Saudi Ceramics Expands Tiles Output on Expected Demand Growth

Saudi Ceramic Co., the largest company on the 13-stock Tadawul All Share Building And Construction Index, is expanding tiles output on expectations of growing demand in the Arabian Peninsula’s most populous country.

“We are confident that the market will continue to grow in 2011 and 2012,” Chief Executive Officer Abdulkarim al-Nafie said in an interview in Riyadh. “This is why we are expanding our tile output and will start red brick production very soon.”

Saudi Arabian home demand is fueling real estate developments in many parts of the kingdom as the population swells and the economy accelerates on increased government spending. Gross domestic product of the Arab world’s largest economy is expected to grow more than 4 percent this year.

“Our sales are growing,” said al-Nafie, the company’s CEO since 2003. “We have not run into a drop in sales.” Fourth- quarter sales rose 13 percent to 278.9 million riyals ($74.4 million) from 246.9 million riyals a year earlier, according to a financial statement posted on the Saudi bourse website. Revenue is expected to grow 20 percent in 2011, Al Rajhi Capital forecast in a Jan. 17 report.

Saudi Ceramic is expanding its tile production and plans to operate at its full capacity of 52 million square meters a year of ceramic and porcelain tiles by the end of 2012. Ceramic Pipes Co., which is half-owned by Saudi Ceramic, will start producing pipes for floods in the first quarter and is expected to generate 30 million riyals this year. A red brick plant valued at 150 million riyals will start production at the end of 2012 to generate 51 million riyals in revenue, al-Nafie said.

Saudi Ceramic does not seek to tap the Islamic bond market, Al Nafie said, citing the company’s expansion size. “We don’t leverage unless we are in dire need.”

Saudi Ceramic fourth-quarter profit rose 11 percent to 56.8 million riyals from the year-ago period. The company proposed a 2010 dividend of 3.5 riyals a share.

Saudi Ceramic shares soared 31 percent last year compared with an 8 percent gain by Tadawul All Share Index. The stock advanced 0.5 percent on 11:10 a.m. in Riyadh, giving the company a market value of 3.6 billion riyals.

To contact the reporter on this story: Mourad Haroutunian in Riyadh at mharoutunian@bloomberg.net

To contact the editor responsible for this story: Shaji Mathew at shajimathew@bloomberg.net

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