Tile and ceramic industry is one of the industries in Iran which has been faced with some difficulties since its commencement. In this article, we are trying to review what has happened to this industry and what are the obstacles that this industry is facing with.
Some of the companies in this industry such as Irana tile has been launched since 1957. Iran’s tile and ceramic production were in a good situation, thanks to accessibility to high quality of raw materials such as clay and silica. Unfortunately, stagnancy in construction industry has led to turmoil (drop in trend of this industry).
In this part of the article, we sorted tile and ceramic industry in to 5 different periods since its launch till now in Iran.
- 1957 to 1978: It was the time that there was a huge change in people’s consumption and production pattern as well as changes in style of architecture in construction industry. By this way, it was necessary not only to increase the supply, but also to import from other countries. In fact, that’s why most of tile and ceramic factories had been constructed at that time. The interesting issue is that importing from other countries has led to more competitive market in this industry and therefore domestic companies started to improve their quality.
- 1978 to 1988: After revolution of Iran, the new government planned to develop domestic production and reach to self-sufficiency by reducing the dependency of this industry to other countries. As a result, this industry had started a new era, however, it didn’t last for so long.
- 1988 to 1999: It was the time that the war between Iran and Iraq was finished after 8 years and thus it was necessary to focus on tile and ceramic industry in order to reconstruct the ruins caused by the war. It was shown by the statistics that the annual gross rate of this industry was around 8.2% during the mentioned period of time.
- 1999 to 2009: In this duration, the government started to run the 3rd and 4th economic and social development plans and also Iranian banks provided more funding to their clients, therefore Iran reached to the 4th rank in producing tile and ceramic in the world.
- 2009 till now: Nowadays, this industry is experiencing depression and it is mostly because of the current unfavorable condition in construction industry in Iran. Unfortunately, the production of some companies has been decreased over the period and by this way, although our neighbor countries such as Iraq and Syria could be good potential markets for exporting of construction materials, Iranian companies lost their market share because of the low quality of their products and also some of political problems in those countries. The other important weakness of producing tile and ceramic in Iran is the lack of innovation in designing. The profit margin and return on equity of some big companies in tile industry for three recent years is shown in the chart below:
Here is where the management role becomes highlighted. The reason that return on equity for Irana Tile Company in 2015 is zero emerged from its negative equity due to accumulated loss, in fact, ROE would not have any special meaning for it. its loss and equity was 313,117 and (147,879) million Rials respectively. This is not the whole picture; more detail about this issue will be reviewed in the future articles.
According to the above diagram, most of Iranian tile companies had not gained as much as predicted although they access to good raw materials in our country. According to Tasnim News Agency, most of the companies in this industry just produce maximum half of their real capacity at present. And unfortunately, most of these companies have been closed. One of the significant reason for this matter is reduction in the number of construction projects in Iran and this has been led to depot of products in some factories. The diagram above somewhat shows the mentioned issue. A question can be raised in this article is how some of the companies in this industry could make profit with existence of some disadvantages.
To wrap it up, what is going to happen to tile industry in Iran? Notwithstanding the accessibility to good raw materials in Iran and available potential markets in nearby countries, investing in some of these companies serve as a double edged sword because of their management problem. Some of these companies could be good opportunities for foreign investors as they are in low price and their board of directors are eager to sell their seats, then based on their advantages we mentioned earlier, investors can take over these companies and renovate their equipment to produce high quality products and also they could be able to reach their market share.