Growth Without Margin Is Growth Without Value
Across the Gulf, manufacturers are expanding capacity, adding lines, and localising supply chains under national diversification programs. Revenue is growing — yet profit conversion is reducing.
Recent regional studies show that even with a 6% top-line rise, EBITDA margins fell nearly a full percentage point over the past year. The cause is not a lack of demand but a cost structure that has outgrown efficiency: import-dependent raw materials, logistics volatility, uneven asset utilisation, and fragmented procurement.
Most manufacturers have already trimmed overheads; SG&A as a share of revenue has dropped from roughly 9.4% to 7.8% since 2020. What remains are structural inefficiencies inside the plant — the kind that silently erode margin every day. Operational excellence is no longer a lean philosophy exercise; it is a board-level EBITDA strategy.
Four Common Levers That Move EBITDA
1. Procurement Cost
Procurement remains the most visible — and often the most misunderstood — lever. In many Middle Eastern manufacturers, buying is still fragmented across plants, each with its own supplier list and pricing. This decentralisation quietly erodes scale advantage. Freight volatility, import dependency, and fluctuating material costs then magnify the impact. When raw materials make up more than half of total manufacturing cost, every missed consolidation opportunity hurts EBITDA.
In practice, the fastest improvement comes from centralising spend categories, rationalising suppliers, and standardising specifications.
Renoir recently worked with a regional metals producer to unify procurement across multiple plants, cutting vendor count by 50% and reducing spend by 7% within nine months.
Similar programmes across the Gulf have delivered 5%-10% cost reduction through new systems, but also through sharper discipline and leverage of scale.
2. Material Yield
Material yield is the second, less glamorous but equally powerful driver of profitability. Every one percent drop in yield directly erodes margin, and in process industries, that can translate to millions. Across the region, fluctuating input quality, inconsistent maintenance, and weak process control frequently cause this loss. Yield improvement is rarely about more equipment; it is about managing what exists more consistently.
Real-time loss accounting, disciplined maintenance routines, and targeted bottleneck management can lift throughput without capital expansion.
In one Middle Eastern food manufacturer, Renoir helped link production, maintenance, and quality into a single performance dashboard, with Cp and CpK visibility. Within six months, saleable yield improved by 3%, downtime fell by 31%, and output rose 10% — translating to over one million dollars in annualised EBITDA gains.
Cost savings through operational efficiency for manufacturer
Paper mill cuts material loss by 300% with maintenance planning
Cost savings through operational efficiency for manufacturer
Paper mill cuts material loss by 300% with maintenance planning
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3. Manpower Cost
Manpower cost, though often treated as fixed, conceals a significant opportunity. In many Gulf manufacturing sites, labour intensity remains high, but planning discipline is low. Overstaffing, unplanned overtime, and uneven supervision inflate payroll even when volumes fluctuate.
Addressing this is less about cutting headcount and more about aligning deployment with actual demand.
Renoir has helped manufacturers in the region introduce manpower allocation models that match crews to production priorities and trained supervisors in active performance management. The results are consistent: Productivity up more than 20% and manpower cost down by roughly 18%.
When every shift begins with clarity on output expectations and ends with accountability on results, cost and morale improve together.
4. Inventory Holding Levels
Inventory is the final hidden drain on EBITDA. Manufacturers across the region tend to hold excess stock as a safeguard against supply risk, but the result is tied-up cash, obsolescence, and duplication.
Without clean data and forecasting discipline, inventory swells quietly while availability problems persist. The fix begins with visibility — understanding what is truly slow-moving or redundant — and then resetting reorder points based on actual consumption patterns.
Renoir’s work with a regional industrial client reduced average inventory levels by 28%, releasing six million dollars in working capital while maintaining over 98% material availability.
Systems and dashboards alone do not protect margin; management discipline does. Real change occurs when operational KPIs are reviewed daily, root causes are addressed weekly, and performance is linked directly to financial results monthly. Renoir’s approach embeds this cadence — transferring capability to client teams so improvements continue long after project completion.
Middle East manufacturing is entering a new phase: volume is rising, but cost efficiency will decide competitiveness. With most easy overhead reductions complete, EBITDA protection now depends on process discipline and execution.
Renoir’s 30-year global experience, coupled with decades of regional delivery, shows that focused operational excellence programs can restore 4–10% EBITDA within a year, often without new capital investment.
To explore where your next percentage points of margin may be hiding, contact us for a diagnostic discussion.
