Abdallah Massaad has seen his company through two economic downturns, and RAK Ceramics is still going strong
Each day, RAK Ceramics CEO Abdallah Massaad begins his day with a swim. For the 46-year old, swimming helps put the world of business in perspective. “It’s a big release for me,” he says. “I always begin and end my day with a swim.”
It’s a natural sport for a man who has had to ride two waves of global economic turmoil while leading a giant among giants in the ceramics industry and keep it afloat. After all, ceramics is a different world today than when RAK Ceramics began operations in 1989, he says.
For a decade after the company’s inception, the red clay laden mountains of Ras Al Khaimah helped propel the company to a position on the world stage in the market for wall and floor tiles. Today, the company also imports white clay from all over the world in a move helping it grow beyond its initial ceramics offering into the UAE’s largest non-oil exporter, and one of the world’s biggest ceramics tile manufacturers that also produces products as varied as tableware porcelain to sanitary ware. The company has strategic investments across the world where it manufactures products in India, Iran, and Bangladesh and at one point even China and Sudan.
In the beginning, he key to success was all about getting off the board faster. “The first ten years were of speedy growth. The next 14 years saw us invest in factories and distribution companies around the world,” he says.
Over 70 percent of RAK Ceramics’ total production continues to come from its facilities in Ras Al Khaimah, 65 percent of which account for products marked for exports and to be sold abroad in over 150 countries. Since the turn of the millennium, the company’s quest for growth saw it invest in technology, facilities and expertise beyond its core businesses. That investment helped the company grow in stature to a nearly $1 billion business and the most important company in the Northern Emirates of the UAE.
However, despite its leading market position, the global downturn in the early part of the decade meant the company had to deal with its fair share of choppy waters. The latest regional economic softening, between 2014 and 2016 was “a really tough period for the company,” says Massaad. “A lot of projects in the region were placed on hold, competition increased while demand shrank, and of course the oil-prices falling meant expenditure on infrastructure also declined.”
The turning of global economic fortunes in the current decade precipitated the need for new thinking re-galvanise the business, says Massaad. CEO at the company since 2012, Massaad had been involved in the ceramics industry for well over two decades. That experience proved invaluable in projecting where the industry was headed, and foreseeing that a turbid global economy was about to result. He also knew what needed to be done keep its balance during the storm.
Months of planning following a 30.6% percent capital injection by Samena Capital in June 2014 turned RAK Ceramics into a company worth nearly $1 billion and jumpstarted a 2014 “value creation plan” that aimed to focus on the company’s core business while offloading nonperforming non-core units and initiate a re-investment in the visibility of the brand, says Massaad. “The plan involved building the product portfolio through technology that would boost brand visibility,” says Massaad, adding that it meant long hours because “everyone had to work harder.”
“The key was building a good management team for whom time was released by encashing the non-core units to focus on the core business and investing in technology to reduce our expenses by improving our productivity across the board,” he says.
By the end of 2016, RAK Ceramics had exited nearly all of its non-performing businesses including its facilities in China and Sudan. In 2017, core-business net profits jumped 73 percent and contributed to a full year profit of AED 315 million. None of that would have been possible if Massaad hadn’t adapted to a changing tide and crafted a plan that while attempting to slim the business down, still pursued an active capital investment in technology to reduce production costs and improve efficiency.
With the prevailing global macroeconomic conditions, the company’s competitors sank their prices lower to capture the market. Meanwhile, what Massaad led his team to do was charge into innovative new products in markets where it already had a foothold, allowing the company to maintain its prices while boosting sales numbers.
Ceramics used to be printed on flat surfaces for instance, but by investing in next generation digital printing technology almost four years ago RAK Ceramics became among the first companies in the world to be able to print on any surface at extra large sizes. The company is also among the few in the world that can produce tiles up to 3 metres long. “This product made a huge difference. Because it absorbs less heat, it can imitate rare marbles and stone. The line, called RAK Maximus, is gaining market share and adoption by both consumers and designers,” he says.
What has also helped is the especially big advantage RAK Ceramics has with the infrastructure and ongoing projects in the UAE that it leverages to grow. “We benefit from Jebel Ali, UAE Airports, each part of the country’s infrastructure, and that is why we are a proud UAE company.”
RAK Ceramics is now leading the pack again, counting big developers among its clients, and exporting 50 percent of its tableware sales, 24 million pieces, to Europe. “In the UAE alone, we have 10 showrooms where we invested in project and product specification teams. With good service we were able to increase overall sales here by 20 percent. In Bangladesh, our second most important market, we did the same to increase sales by 21 percent. In India, we increased sales by 10 percent,” says Massaad.
In the short-term, Massaad sees a new set of challenges and opportunities beginning to emerge: with rising oil prices, transportation, energy, and raw material costs will increase. But there is the expectation of growing government expenditure as well that should drive the region forward, he says. “We see the challenges lasting only in the short term. When the government increases spending, it reflects in the growth of infrastructure and construction, all of which are directly related to our business,” he says.
Massaad’s stewardship of RAK Ceramics, and understanding what allowed the company to persevere, has taught him a valuable lesson: to embrace change, and embrace that it happens constantly “Success is a moving target,” he says, “and only those that adapt survive.”
However, that doesn’t imply there is no room for ad-hoc decision making. “We operate in a number of countries and need to rely on an authority matrix and a reliance on process. But dedication, hard work and creative problem solving is something that always needs to be appreciated, and rewarded. That’s what I ask of all my employees. To work and make decisions thinking what would they do if this was their own company,” he says. “That’s how you reach the finish line.”