RAK Ceramics is offsetting the Iran-war-driven slowdown in exports with a pivot to the domestic market, where the push for new developments to be completed on time is supporting sales, its chief executive has said.
Domestic sales for one of the world’s biggest producers of ceramics have exceeded prewar levels, Abdallah Massaad, RAK Ceramics group chief executive, told The National on the sidelines of the Make it in the Emirates summit.
While the conflict in the Middle East, now in its third month, has affected businesses across many industries in the UAE – the Arab world’s second-largest economy – including tourism, hospitality and aviation, the projects market remains robust, with no delay in delivery so far, Mr Massaad said.
“We did not see, honestly, a sense of delaying of projects or hesitation … from [a] numbers [perspective] we are selling more than what we were selling in the UAE,” he said.
With the Strait of Hormuz effectively shut since the beginning of the Iran war on February 28, UAE exports have taken a hit, as well as imports of raw materials,
Despite the uncertainty, developers are still pushing to finish projects across the Emirates but some have struggled to import materials on order, which opened a window for RAK Ceramics to step in, he said.
“We even supported some developers who bought [materials] from somebody else but were unable to get it,” Mr Massaad said.
Loss of exports
Though the company has production units abroad, including in Europe, the UAE accounts for 70 per cent of its total production capacity.
The company exports more than 60 per cent of its production from the UAE. Like many other export-focused businesses, the company has suffered a decline in exports in the past few months, he said.
Mr Massaad declined to give a percentage of the overall drop in exports, saying it was too early to make that estimate.
“For sure, the impact will be on everyone. It's a period where no one will be excluded from the impact, but we see that the impact will be a minimum … we will come back up stronger after this.”
Though exports through the strait have come to a standstill, RAK Ceramics is still selling products in Gulf markets.
“You know, markets open, markets close” but the business continues and despite an adverse operational climate there was not a single day of production loss during the war, he said.
“It's not the first time the markets are facing a crisis “, it's a cycle, and being in business since 1991, we have passed through ups and downs”, Mr Massaad said.
Growth goals
The manufacturing sector in the UAE, he added, has been put to the test and proven its strength during the extreme volatility and with lessons learnt it will galvanise even more.
The most important is “how resilient you are and where you want to reach”, and for RAK Ceramics, the objective of boosting long-term growth is very clear, he added.
The biggest supplier of ceramics products in the Emirates currently controls 30 per cent of UAE market share, and Mr Massaad said the ambition was to increase that share to 40 or even 50 per cent by the end of the decade.
“Thirty per cent is already good but growing it further is doable,” he said. “It is difficult for us to export but it is easier for us and easy for everyone to sell it locally”.
RAK Ceramics serves clients across continents through its network of centres in Europe, the Mena region, Asia, North and South America, and Australia.
Ceramic tiles are the largest segment of the company's business, with a production capacity of 118 million square metres. This accounts for 58 per cent of its overall business, while bathroom fixtures and tap divisions at 14 per cent each are in a distant second place. Tableware is another production segment.
RAK Ceramics reported a 10.7 per cent increase in its fourth quarter net income to Dh65 million ($17.7 million), as revenue for the reporting period rose to Dh856.4 million.
