- RAK Ceramics
For RAK Ceramics, the world’s biggest manufacturer of tiles, 2014 may become one of the most transformative periods in the company’s 23-year history.
Investment firm Samena Capital this year bought a 31% stake in the company that in the past two decades has become the flagship business of Ras al Khaimah, the most northern of the seven emirates that make up the United Arab Emirates, where it is based.
The Samena investment coincides with a planned strategic overhaul that will see the ceramics producer making further inroads into some of the world’s fastest-growing markets and at the same time exiting a number of businesses it doesn’t deem essential anymore.
“We’re looking into how to take the company –today we’re almost a $1 billion company – how to take it further in the next 5 years,” said chief executive Abdallah Massaad, who’s been active in the ceramics industry since 1991, the year Rak Ceramics was established. “Therefore we’re studying on how to grow the core business. Our priority this year is to exit from all non-core businesses, an exit targeted by the end of the year.”
RAK Ceramics CEO Abdallah Massaad on the company’s plans to sell non-core assets by the end of the year.
In many ways, RAK Ceramics is returning to its roots. Its focus more than ever lies on products -tiles, sanitary ware, faucets- that helped grow the company into a global leader. Its domestic operations still account for 66% of the group’s revenues and will be modernized at a cost of around 100 million U.A.E. dirhams ($27.2 million).
Part of the positive outlook and the deepening focus on domestic operations stems from the recovery of the regional real estate market.
“You can feel the momentum of real estate in the region is coming back and we can feel it despite the instability in Iraq and Syria – we can see the real estate project announcements and for sure this gives us confidence for good potential years to come,” Mr. Massaad said.
Geographically, RAK Ceramics is pushing deeper into Bangladesh, India and in the long run China, countries where it already has a presence but where capacity needs to be increased in response to rising demand.
To grow its business, RAK Ceramics may even go on the acquisition trail, Mr. Massaad said.
“We’re looking in the region and outside the region at opportunities, either to start up a greenfield project or we’re also open to any M&A option,” he said.
At the same time, the company’s non-core activities –including assets in construction, real estate and even pharmaceuticals-are to be sold or even shut down. “Our target is to generate over a 1 billion U.A.E. dirhams ($272.3 million) out of exiting these non-core assets,” Mr. Massaad said.
The company also still operates plants in Sudan and Iran, two countries that have been hit by financial sanctions.
“We are considering our existence in these markets. It could be an opportunity but for the time being we’re not touching it. It’s a macro thing, it’s not in our hands,” said Mr. Massaad.
The decision on Iran and Sudan will be one of many to take as the company embarks on 5-year growth plan that looks to consolidate its position as the world’s biggest maker of ceramic tiles.
“Step by step. We are cleaning, focusing, putting the foundation, we will grow it,” Mr. Massaad said.
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(via WSJ Blogs)
