China operations turned around for world's biggest maker of ceramic tiles.
RAK Ceramics profits more than double after shift in strategy
Profits at RAK Ceramics more than doubled in the third quarter after the world’s biggest maker of ceramics tiles shifted its strategy over its Chinese affiliate and paid down debt, its chief executive said.
“Last year we had losses in our operations in China, whereas this year it turned into a profit,” said Abdallah Massaad, the chief executive at RAK Ceramics. “There’s a lot of competition and we had higher energy costs. This year we shifted to LNG [liquid natural gas], invested in new technology and changed the product mix. In the past we were selling wall tiles mostly; this year we changed to porcelain floor tiles.”
Net income in the quarter ended September 30 stood at Dh70.3 million, compared with Dh28.06m in the same period last year. Revenues in the quarter touched Dh922.30m, from Dh860.86m in the corresponding period last year. The company was the world’s top ceramic-tile manufacturer by value in 2011, according to Ceramic World Review.
The Ras Al Khaimah-based manufacturer is also concentrating on its biggest market, the Arabian Gulf region amid a surge of infrastructure spending, Mr Massaad said.
Some markets that were affected by the Arab Spring are now being substituted by larger volume sales in other markets.
“We were not selling as much to Libya and Syria, but the numbers were improved in Algeria and Morocco where we are selling more,” he said.
The company reduced its net debt to Dh1.39 billion, from Dh1.47bn at the start of the year, despite having paid a 20 per cent cash dividend to its shareholders for last year’s performance.
“This year was a good year for us,” Mr Massaad said. “You can see the impact of our profitability on our share price.”
Shares of RAK Ceramics have surged 133.9 per cent this year. They traded at Dh2.55 yesterday.
“RAK Ceramics has proven to be a successful industrial company that was one of the first companies to build a reputation outside the UAE by exporting in the Gulf and Arab World,” said Mohammed Ali Yasin, the managing director at National Bank of Abu Dhabi’s brokerage arm.
“Unfortunately their shares are not widely traded in the market but still followed by selective investors who consider it as part of their coverage of the property sector. Whenever they are positive on that market, they pile their money on RAK’s shares too.”
The manufacturer said it is looking to expand capacity in Bangladesh and India.
“In India, we are moving from 20,000 square metres per day to 30,000 sq metres and sanitary ware from 3,000 pieces per day to 4,000 pieces per day,” he said. “In India, we are moving from 1,000 pieces of sanitary ware to 3000 pieces of sanitary ware.”