RAK Ceramics realized solid growth in 2015, accounting for a 10.2% increase in annual profits at AED310.3 million. What were the key highlights of 2015?
It was our 25-year anniversary in 2015 and we have much to be proud of; over the last 25 years we have helped to create icons, build marvels, and our products have featured in some of the most iconic buildings in the world. In 2014 the board approved a value creation plan (VCP) designed to streamline our business and unlock hidden value for our shareholders. In 2015 we continued with our implementation of the VCP and have started to see positive results. We invested in our core businesses through capacity expansions for sanitary ware in the UAE and Bangladesh, and by doing so we have strengthened our focus markets of the UAE, GCC, India, and Bangladesh. We have also increased our stake in a number of our subsidiaries and strengthened our leadership team.
What is the role of your non-core businesses within your strategy?
Our vision is to be the leading ceramics lifestyle solutions provider in the world and our Value Creation Plan was implemented to support this vision. The VCP is aimed at streamlining the business by investing in core businesses and exiting from non-core and non-performing businesses. Throughout 2015 we continued to divest non-core businesses such as RAK Logistics, we sold non-performing operations such as Sudan, and we also ceased manufacturing in China. The continued implementation of the plan is our immediate focus, with a strong emphasis on revenue growth, capacity expansions, and ongoing acquisitions in core businesses.
What strategy do you use to strengthen the control of the group over its subsidiaries?
In 2015 we acquired 100% of our subsidiaries in the UK, Germany, Iran, and India, and these acquisitions will strengthen the RAK Ceramics' brand, giving us greater control over our global operations. By working in a more cohesive and joined up way globally, we can improve the way we operate and add value to the business. In 2012 we invested in SAP in order to have the same IT infrastructure available across the organization. Last year we rolled it out in Bangladesh and India and we are now implementing SAP in Europe. It is challenging but it is something that will help the group and will take us further.
Do you still feel there are any untapped markets around the globe?
The focus markets for us are the GCC, India, and Bangladesh followed by value markets such as Europe, MENA, and North Western Africa. Other markets where we see opportunities are the Americas and Russia. These are important markets where we are selling but do not yet have a strong presence. We are already available in more than 150 countries but we will always continue to seek out new opportunities.
What opportunities do you see in Iran?
We invested in Iran before the sanctions were imposed and the investment was financed by The World Bank. Iran has an abundance of raw materials, energy, and manpower, and is the fourth-largest ceramics market in the world. Since the sanctions have been imposed, we have scaled down operations to adhere to the required regulations. However, we have a long-term vision for the Iranian market both domestically and as an export center once the sanctions get lifted.
How can the ceramics industry implement innovative practices and how is RAK Ceramics doing so?
From the beginning we aspired to have the best machinery, the latest technology, and produce the best products for sale in the world. During the 2008 crisis RAK Ceramics were among the least affected and we continued to invest in new technology and were the first factory in the region to introduce digital printing. This allowed us to enter into many new segments at the time such as marble, stone, and different surfaces. Technology and innovation are at the heart of our philosophy and we have continuously led the way in terms of product innovation. We are now one of the largest ceramics manufacturers in the world and have evolved from being a manufacturer of functional ceramics' products to becoming a comprehensive producer of ceramics lifestyle solutions. Two years ago RAK Ceramics was the first manufacturer in the GCC to introduce Continua+ technology enabling us to manufacture super-sized slabs such as Maximus Mega Slab. We have also introduced environmentally friendly innovations that have allowed us to use less gas and energy during production. It is this commitment to innovation that has been fundamental to our success and something I plan to continue as part of our long-term strategy.
What mechanisms are RAK Ceramics using to mitigate the current economic and geopolitical situation in the region?
In 2015, we experienced a 10.2% growth in annual profits and in 1Q2016 we have also grown by another 10.8%. However, there is no doubt that the geopolitical conditions are not the best. As a company, we have always followed market diversification. Our strong presence in the UAE is driven by innovation, new products, reliability and quality and we are gaining an increase in market share over our competitors. As a global company we have to work harder to maintain our strong worldwide distribution network to mitigate the potential impact of a downturn in one particular region.
What is your outlook for the ceramics industry?
The global ceramic tiles market is projected to reach $125.32 billion by 2020 with a growth from 12.3 billion sqm in 2013 to 21.8 billion sqm by 2020. Traditionally, ceramics was only used in kitchens and bathrooms, but today ceramics is used everywhere; whether it is for cladding, indoor or outdoor, or substituting the use of natural wood, marble, stone, granite, and cement. The outlook is positive because ceramics is a superior product and the industry is continuing to see new investment.
How has RAK ceramics contributed to Ras Al Khaimah's economic development?
We are raising the flag of the UAE all over the world. We employ 15,000 employees globally and over 8,500 of these are living in Ras Al Khaimah, therefore contributing to the local economy.
What are your prospects for 2016?
In the short term we will remain focused on the VCP and will continue to exit from non-core and non-strategic assets such as contracting activities and non-profitable businesses. We have already successfully completed many initiatives and the VCP is unlocking value across the business. We will continue to focus on expanding our core businesses and streamlining operations. In particular, expanding our high-margin sanitary ware and tiles businesses in focus markets of the UAE, India, Bangladesh, and Europe, developing improved integration across the business, streamlining our distribution networks, and unifying our brand positioning globally. It will be a challenging year, but I am confident that we have all the right plans in place to make it a successful one.