RAK Ceramics seeks India acquisition this year to expand capacity
RAK Ceramics said on Monday it will target markets in India, Iran and Europe as it reported lower profits for the first quarter.
The company expects to acquire a ceramics manufacturer in India this year to expand capacity in the country driven by its economic growth. It is also looking at opportunities to expand its manufacturing activities in the Arabian Gulf region.
The Ras Al Khaimah-based tile and ceramic ware manufacturer said first-quarter gross profit dipped by 3 per cent to Dh215.7 million from Dh222.4m year-on-year because of low oil prices and a slowdown in the building activities in the region.
The net profit for the group was Dh64.5m compared with Dh65.9m a year earlier.
Revenue during the quarter dropped by 7.4 per to Dh681.1m from a year earlier.
The drop in revenues was because of the sale of non-core businesses but the profit from the core businesses such as tiles, sanitary ware and tableware improved compared with the second half of last year, said Abdullah Massaad, RAK Ceramics’ group chief executive.
“A combination of cost control, efficiency in production, product innovation and new showrooms in the UAE led to an improvement of sales in the UAE and Europe,” he said. “The market in the Arabian Gulf region is stabilising and I am cautiously optimistic about the macro economic conditions for the full year.”
Revenue from its Saudi Arabia business dropped 39.1 per cent.
Low oil prices from the second half of 2014 and subsequent cutbacks in government spending have hurt the construction industry in the Arabian Gulf.
“Saudi Arabia has seen delays in project activity in addition to rescheduling of non-essential projects that resulted in a decline in construction activity,” said Faisal Hasan, the head of investment research at Kuwait-based Kamco Investment Company.
“Pressure on construction activity is expected to continue in the near term with oil price expected to remain low.”
Cutbacks on state subsidies and prudent spending in Saudi Arabia, however, have enabled the country to reduce its first-quarter deficit.
“The impact on business in the Arabian Gulf will affect us short term but we will be able to reduce our dependency on the Saudi market [as we are a multinational company],” Mr Massaad said.
In Iran, where RAK Ceramics opened its plant in 2004 and closed it during the years following international sanctions, production started last year. The plant supplies the local market, manufacturing at about half of its capacity. “We will ramp our capacity there depending on the economic situation,” Mr Massaad said.
It consolidated its control over its joint venture, Restofair RAK, which has interests in tableware, catering equipment and turnkey contracting projects, during the first quarter.
Its shares closed unchanged at Dh2.43 on Monday.
The share price is down from a peak of Dh3.76 in March 2015.
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