RAK: Ceramics milestone

The limestone deposits of Ras Al Khaimah (RAK), along with the emirate’s five ports, an airport and good road links to the rest of the UAE and GCC, have enabled the emirate to develop a substantial industrial sector, most notably in ceramics. Indeed, despite facing rising costs and uncertainty in overseas markets, RAK’s flagship industrial manufacturer recently reached a major milestone by becoming the first ceramics firm in the region to produce 1bn sq metres of tiles.

While RAK Ceramics’ profits in 2011 were below those posted during the height of the regional construction boom in the middle of the last decade, the company’s efforts to extend its international production base with an eye on expanding markets have helped it to maintain solid growth.

Figures show that the company, which has just been named the world’s largest ceramics manufacturer for a third consecutive year by Ceramics World Review magazine, manufactured around 117m sq metres of tiles in 2011, nearly double the UK’s total tile production for the same year.

While RAK Ceramics continues to register solid growth, its expansion risks being curbed by the same factors as all export-oriented manufacturers, the uncertain global economic climate. Indeed, in its 2011 annual directors’ report issued in April, the company acknowledged that these challenges looked likely to continue in 2012 since there were a number of “economic and regional issues pending resolution”.

RAK Ceramics will also be concerned that high energy prices could impact both its production costs and freight charges. The company imports minerals and ships raw materials to its plants even though it sources most of them locally. It also bears the expense of exporting its finished products.

In 2011, RAK Ceramics’ fuel and power bills rose by 7%, while its liquefied petroleum gas (LPG) and gas payments climbed by 10%. Although part of the increase was due to higher production levels and shipping, much of it stemmed from energy inflation. Combined energy costs were listed as the manufacturer’s second-largest expense last year, behind raw materials.

The firm’s strategy for tackling the challenging economic environment has been to continue increasing international exposure and extending its production base. The manufacturer’s products are now distributed in over 160 countries and its plants in China, Sudan, Bangladesh, India and Iran are located close to both sources of raw materials and expanding regional markets.

Figures show that overseas outposts contribute approximately one-third of total daily capacity, which is made up of 360,000 sq metres of tiles and 12,000 pieces of bathware. And with some 85% of the company’s production going to export, RAK Ceramics is now stepping up efforts to raise its profile in the European market.

Indeed, looking abroad has long been a promising path to growth for RAK’s industries. Although the global credit crunch of 2008, not to mention Europe’s current woes, did affect some of the emirate’s industries, especially those catering to the UAE’s real estate boom, the emirate’s industrial base continued to grow, accounting for 30% of GDP in 2011. Moreover, the emirate emerged from the downturn without a single factory closure.

In 2010, the latest year for which figures are available, manufacturing accounted for 22.2% of GDP, compared to 23.3% in 2009, according to the RAK Department of Economic Development (DED). The value of manufacturing output expanded from Dh3.87bn ($1.05bn) in 2009 to Dh3.9bn ($1.06bn) in 2010. Non-oil exports were worth Dh4.01bn ($1.09bn) in 2010, and re-exports worth Dh1.92bn ($524m), compared to figures of Dh3.23bn ($879m) and Dh1.2bn ($326m), respectively, in 2009.

In terms of exports, the leading sectors by value in 2010 were machinery, worth Dh227m ($61.8m), followed by ceramics, stone and glass products, valued at Dh87m ($23.7m).

RAK Ceramics, along with the sector at large, is aware that Europe’s construction industry remains weak at present. However, the company’s plans to revive growth in the European market may well form part of a broader, long-term strategy, given the sector’s wider proven ability to ride out economic storms at home and overseas.