perfect the manufacturing of products which continue to replace imports.