RAK Ceramics to invest Tk 902cr to build tiles factory

June 20, 2022

RAK Ceramics, a listed multinational ceramic tiles and sanitaryware maker, is set to invest Tk 902 crore for setting up a new tiles factory in Gazipur to deliver value-added products to local customers.
To sit on around 100 bighas of land, the new setup is expected to begin commercial operations in 2025, according to the company’s top brass.
This will raise its daily tiles production capacity by an estimated 15,000 square metres, taking the annual production capacity to 15.50 million square metres.
The company’s current annual production capacity is 10.32 million square metres of tiles and 1.45 million pieces of sanitaryware.
Now enjoying zero debt, the company is yet to decide on its source of investment.A portion may come from bank loans and some from its own funds.
RAK Ceramics has retained earnings worth Tk 174 crore, according to its annual report for 2021.
Despite the pandemic and global economic pressure, the factory is being planned for growing demand observed both in rural and urban areas, said Chief Operating Officer and Chief Financial Officer Sadhan Kumar Dey.
At present, 60 per cent of its products are sold in urban markets while the rest in rural markets.
The new plant will add around 1,500 new jobs and average profits of Tk 90 crore in 10 years, so shareholders are surely to benefit.
Some 72.08 per cent of shares are held by sponsors, 16.57 per cent by institutional investors and 11.35 per cent by general investors, according to the Dhaka Stock Exchange (DSE) data.
The main objective is to take full advantage of growing construction activities in the country, Dey said, adding, “Bangladesh has a huge potential so we are increasing our production capacity.”
New machinery will be brought from Italy and Spain and increased production of high-value added tiles is expected to reduce dependence on imports.
However, demand is inelastic when it comes to imported tiles, at least for a portion of consumers, for which some imports will continue to be made.
The raw materials for making tiles have to be imported, which eats away competitive advantages in exports, he told a press briefing at The Westin Dhaka recently.
Responding to a question, Dey said RAK Ceramics’ products were the same, be it those marketed at home or abroad, in spite of the fact that people of the two geographical regions have different preferences.
For instance, the practice in European countries is to avoid having shiny tiles on floors for the slipping hazard that it poses but in Bangladesh it was the complete opposite.
The company is trying to raise awareness on the use of anti-skid tiles on indoor floors considering the hazard, he said.
At present, the company accounts for around 16.5 per cent of market sales in terms of value but around 6 per cent in terms of product volume, according to the company.
Muhammad Shahidul Islam, company secretary, said the construction sector was growing day by day, having a ripple effect on the demand for tiles and sanitaryware.
As per capita income is rising, demand for the products is also rising.
RAK Ceramics has a lot of experience in the local and international markets, so it will continue to grab even more of the market share in the future, he said.
Sales of the company rose 29.53 per cent to Tk 685 crore, mainly from ceramic products, according to its yearly financial report.
Its profits skyrocketed 191 per cent to Tk 90.5 crore last year, the data shows.
Responding to a question, he said gas shortages sometimes disrupt production but it was nothing new and every competitor faces the same problem.
Established in 1998, the UAE-Bangladesh joint venture company started commercial operations in 2000 and raised funds from the stock market in 2010. Its paid-up capital was Tk 427 crore.
It has two subsidiaries, RAK Power and RAK Security and Services. The former supplies power to its parent company while the latter provides a myriad of services.
This includes providing security guards, managing facilities through cleaning, pest control, fumigation and fire safety services and setting up technical training institutes for developing skilled manpower for various fields, including construction.
The ceramic sector’s potentials have lured in big conglomerates like Akij and DBL Group in recent years.
Currently, there are over 60 ceramics factories in Bangladesh and over a dozen are in the pipeline, according to the Bangladesh Ceramic Manufacturers and Exporters Association (BCMEA).
Of the products, over 25 crore pieces of tableware, nearly 20 crore square metres of tiles, and over 83 lakh pieces of sanitaryware were produced in fiscal 2017-18.
Local manufacturers cater to 85 per cent of the country’s demand, while the rest, most comprising high-end ceramic products, is imported from Japan, China and Taiwan, said Irfan Uddin, general secretary of the BCMEA, earlier.

– With The Daily Star input

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