RAK Ceramics 2010 income falls despite net rise
Tile and bathroom giant suffers from regional economy as it cuts debts
RAK Ceramics, the world’s biggest ceramic tile manufacturer, saw revenues fall last year against 2009 due to an economic slump in the region, though net profits still managed to increase.
The Ras Al-Khaimah-based supplier of tiles and other ceramic-based bathroom appliances saw income dip 11.5% from AED 3.7 billion to AED 3.3 billion, a fall caused by a cut in payments “impacted by a cyclical slowdown in the local economy”.
The cost of sales fell just over 12% due to cost-cutting measures implemented last year that also caused a 9.7% fall in administrative, selling and financial expense. These measures allowed the company’s net profits – which had seen strong quarter-by-quarter gains throughout 2010 – to rise 3.2% from AED 261.9 million to AED 270 million.
The company’s non-current assets, which typically includes its property and equipment and available-for-sale investments, rose 3.7% to AED 2.15 billion as the company benefitted from the completion of a six-year expansion programme. The company now produces 115 million square metres of tiles per year and 4 million pieces of sanitary ware. Total current assets rose 12% to AED 3.5 billion.
The company “has made investment in forward and backward integration of its value chain by strategically investing in joint ventures and projects and successfully spinning off cost centres into profit centres,” the company stated to investors in a report published on the Abu Dhabi Securities Market.
The company is one of the biggest suppliers of construction-related material in the Middle East, with around US $1 billion in sales and an export network to more than 121 countries. The company’s net debt decreased by 11%, paid out of surplus cash revenue.
Last year RAK Ceramics announced it was considering an initial public offering in India, a key market for potential growth for the company. It would follow its IPO in Bangladesh, which is a major venue for production outside Ras Al Khaimah.
Abdulla Mahmood, marketing manager, would not specify the investment banks involved in the India IPO at the Big 5 exhibition in Dubai last November.
The company’s share price rose considerably from the third week on September last year, though since the start of 2011 the surge has been tempered, closing at AED 2.54 per share on Monday. Hettish Kumar, a senior analyst at Global Investment House in Kuwait, recommended a ‘buy’ rating on the stock on 26th January.
Abdallah Massaad, deputy CEO, was unavailable for comment due to a travel schedule.