May 2017
- Strong QoQ performance led by growth in core revenues of 10.8%
- Tile sales up 13.0% QoQ, Sanitaryware sales up 2.9% QoQ and 9.6% YoY driven by increased demand in the UAE and Europe
- UAE sales growing and resilient by all measures; up 10.3% QoQ and 5.4% YoY
- KSA revenues surge 85% QoQ, signalling signs of a market recovery
- Core gross margins up 190bps YoY, with tile gross margins reaching their highest quarterly result since 2014
RAK Ceramics PJSC (Ticker: RAKCEC: Abu Dhabi), one of the largest ceramics’ brands in the world, announced its results for the first quarter ended 31 March 2017.
The company reported strong QoQ performance with total revenues growing by 4.0% to AED 681.1 million and core revenues growing by 10.8% to 620.6 million.
Compared to the same period in 2016, total and core revenues declined by 7.4% and 3.7% respectively. Non-core revenues declined 33.5% YoY, in-line with the company’s strategy to divest non-core operations.
Strong core business performance
RAK Ceramics’ core businesses growth was driven by growth in tile revenues of 13.0% QoQ, stable growth in sanitaryware revenues of 2.9% and growth in tableware revenues of 12.9%.
Tiles and sanitaryware revenues were driven predominantly by the UAE market and increased sales to Saudi Arabia. Tableware sales were 40% higher YoY on account of the consolidation of Restofair, which took effect from January 1st 2017. Like for like tableware revenues increased 4.3% compared to Q1 2016.
Increased regional demand
Revenues in the UAE, the company’s largest market, rose by 10.2% QoQ and 5.4% YoY. This growth was driven by a revenue increase of 17.9% YoY in sanitaryware and 2.2% YoY in tiles.
Sales in Saudi Arabia, one of the company’s core markets, surged by 85% to AED 51.0 million compared to AED 27.6 million in the previous quarter. While still below Q1 2016 levels, the quarterly rebound appears to signal the beginning of a market recovery.
Driven predominantly by strong demand in the UAE and Europe, sanitaryware revenues grew by 9.6% to AED 122.2 million vs. AED 111.5 million in Q1 2016. This increase is also demonstrative of the group’s ongoing investment in sanitaryware capacity expansions.
Operational efficiencies driving profitability
The company showed positive momentum in gross margin improvements for the first quarter of 2017 reporting core gross margins of 32.1%, up 190bps YoY. Tile gross margins increased 160bps YoY to 27.1%, their highest quarterly result since 2014, driven by improved production efficiencies across UAE tile plants.
Core EBITDA was stable at AED 96.4 million compared to Q1 2016 while EBITDA margins showed a healthy improvement over the same period from 14.9% in Q1 2016 to 15.5% in Q1 2017. This is a result of ongoing cost rationalisation initiatives across the group. Sales, general and administrative expenses were 6.2% lower YoY and the group is targeting further overhead reductions of up to AED 30 million in 2017.
Abdallah Massaad, Group CEO, RAK Ceramics commented
“Our first quarter performance came as expected. We successfully identified the UAE as a source of growth and we are pleased to see Saudi Arabia having turned a corner. Our second half results should also benefit from a turnaround in sales in India and greater production from Iran. We continue to remain focused on cost efficiencies and anticipate better gross margins and lower overheads going forward, which we believe will increase profitability and shareholder value.”
