RAK Ceramics Sees Profit Boost as It Sells Non-Core AssetsArif Sharif
Ras Al Khaimah Ceramics, the world’s biggest maker of ceramics, expects profit to increase this year after it closed its manufacturing operations in China and completes the sale of its loss-making business in Sudan this month.
The company based in Ras Al Khaimah, the northernmost sheikhdom in the United Arab Emirates, has reduced production at its Iran plant to a minimum as it contributes less than 5 percent to revenue, Chief Executive Officer Abdallah Massaad said in a phone interview. It also shut production at its China facility, which posted a 46 million-dirham ($12.5 million) loss last year.
“We are concentrating on the U.A.E., India and Bangladesh as the main industrial hubs,” Massaad said yesterday.
The company announced plans last year to sell non-core businesses such as construction, property development and pharmaceuticals as it focuses on ceramics production. The company signed preliminary agreements to exit RAK Sudan and adhesives company RAK Laticrete, while the sale of RAK Pharmaceuticals in Bangladesh was concluded in 2014, it said in a statement this week.
RAK Ceramics booked a loss of 56.5 million dirhams last year due to hyperinflation and currency fluctuations in Sudan and Iran, which probably won’t be repeated this year, he said. Still, the company reported a 3.5 percent rise in 2014 profit to 282 million dirhams and said it’s aiming for a dividend payout of at least 60 percent of net income in the future, subject to funding needs.
The dividend policy is “sustainable” and the sale of non-core assets expected over the next two years will support payouts, Massaad said.
RAK Ceramics plans to sell its construction business, hotel, land and properties in the U.A.E. over the next two years as part of the plan to exit non-core assets, Massaad said. It will raise its sanitaryware capacity by almost 25 percent next year, helping to boost its profit margin, he said.
The company may consider acquisitions in the six-nation Gulf Cooperation Council, which includes Saudi Arabia, the U.A.E. and Qatar, as well as India, Massaad said. Capital expenditure this year may be similar to last year’s 282 million dirhams, he said.
The company’s shares have soared 27 percent this year to 3.80 dirhams on Monday. That compares with a 3.6 percent decline in Abu Dhabi’s benchmark index of equities.