Exclusive: Germany's Bosch eyes Middle East expansion after sales uptick

Bosch, the German multinational supplier of technology, services and consumer goods, wants to expand in the Middle East after reporting strong regional sales for 2017 and said its operations in Saudi Arabia are "unaffected" by diplomatic differences between the kingdom and Germany.

"We want to focus very closely on new business opportunities in each country and of course the way forward is to really increase our local footprint further," Volker Bischoff, vice president and general manager of Bosch Middle East, told The National. Markets of interest include Iraq – where Bosch does not currently operate – Saudi Arabia and Pakistan, he said.

Bosch operates in 14 markets across the GCC, Levant and Pakistan, which includes representative offices in the UAE, Riyadh, Pakistan, Lebanon and Qatar. This week, it reported an 11 per cent annual increase in revenues to €500 million (Dh2.17 billion) for the full year 2017, a continued uplift from €450m reported in 2016. Net profit is not reported at regional level.

Sales growth in the region is outpacing global growth – the Bosch Group registered a 6.7 per cent rise in revenues to €78bn in 2017.

“It was a fantastic set of results given the overall economic challenges worldwide, and looking at the Middle East it was a very good year as well, and a little bit higher than in 2016,” Mr Bischoff said. He hopes for high single-digit growth in 2018. “We are being cautiously optimistic about the year ahead, keeping wider macro-economic factors in mind.”

The Bosch Group operates in four main sectors: mobility solutions, including automotive and self-driving cars; industrial technology; building technology, including security systems and access controls; and consumer goods, mainly home appliances.

In the Middle East, there are further sub-divisions: power tools, including drills, jigsaws and grinders for the construction industry; hydraulics systems through subsidiary Bosch Rexroth; thermotechnology, including steam boilers and solar thermal systems; and computer software through Robert Bosch Engineering, which is part of the Mumbai stock exchange-listed Bosch India. All divisions in the region are growing, but Bosch power tools and building technology are showing the strongest performance, Mr Bischoff said.

Despite subdued regional growth in the past two years on the back of low oil prices, GCC economic growth is set to pick up in 2018. “We’re seeing an ongoing recovery in the market,” Mr Bischoff added. “There is more investment in construction and infrastructure, and we’ve seen a positive uplift from that, which has continued into 2018.”

Year-on-year growth in the Middle East for the first quarter of this year is in the single digits, “in line with our expectations”. The strongest markets are the UAE and Saudi Arabia.

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German media reported last month that Saudi Arabia's Crown Prince Mohammed bin Salman had ordered a freeze on government contracts to German companies, amid strained relations between the two countries. The kingdom recalled its ambassador to Germany last year over comments made by former foreign minister Sigmar Gabriel about the political crisis in Lebanon, and the ambassador has yet to return to Berlin.

Mr Bischoff said Bosch's Saudi operations are conducted through selling products to 20-plus Saudi partners in the sectors it operates, rather than entering directly into government or other contracts. As such, the Saudi business is “unaffected” by the reported freeze. “There has been no official decree, so I would not be too worried about that," he said.

Bosch is looking to expand its Saudi business in the coming years “in whatever form that may take”, Mr Bischoff said, referring to government plans to relax foreign ownership laws. “But the detail needs to be looked at and we will always take our long-standing partners into consideration.”

Bosch hopes to enter Iraq by 2019 – a “promising market with lots of potential”, the vice president added. The company was on the brink of setting up a representative office in Iraq in 2014, but security issues forced it to shelve those plans until now, when long-standing political unrest has begun to subside. “We are closely watching developments, and as soon as the right time comes, we will go there,” Mr Bischoff said.

Pakistan, South Asia's second largest economy with a population of almost 200 million people, and Kuwait, which has significant infrastructure investment plans, are also of interest, he said.