Industry

The Company

Al Maha Ceramics (AMC) was set up in 2006 and began commercial production in April 2008, with a manufacturing plant in Sohar Industrial Area spread over 150,000 sq metres. The company has emerged as one of the largest selling ceramic tiles in the years since its inception, due to its popularity in the local market as well as in the export market. Its distribution network is spread wide across the UAE, Saudi Arabia, Qatar, Bahrain, Syria, Lebanon, Jordan, Africa and South Asia.

AMC is one of the lowest-cost ceramic tile manufacturers in the region because of proximity to its mines and long-term agreements with the government for fuel procurement. This cost advantage has resulted in Omani manufacturers being able to compete with cheap imports from producers in China, while preserving domestic market share against large-scale producers from GCC countries.

The plant is equipped with fully automated machinery that uses high-quality raw materials imported mainly from Europe for tile production. The company constantly focuses on updating its technology, with two digital printing machines installed recently. The plant’s annual production capacity is currently around 6m sq metres of tiles, and the company plans to increase this by 7.6m sq metres in two phases, taking the total capacity to 13.6m sq metres per annum. The board envisages that the proposed capacity enhancement will lead to future growth in revenues and profitability.

In 2014 AMC launched an initial public offering (IPO) that closed on October 15, and its shares were listed on the Muscat Securities Market on November 3. The IPO – which offered 200m shares at a price of 400 baizas ($1.04) each – saw strong participation, and the price surged to close at 670 baizas ($1.73) on the first day of listing.

Performance

Revenues grew by 11% to OR10.8m ($28m) in 2014, up from OR9.7m ($25.1m)in 2013. The company reported sales of 6.2m sq metres of ceramic tiles in 2014, up from 5.8m sq metres in 2013, and achieved average capacity utilisation of 98%. Net profit for 2014 was OR2.7m ($7m), up from OR2.5m ($6.5m) in 2013. This increase was attributed to the higher sales revenues, initiatives taken to reduce the cost of raw materials and an improvement in productivity.

Over the first nine months of 2015 AMC reported after-tax profits of OR1.89m ($4.9m), an increase of 6% on OR1.79m ($4.6m) in the same period in 2014. Revenues dropped by 10% to OR7.54m ($19.5m), down from OR8.34m ($21.6m). Profit margins improved from 21.5% in the first nine months of 2014 to 25% in the same period of 2015.

In November 2014 the Financial Affairs Council of Oman decided to raise feedstock gas price to 41 baizas ($0.11) per standard cu metre, up from 20.5 baizas ($0.05), with an annual increase of 3% thereafter. As a result, management anticipated projected net profits of 2015 to be affected by 5%. The company plans to mitigate the impact of gas price rises by reviewing the pricing of products and the implementation of cost reduction.

Favourable demographics in Oman and the GCC will lead to sustainable demand for housing, and this is expected to be the fundamental driver of demand growth in the tile industry.

AMC plans to drive growth from continued capacity expansion and improve margins via economies of scale. The company plans to use the additional capacity to launch new products, and will explore new export markets for growth as demand in the GCC slows in the short term due to the drop in oil prices. AMC has recently launched some new products that received an encouraging response from the market, which helped the company maintain the average price realisations in a market that is becoming increasingly competitive.