RAK Ceramics rides wave of UAE property boom as profit rises 22%

RAK Ceramics has a healthy outlook as the construction sector picks up in Gulf and Europe.

A shift of focus to Arabian Gulf markets has paid off for the UAE’s largest ceramics manufacturer amid the region’s construction and property boom, the RAK Ceramics chief executive said yesterday.

“The whole good thing is that the momentum of real estate in the UAE and Gulf is putting a positive impact on the market, and it will create more room for us to sell bigger volumes,” said Abdallah Massaad.

RAK Ceramics said it increased its annual profit by 22 per cent last year to touch Dh272 million, up from Dh224m in 2012.

While the UAE contributes a small portion of its sales revenues – almost 85 per cent of its sales come from outside the country – the company’s largest market is the Arabian Gulf, with Saudi Arabia taking a major chunk of production.

In a Gulf-wide survey of the construction industry last month by Pinsent Masons, about 77 per cent of the respondents reported a healthier order book for the next year compared with the last. And the cost of construction is not coming down, the survey said.

RAK Ceramics is also feeding the appetite for tiles in Germany, and for bathroom fittings in the United Kingdom, the two largest European markets for the company. Construction is also picking up in the UK, according to a poll of purchasing managers from the data company Markit and the Chartered Institute for Purchasing and Supply.

Ceramic products contributed 81 per cent of RAK Ceramics overall revenue, which touched Dh3.51bn, up 11 per cent from last year. The company also makes taps and faucets, a tableware range and paints.

It is also increasing its production capacity in factories in India and Bangladesh. In India, it is doubling its bathroom fittings capacity to 1,500 pieces a day. In Bangladesh, it is adding 500 pieces a day to its current daily capacity of 3,000 pieces. The Bangladesh plant will be expanded to produce 30,000 square metres of tiles a day, up from 20,000 sq metres a day. The company also has plants in China, Sudan and Iran.

In the UAE, RAK Ceramics has 10 showrooms – it expects to add two more – offering products directly to consumers as an alternative to cheaper imports from China.

“We are known as a quality provider, and we are not competing in the same segment,” Mr Massaad said.

Last year, the Abu Dhabi-listed company also pared its debt by Dh149m. The stock has climbed more than 25 per cent this year after almost tripling last year. This month, media reports indicated that Ras Al Khaimah’s ruling family was said to be in talks to sell a stake valued at as much as US$391m.

The company, which has a market cap of Dh2.33bn, this year recommended a 25 per cent cash dividend to shareholders compared with 20 per cent a year earlier.

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