Saudi Ceramic Continued success - Al Rajhi Capital

Saudi Ceramic
Construction & Materials –Industrial
1 August 2010
Figure 3. Saudi Ceramic: production capacity for each segment
2007 2008 2009 2010E 2011E
Ceramic tiles(mn m2) 21 32 34 43 52
Sanitary wares (tons) 19,200 24,000 27,600 34,500 41,000
Water heaters (heater) 600,000 850,000 1,200,000 1,500,000 1,600,000
Source: Company data, Al Rajhi Capital
55% of revenues come from
local dealers
Sales by distribution channels
The company’s sales can be divided based on the distribution channels. The company has 25
showrooms around Saudi Arabia that derive 20% of its sales. The exports represent 13% of
sales. The sales of the Dubai office increased by 25% in 2009. The third channel is direct sales
to institutional projects, which make up a 7% share. Most of the sales are driven by company
dealers, which represent 55% of sales.
Figure 4. Saudi Ceramic: revenues breakdown by distribution channels
Source: Company data, Al Rajhi Capital
We expect an increase in
capacity of ceramic tiles of 50%
in 2012
Increased utilisation of
bathroom products factory
We expect revenues to grow by
18% and 22% in 2010 and
2011 respectively
Ceramic tiles and bathroom products segment: gradual
and sustainable expansion strategy
Saudi Ceramic plans to continue expanding its production of ceramic tiles. The company has
replaced the old tiles line in the first tiles factory whose capacity totalled 600,000 m 2 by a
new line whose annual capacity is 2mn m 2 . This project has been completed and production
started on March 2009. The company also lunched a new production line at the first tile
factory with an annual capacity of 1.3mn m 2 , which started production on May 2010.
Moreover, work is progressing on implementation of the first stage of the fourth tile factory
project with annual production capacity of 9mn m 2 . This stage is expected to be in operation
by the end of 2010. The second stage of the fourth tiles factory has a capacity of 9mn m 2 , and
the company expects to launch production by the end of 2011. The company currently has a
total production capacity of 34mn m 2 of ceramic tiles, and we expect it to reach 43mn and
52mn m 2 by the end of 2010 and 2011 respectively.
The company has one factory that handles bathroom products production. The current
capacity of 30,000 tons per year equals more than 2mn pieces. The company is planning to
expand its capacity further since demand is huge. The company is working on upgrading and
expanding the bathroom products factory. The plan includes more automation by adding
glazing robots for spraying, high and low pressure casting lines, tunnel and shuttle kilns and
tunnel dryers. Upgrading and expanding will result in an increase of capacity of 50% up to
3mn pieces annually within tow years.
The ceramic tiles and the bathroom products segment sales grew by 41% and 9% in 2008 and
2009 respectively. From the fact that the company’s policy is to produce at full capacity, and
based on the aggressive expansion, we expect that the company’s revenues will grow by 18%
and 22% in 2010 and 2011 respectively.
Disclosures Please refer to the important disclosures at the back of this report. 6