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Abu Dhabi, UAESaturday 23 June 2018

RAK Ceramics says bullish on India, plans to acquire more operations

Ras Al Khaimah-based company seeks to boost India production 

RAK Ceramics produces 110 million square meters of ceramic annually. Pawan Singh / The National
RAK Ceramics produces 110 million square meters of ceramic annually. Pawan Singh / The National

RAK Ceramics, the world's fourth largest producer of ceramics, said that it was planning to expand its business by nearly two thirds in India where the company sees potential for outsized growth amid spending on infrastructure.

The Ras al-Khaimah-based company is planning to increase "soon" its output in India to 18 million metric tons from its current 11m tons, said Abdallah Massaad, RAK Ceramics' chief executive. RAK produces 110 million square meters of ceramic annually.

"We have a plan to grow more in India," Mr Massaad told The National. "We have a plan to acquire another factory and increase the existing operation. We are planning to increase our capacity in India to add another 7 million square meters."

The executive didn't say how much he planned to spend on the acquisition but said that it would not require fresh debt.

India's economy has benefited in the past couple of years from low oil prices because it's a net energy importer. Since Narenda Modi came to power in 2014, the fortunes of the economy have improved as the reform minded prime minister moved to cut red tape and reduce subsidies, pushing the country’s benchmark stock index to a record high.

The IMF is forecasting that the Indian economy will grow 7.2 per cent this year, more than double the expected average for global growth. India is RAK's third largest operation after the UAE and Bangladesh and it has two factories there producing 3 million square meters and 8 million square meters of ceramics annually.

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RAK Ceramics' profits soar

RAK Ceramics seeks India acquisition this year to expand capacity

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RAK Ceramics on Monday said its third quarter net profit jumped more than fourfold amid greater efficiency and the exit of non-core businesses.

Net income rose 365 per cent to Dh84.7 million in the three months ended September 30 compared to Dh18.2m in the same quarter last year. On a nine-month basis, the company reported a Dh262.3m profit, a 76 per cent increase from the same period last year. Total revenue rose to Dh705.2m in the third quarter, a 9.2 per cent increase from the same period last year, it said.

"RAK Ceramics has made steady progress in 2017 and we continue to deliver on our value creation plan initiatives by investing in core business growth, maintaining cost efficiencies, growing our market share in the UAE, restructuring our Indian operations and implementing our strategy to drive profitability in Saudi Arabia," Mr Massaad said in a statement.

"As a result of our strategy to exit non-core and non-performing businesses operations we have lightened the balance sheet, increased margins and enhanced returns for our shareholders."

Mr Massaad is also upbeat about growth in the UAE and the wider Arabian Gulf where there are increasing signs of recovery such as the resumption of infrastructure projects, especially in Saudi Arabia, that had slowed down or had been put on hold. The chief executive said the company had achieved more efficiency through the reduction of rejection rates of ceramics in its factories as a result of improvement of quality.

In the UAE, revenues grew 17.7 per cent in the third quarter, driven by strong demand amid signs the country's economy is turning the corner. Meanwhile in neighbouring Saudi Arabia where the impact of lower oil prices has taken a greater toll on its economy than on that of the UAE, tiles and sanitary ware revenues increased by 50 per cent to Dh65m.