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RAK Ceramic, one of the world’s largest ceramics manufacturers, will further expand its operations in Saudi Arabia as surging sales in the kingdom offset a sluggish domestic market, the company’s CEO told Zawya.
Founded by Ras Al Khaimah’s ruler in 1989, RAK Ceramics sells to 150 countries and has manufacturing facilities in several countries including the UAE, India and Bangladesh. Annually, it can produce 123 million square metres of tiles, 5 million pieces of sanitaryware, 24 million items of porcelain tableware and 1 million pieces of faucets, according to its website.
The firm reported a third-quarter net profit attributable to shareholders of 33.1 million dirhams on Wednesday, down from 39.1 million dirhams in the prior-year period as sales costs rose 3.5 percent according to Zawya calculations.
Quarterly revenue was near-flat year-on-year at 625.7 million dirhams, with the company’s operations largely returning to normal following lockdowns due to the coronavirus pandemic; third-quarter revenue was 52.1 percent higher than that of the second quarter.
“When you see everything shut down and borders are closed, this is very challenging, but we know there will be an end,” Abdallah Massaad, RAK Ceramics chief executive told Zawya. “Whenever you have a strong foundation you will be able to recover faster. I wasn’t worried about the business because I was convinced it would rebound.”
Massaad declined to provide sale forecasts but said “I’m cautiously optimistic … if things continue like it is, I can see that the impact of COVID-19 is behind us”.
He attributed RAK Ceramics’ rising sales costs to higher transportation expenses as a result of increased sales to Saudi Arabia and Europe, which the company supplies from its UAE factories.
Third-quarter revenue from Europe rose 12.9 percent to 91.5 million dirhams, while its quarterly India revenue rebounded to around pre-covid levels of 66.7 million dirhams.
The company’s stock rose 2.9 percent on Wednesday to 1.41 dirhams ($0.38), extending gains since mid-August’s seven-and-a-half year low.
RAK Ceramic’s nine-month profit fell 63.5 percent to 47.2 million dirhams. Its local production facilities have continued to operate throughout 2020, despite the pandemic, but its factories in India and Bangladesh were closed from late March until early June before operating uninterrupted throughout the third quarter.
The company’s supplies to Saudi Arabia, Europe and Australia were largely unaffected during the third quarter aside from what it describes as intermittent supply chain issues.
Market leader
RAK Ceramic is the UAE market leader. Over the past few years, the company opened around a dozen showrooms across the country, while it also supplies other retailers and sells directly to real estate developers. The domestic ceramics market has been in the doldrums due to covid and a sluggish real estate sector where prices have been in retreat since mid-2014.
“There’s no doubt that sales to projects came down, but we opened two new domestic showrooms and a virtual showroom … the sales in retail and distribution increased and offset the drop in the project (sales),” said Massaad, noting has firm has gained market share from its domestic competitors.
He declined to reveal the domestic revenue split between retail, wholesale and real estate projects.
RAK Ceramics’ third-quarter revenue from Saudi Arabia nearly doubled to 137.8 million dirhams, in an increase the company partly attributed to anti-dumping duties on tiles from China and India that came into effect in June.
The sales surge follows a 2018 decision to launch RAK Ceramic retail stores in Saudi Arabia, having previously relied on other retailers and distributors to sell its products in the kingdom.
“(We) follow the same model as the UAE,” said Massaad.
The company has opened showrooms in Riyadh and Mecca and will open a similar store in Jeddah by December-end. It plans to expand its Saudi retail presence further.
“No doubt, this improved our position in Saudi. We positioned ourselves as a premier product, differentiating us from competitors,” said Massaad.
He said he was confident his company can maintain its sales momentum in Saudi. “UAE, Saudi and Europe, plus India and Bangladesh are our focus markets,” said Massaad.
“We will look at other markets, but Saudi is the most important for us.”
Europe is a priority for RAK Ceramics despite the continent’s lethargic economy, because it provides revenue diversification. The company has units in Italy, Germany and Britain.
“We buy raw material, machinery and spare parts from Europe … it’s an important market to give us revenue and spending in euros,” said Massaad.
In its results announcement, RAK Ceramic warned its tableware business “continues to suffer due to the impact of COVID-19 on the hospitality and airline sector”. Massaad said it was too early to predict when this segment would recover, highlighting renewed lockdowns in Europe.
The company does not intend to raise new debt, said Massaad. “For the time being, we don’t have major spending, investment (plans),” he added.
(Reporting by Matt Smith, editing by Seban Scaria)
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© ZAWYA 2020
