Heavy metal and fine porcelain boost Ras Al Khaimah economy

Stevin Rock

• Minerals and metals sector benefiting from Gulf building boom
• RAK Ceramics is growing organically and through acquisitions
• The emirate’s pharmaceuticals giant is back in profit

Ras Al Khaimah has been making up for its limited hydrocarbons sector by developing non-oil businesses such as quarrying, cement, ceramics and pharmaceuticals.

Today RAK’s manufacturing, wholesale and retail trade, along with its construction/real estate activities amount to about 50 percent of GDP.

The direct contribution of the mining and quarrying sector is currently only about 2 percent.

However, the processing of mined minerals and metals – limestone, iron, copper and rocks, chemicals and petroleum products – accounts for more than 50 percent of manufacturing GDP, which in turn contributes about 25 percent in the overall GDP.

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The minerals, metals and mining sectors are of increasing importance to the RAK economy, according to Trevor Cullinan, lead analyst for sovereign ratings at S&P Global Ratings.

He said: “Strong demand from the Indian subcontinent, and a large number of upcoming infrastructure and hospitality projects in the UAE and wider GCC region will support this industry in the foreseeable future.”

Government spending on construction projects usually picks up during oil windfalls in the GCC region, and this is set to have a positive spillover effect on the minerals and mining industries of RAK.

Operational collaboration between local companies, such as RAK Ports and quarrying group Stevin Rock ensure effective supply chain management of mining products.

Stevin Rock and fellow quarrying company RAK Rock provide about 80 million tonnes of limestone to the construction sector annually.

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Ceramics put a shine on the economy

If quarrying and mining are of increasing importance to the economy, RAK Ceramics and Julphar Pharmaceuticals are the industrial giants pushing most aggressively to develop the emirate’s full non-oil potential. 

Formed in 1989 RAK Ceramics has grown from a UAE-based tile manufacturer to one of the largest ceramics brands in the world, specialising in ceramic and gres porcelain wall and floor tiles, tableware, sanitaryware and taps.

With 23 plants located across the UAE, India, Bangladesh and Europe, the Abu Dhabi Securities Exchange-listed company serves clients in more than 150 countries through its network of operational hubs, employing 12,000 staff. 

RAK Ceramics saw profits grow 16 percent to AED 232.8 million ($63.4 million) over the first nine months of 2022. 

Group CEO Abdallah Massaad said the company achieved its solid performance due to strong operational capabilities despite navigating challenging macroeconomic conditions.

“We were able to not just withstand current market dynamics, but also to continue recording growth in top-line and profitability,” he said.

The company is focused on optimising productivity and increasing efficiency. It is also active in growth markets, including Saudi Arabia.

In Q3 2022, it acquired additional land in the kingdom’s Yanbu industrial zone for greenfield expansion purposes. It has also acquired additional land in Bangladesh for a new greenfield project.

“The signing of the conditional investment agreement with the Royal Commission of Jubail & Yanbu brings us one step closer to launching our Saudi Arabia greenfield project,” said Massad. “We continue to work closely with regulatory bodies to ensure continuous project progress.”

RAK Ceramics is also active in the mergers and acquisitions market, paying $30.3 million last year to acquire Germany’s kitchen and bathroom fixtures firm, Kludi Group as part of a strategy to strengthen its presence in core markets. 

“In terms of inorganic growth, we’ve completed the 100 percent acquisition of Kludi and minority stake buy-outs in RAK Porcelain, allowing us to now reach 92 percent ownership,” said Massaad.

“Consolidation was the theme for 2022. We’re now advancing on our post-acquisition plan for Kludi and expansion plans for RAK Porcelain.”

Analysts are positive about the company’s prospects. “RAK Ceramics has strengthened its foundation through brand positioning and by improving its productivity and efficiency to solidify growth and boost shareholder returns,” said Ahmad Bani Hani, a research analyst at FAB Securities.

Pharmaceuticals return to healthy profit

Julphar, the Gulf region’s first pharmaceuticals company was founded in the 1980s and is a major producer of insulin among other generic medical ingredients.

Employing more than 2,400 staff, through 12 manufacturing facilities, Julphar distributes pharmaceutical products to more than 50 countries.

It is eyeing further growth, with plans to launch over 100 new products between 2022 and 2030. It also plans to leverage its in-house research and development capabilities and sign licensing agreements with top-tier pharma partners.

The company returned to profit in 2021, after an AED 316.1 million ($86 million) loss in 2020. In Q3 2022 it reported net sales of AED 415.67 million ($113.2 million), a year-on-year increase of almost 13 percent.

These were the fruit of a two-year strategic turnaround programme that saw Julphar move out of non-core and loss-making activities. 

With no one sector exceeding more than 20 percent of total GDP, RAK has avoided the challenges of hydrocarbons dependency experienced by other Gulf states. Companies like RAK Ceramics and Julphar aim to continue the diversification of the emirate’s non-oil economy.