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The company’s Gres porcelain tiles from the Cementina series

The company’s Gres porcelain tiles from the Cementina series



Ceramics firm reports better local sales

RAK Ceramics is strategising to maximise returns by concentrating on its core business activities and on markets it sees as showing the best sales potential

September 2015

RAK Ceramics has reported continued solid performance in tiles and sanitaryware in the UAE market and a rebound in the Saudi market.

The company, one of the world’s largest manufacturers of ceramic tiles and sanitaryware, also said the outlook was promising for restructuring and expansion in high-margin sanitaryware
and tiles.

The global high-tech manufacturer of lifestyle ceramics solutions said overall revenues declined year on year by 1.1 per cent reach-ing Dh803.8 million ($218.8 million) in the second quarter of 2015, the same level as in first-half 2015 where revenues amounted to Dh1.55 billion. Non-core revenues increased in Q2 2015 by 11 per cent to Dh137.3 million (20.9 per cent increase in H1 2015 to Dh255.2 million) and core tiles and sanitaryware activities in the core focus markets also witnessed strong growth.

UAE tiles sales recorded a 9.5 per cent increase and reached Dh121.8 million in Q2 2015 (9.5 per cent increase in H1 2015 to Dh242.1 million) and UAE sanitaryware sales increased by 6.7 per cent to

Dh36.4 million (5.2 per cent increase in H1 2015 to Dh69.0 million).

Sales in Saudi Arabia have also rebounded as tiles sales increased by 5.0 per cent to Dh88.9 million compared with the first quarter of 2015.

Overall net profit for the period declined by 5.7 per cent to Dh85.9 million (2.4 per cent decline in H1 2015 to Dh146.4 million), after considering total net losses of Dh13.7 million from restructuring activities such as the divestments of stakes in RAK Pharma and Moshfly in Bangladesh and RAK Laticrete in the UAE in addition to impairment provision in Sudan, Al Hamra Aluminium and RAK Gypsum.

In Q2 2015, RAK Ceramics sold RAK Gypsum and Al Hamra Aluminium and 15 townhouses in Al Hamra Village for Dh25.2 mil-lion to focus on core activities.

Massaad: expanding for growth

Massaad: expanding for growth

RAK Ceramics continues to execute exits from markets in Sudan and China in line with the announced restructuring strategy.

The company has annual global production capacity of 117 million sq m of tiles, 4.6 million pieces of sanitaryware and 24 million pieces of tableware and it exports to over 160 countries on
five continents.

EXPANSION STRATEGY

“Strengthening core businesses is on track, where RAK Ceramics is seeking to gain greater control of the companies it invests in,” it said in a statement. RAK Ceramics announced acquiring the remaining 20 per cent of RAK Iran recently, gaining full operational and financial control over the Iranian facility, which is ready to fully integrate into RAK Ceramics’ overall operations.

Meanwhile, commenting on the growth of tiles and sanitaryware sales in the UAE and positive growth in Saudi Arabia, Abdullah Massaad, chief executive, RAK Ceramics stated: “This growth has been primarily driven by a combination of factors including the implementation of the ‘Value Creation Initiatives’ set by the board of directors in 2014 to focus on RAK Ceramics’ core businesses of tiles, sanitaryware, tableware and faucets in focus markets of the UAE, India and Bangladesh and exiting non-core, non-strategic businesses such as the Sudanese plant which was hit by hyperinflation and the non-profitable Chinese plant.”

In other remarks, Massaad said: “RAK Ceramics has witnessed a stabilising year in terms of growth and income. Global sanitary-ware expansions have been planned with an increase in production of 22 per cent in the UAE, 52 per cent in India and 25 per cent in Bangladesh in line with refocused strategy to support revenue growth by expanding high-margin core businesses.

“The refocused strategy aims at expanding high-margin core businesses to unlock hidden value and improve shareholder profita-bility. Growth in 2016 is expected to be driven by planned expansions and higher demand in the Middle East and Asia.”

Massaad said June 2014 marked a transformational point for RAK Ceramics when Samena Capital acquired 30.6 per cent of the business and implemented a ‘Value Creation Plan’ aimed at unlocking value for shareholders.

A production unit of RAK Ceramics

A production unit of RAK Ceramics

“The board of directors adopted a new dividend policy which is committed to returning capital to shareholders, aiming at a pay-out ratio of at least 60 per cent of consolidated net income subject to consideration of the business outlook, capital requirements of growth opportunities, expansion plans and healthy cash reserves in addition to regulatory approvals.”

REFOCUSING EXERCISE

As part of the Value Creation plan, RAK ceramics started a re-focused strategy in 2014 which aims to streamline global businesses and identify the most profitable operations. The business has then been split into ‘core businesses,’ identified as tiles, sanitaryware, tableware and faucets, and ‘non-core businesses’, which covers other operations such as joint ventures and overseas expansions. The company expects continued execution of its re-focused strategy to scale down the non-core business operations and divest non-profitable operations, while at the same time anticipating heightened levels of activity across all core businesses.

Initial agreements were signed to exit RAK Sudan and the RAK Laticrete joint venture while exiting RAK Pharmaceuticals in Bang-ladesh was concluded in 2014.

RAK Ceramics will focus on improving profitability and further developing its sales and distribution strategy. This involves a sig-nificant expansion in the high-margin sanitaryware business and investing in a new distribution platform in Saudi Arabia.

Its priorities remain to be in the top three players in focus markets of the GCC, India and Bangladesh and to be among the top five exporters to value markets  in Europe and the Mena region while strengthening its presence in frontier markets – the US, Africa, Southeast Asia and Russia.




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