After cutting its debt by a quarter the world's largest ceramic tile company, Ras al Khaimah Ceramics, is preparing for revenue to increase.
RAK Ceramics set for growth
Ras al Khaimah Ceramics, the world's largest ceramic tile company, expects to boost its revenue by up to 15 per cent over the next two years after slashing its debt by a quarter.
The company, which is based in Ras al Khaimah and has operations in Bangladesh, Iran, China, Sudan and India, has a global production capacity of 117 million square metres of tiles per year. It is selling 105 million square metres at present.
"We have adequate capacity to meet our sales [targets] and to grow revenues within the existing capacity by between 10 or 15 per cent," said Manish Joshi, the chief financial officer at RAK Ceramics. He added that emerging markets, which offer large returns on investment, were the main targets for growth.
He singled out India and Bangladesh as having "large" market growth potential for sales of tiles.
"There's a lot of sustenance from the emerging market. If India's tile consumption reaches half of China, it means the India market will grow by 770 million square metres," said Mr Joshi.
This equates to more than double India's present consumption rate of 350 million square metres per year. About three out of every four tiles laid in India come from RAK Ceramics, according to the company. Housing demand in India and Bangladesh is also expected to fuel demand for ceramic tiles and sanitaryware, which includes toilet bowls and sinks.
RAK Ceramics supplies up to 75 per cent of Indian domestic demand for sanitaryware and 25 per cent of demand for ceramic tiles in Bangladesh.
Khater Massaad, the chief executive of the company, said in September that it planned an initial public offering (IPO) of its India subsidiary this year. He did not disclose the size of the issue.
This follows the US$250 million (Dh918.22m) IPO of its Bangladesh unit last May, which was 15 times oversubscribed and the first book-building IPO in the history of the Bangladesh stock market.
The company has cut its debt by more than Dh550m, 25 per cent in the past two years, making it less debt-dependent and freeing cash to expand existing operations around the world.
"The company is generating cash, and because it has sufficient capacity, it is using its funds to pay debt," said Mr Joshi.
"This gives us a position to grow our operations without external means," he added.
RAK Ceramic's share price has more than doubled in the past year to Dh2.55, but it is still trading at a substantial discount, traders said.
Fadi al Said, a manager at ING's MENA fund, which has a 1.1 per cent stake in RAK Ceramics, said the possibility of selling non-core assets and handing out a cash dividend was not "out of the question".
Separately, RAK Minerals, a unit of RAK Ceramics that owns a coal business in Indonesia, is expected to reap rewards for the company.
About 500 million tonnes of coal was thought to be in the coal mine, but exploration unearthed nearly 2 billion tons, "far exceeding expectations", said Mr Joshi.
"It's an interesting asset because of the amount of coal that has been identified," he said.
He would not be drawn on speculation that the asset would be sold or on how much a sale could raise. People close to the situation estimated a sale could raise as much as $100m.