RAK Ceramics reports 43 per cent profit growth as market share gained in UAE

CEO says company has gained market share in its two biggest markets of Saudi Arabia and the UAE.

Third-quarter profit at RAK Ceramics rose 43 per cent to Dh82.1 million as it boosted operating margins.

Although turnover remained relatively flat during the period at Dh782.8m. Improving market share in the UAE and Saudi Arabia offset the impact of discontinued businesses in Sudan and elsewhere.

The chief executive Abdallah Massaad said sales in Saudi Arabia have risen by 32 per cent during the third quarter and are up 11 per cent in the first nine months of this year, following its opening of a representative office in Riyadh to bid directly for government projects. Sales in the UAE have increased by 3.5 per cent in the last quarter and 7.5 per cent in the first nine months.

Revenue for the nine-month period to date was also largely flat at Dh2.3 billion, but net profit increased by 10 per cent to Dh228.4m.

The margin improvement was partly as a result of lower fuel and transport costs, but also thanks to an improved product mix, Mr Massaad said. Gross margins increased by 4 per cent to 30.7 per cent during the quarter.

“Over the past year, we focused on core business and growth opportunities in core markets and succeeded in delivering results,” said Mr Massaad.

The company, whose largest shareholder is the private equity firm Samena Capital with a stake of more than 30 per cent, has recently bought out minority shareholders in both Indian and Iranian subsidiaries, paying Dh20.6m to acquire the remaining 10 per cent of its Indian business and Dh13.9m for 20 per cent of its Iranian arm.

Mr Massaad said he has high hopes for the potential of both, stating that India is the third-biggest market for consumption of ceramic products in the world.

“It’s a growing market where we see potential,” said Mr Massaad, adding that it was in the process of seeking a new CEO and strengthening its management within the country.

It is also keeping a watchful eye on Iran with a view to revitalising its shuttered factory there once international sanctions are lifted.

“We are in a country where we follow the rules and regulations, where we don’t want to do anything until we will be allowed. Potentially, we will have first mover advantage where we have the factory and the asset ready. When the time will come, we will act accordingly. We can act very fast.”

Within the past three months, RAK Ceramics has opened a representative office in Singapore to target the business-to-business market in South East Asia, and is planning a similar site in the US next year.

Anoop Fernandes, a senior analyst at Bahrain-based Securities & Investment Company, said that results for RAK Ceramics were “pretty much in line” with expectations.

He said that extending its representation in South East Asia through the new Singapore office was an “obvious focus”, as it is a growing market that can be served from its manufacturing bases in the UAE, India and Bangladesh.

He also felt there are opportunities for RAK Ceramics to explore in India.

“Unlike China, India is not a heavily oversupplied market. There’s a small amount of excess, but demand prospects look bright,” said Mr Fernandes.

Follow The National's Business section on Twitter