x Abu Dhabi, UAESunday 21 January 2018

Cheap tile imports test Al Anwar's limits

Already operating at peak levels, company aims for expansion

Cheap imports from China, among other factors, are expected to keep earnings growth muted at Al Anwar Ceramic Tiles, based in Oman.

The company reported 5.3 million Omani rials of profit last year and may struggle to do any better this year.

"Al Anwar is already operating at its peak capacity levels in Oman," said Kanaga Sundar, an analyst at Gulf Baader Capital Markets in Oman. "On the back of this we are assuming earnings to show a meagre growth of 6 per cent year on year to 5.8 million Omani rials."

The ceramics producer, listed on the Muscat exchange, is a mid-sized player in the GCC ceramic tiles industry. Al Anwar caters to the medium-price points and operates primarily in its home market, with limited exports to Saudi Arabia, the UAE, Syria, Jordan, Yemen and north Africa.

That strategy is markedly different from that of RAK Ceramics, which relies on international markets in India and Bangladesh for much of its demand.

While cheap imports from China are a major threat for Al Anwar, analysts said the company's low cost of production and the quality of the product help to mitigate this risk.

Mr Sundar has a neutral rating on Al Anwar's stock because of flattening earnings and a recent run-up in price. It has gained 11 per cent in the past month to 0.360 rials a share.

Al Anwar is embarking on a capacity expansion at an estimated cost of 8m rials to reach 13 million square metres, up from the existing 10 million sq metres.

The plan would increase capacity by about 60 per cent over the next three years. In the first phase, estimated to be completed by the beginning of next year, the company would add a tile manufacturing facility. Construction has been already started.

The company has also received an informal commitment from the government of Oman that it will allocate natural gas for the expansion. The use of natural gas as feedstock would help to keep costs low and maintain its market share.