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| 12 July, 2018

RAK Ceramics weighing up acquisition opportunities

Company looking to expand production capacity either in its 'core' or 'value' markets

RAK Ceramics’ new Dubai showroom, which opened in May

RAK Ceramics’ new Dubai showroom, which opened in May

RAK Ceramics/Handout via Thomson Reuters Zawya

RAK Ceramics is set to hit the acquisition trail as the company seeks to move back onto a growth footing after spending the past three years implementing a 'value creation plan'.

Speaking to Zawya at the company's headquarters in Ras Al Khaimah in May, chief executive Abdallah Massaad said that any potential target would have to operate within its core markets of tiles, tableware and sanitaryware.

"This is the core business. We are not looking to invest in other than our core business products," Massaad said.

He added that the company, which has acquired stakes in distributor businesses in Saudi Arabia and Europe over the past two years at the same time as selling off "non-core" businesses like mechanical, electrical and plumbing (MEP) contractor RAK Electrotherm and infrastructure company Emirates Heavy Engineering, would "hopefully" be able to acquire stakes in companies offering more production capacity.

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"Distribution, we've done it. So we did the restructuring (of distributors) in Europe and in Saudi. (We're) looking at production," Massaad said.

The company currently has its main production bases in the United Arab Emirates, India, Bangladesh and Iran, although the latter is currently at a "standstill" due to ongoing restrictions in trade between Iran and the UAE.

The three-year 'value creation plan' it has just completed with the assistance of main investor Samena Capital has also seen it exit other markets, including an unsuccessful venture in China and a venture in Sudan, where results were hampered by hyperinflation.

Massaad said that the company has investments in "core markets" where it has production bases, "value markets" such as Saudi Arabia and Europe where it has a large export presence and a series of other markets to which it supplies. The company currently exports to 160 countries worldwide, served mainly from its UAE production hub.

"For sure, we need to invest. For us, after we have done the restructuring, the value creation which we have put in place improving our margins and maintaining and growing our market share, next for us is to grow.

"Growth, where we are looking today, is in our core, which we have done last year - we grew Bangladesh and we did the acquisition in India - if anything comes into our core or value markets, we are assessing and we will be looking for any opportunity in these areas," he said.

Data published by Thomson Reuters on Tuesday found that the amount of outbound mergers and acquisitions completed by Middle East and North African entities fell by 4 percent year-on-year during the first six months of 2018 to $6.6 billion. In value terms, 73 percent of outbound acquisitions were completed by United Arab Emirates-based organizations, with the biggest deal being Emirates NBD’s $3.19 billion purchase of Turkey’s Denizbank.

The full interview with RAK Ceramics can be found here.

(Reporting by Michael Fahy; Editing by Shane McGinley)

(michael.fahy@thomsonreuters.com)

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© ZAWYA 2018