RAK Ceramics bounces back with a new team and strategy

The business of RAK Ceramics Bangladesh has turned a corner from the shock of the Covid-19 pandemic, riding on the positive outcomes of a new marketing team and a new strategy.

In the January-March quarter of this year, the multinational company based in the United Arab Emirates (UAE) posted an 18% year-on-year growth in revenue to Tk173.37 crore.

Still, the revenue was 8% lower than in the previous quarter as production was partially suspended for 30 days from 20 December last year.

In the first quarter of this financial year, the company's net profits rose 42% to Tk21.50 crore.

Company Secretary Muhammad Shahidul Islam told The Business Standard, "We have changed the management team and formed a new marketing strategy to boost and recover business after the shock of the ongoing pandemic."

But he refused to share the new strategy with the newspaper saying that was business confidential.

"Profits in the ceramic sector have already declined due to increased competition, and now sales have also collapsed because of the novel coronavirus. That is why we took that decision," Shahidul Islam added.

In the April-June quarter of last year, the company earned just Tk50 crore in revenue and incurred losses due to a 66-day countrywide shutdown put in place from March 26 to fight the pandemic.

RAK Ceramics, which manufactures tiles and sanitary ware and does not produce ceramic tableware items, has four tile plants in Bangladesh with an annual production capacity of 12.30 crore square metres.

Additionally, it has a sanitary ware line with an annual production capacity of 50 lakh items.

Setting out on the Bangladeshi market in 2001, RAK's sales reached Tk887 crore by the end of 2019.

The company posted a 130% business growth over the last ten years but net profit is not growing in proportion to its business growth.

RAK gave a 10% cash dividend to its shareholders in 2020, the lowest since it got listed on the country's premier bourse in 2010.

The closing price of each RAK share was Tk33.10 at the Dhaka Stock Exchange on Wednesday.

RAK Ceramics PJSC, UAE, holds 68.13% of the company's total shares. 

The ceramic industry in Bangladesh

In recent years, the ceramic industry has grown significantly in Bangladesh where 66 brands now manufacture ceramic products.

The monetary size of the domestic market for ceramic products, including tableware, tiles, and sanitary ware, is Tk6,000 crore.

Apart from major brands, more than 100 ceramic manufacturing companies – both small and medium – have evolved in the country.

At present, the sector employs around 5 lakh people, including 55,000 direct employees and those from backward linkage industries.

Annually, these companies manufacture 25 crore items of tableware, 15 crore square feet of tiles, and 50 lakh sanitary ware items.

According to a study by the United States Agency for International Development (USAID), Bangladesh's ceramic industry has experienced a staggering 200% growth in production in the last five years.

The industry has also expanded rapidly in the global market with its high-quality products, added the study.

By the end of 2018, the market size of the ceramic industry was Tk5,950 crore, to which the tiles industry contributed the most – Tk4,500 crore.

Zahedi Hassan Chowdhury, secretary of Bangladesh Ceramic Manufacturers and Exporters Association (BCMEA), told TBS, the demand for ceramic products is low in both domestic and international markets, although the demand for tiles is high in the country.

"Tiles are used mostly in government development work. But development work has not yet begun in full swing. So, most of the companies have not made a comeback yet. The ceramic industry will have to wait a bit more to gain momentum. Maybe it will see momentum after winter," he added.