Ras Al Khaimah, United Arab Emirates, 02 August 2018
RAK Ceramics PJSC (Ticker: RAKCEC: Abu Dhabi), one of the largest ceramics’ brands in the world, announced its financial results for the second quarter ended 30 June 2018.
The company reported steady year on year performance with total revenues stable at AED 719.2 million and core revenues growing by 2.6% to AED 678.4 million.
RAK Ceramics’ total revenues decreased by 0.3% year on year due to a decrease in non-core revenues by 31.9%, reflecting the complete discontinuation of the rough grading business in line with the company’s Value Creation Plan.
Total gross margin increased by +110bps to an all-time high of 34.4% and core gross margins increased by +50bps to an all-time high of 34.7% compared to Q2 2017, despite an increase in raw material costs and energy prices.
RAK Ceramics continued to invest in upgrading of machines and the installation of co-gen and heat recovery systems to reduce the consumption of gas and power.
Reported net profit for the quarter was AED 55.1 million compared to AED 113.2 million in Q2 2017, however net profit in Q2 2017 included AED 34.8 million of net extraordinary gain from the sale of RAK Warehouse.
Net profit was also impacted by an increase in energy costs, foreign exchange losses, general and distribution expenses and investments in Saudi Arabian entities, brand building expenses in India and in the US for the tableware business.
The company stays committed to its Value Creation Plan, and continued improvement in operational efficiencies has offset the increase in costs and contributed to gross margins.
Stable core business performance
RAK Ceramics’ core revenue grew by 2.6% year on year, led by strong sales in the UAE and India, as well as strong performance by the tableware business driven by growth in Europe and the US markets.
Tile and sanitaryware revenues in the United Arab Emirates, Saudi Arabia, India and Europe increased by 2.7%, 17.2%, 2.2% and 6.0% respectively year on year.
Core gross profit margins reached an all-time high of 34.7%, increasing by 50bps year on year. Total gross profit margins also reached an all-time high by increasing 110bps to 34.4%.
Core EBITDA decreased by 16.9% to AED 107m compared to Q2 2017 with margins of 15.8%, and reported net profit decreased by 15.7% to AED 55.1m quarter on quarter.
The business in India witnessed a gradual turnaround this quarter. There is an expansion as well as a green-field project at Morbi underway, both due to begin commercial production by the end of the year.
Sanitaryware revenues in India increased by 12.9% year on year and tile revenues increased 1.7% year on year.
In line with the company’s strategic focus on divesting non-core and non-performing operations, non-core revenue contribution in Q2 2018 represents 5.7% of total revenue due to the discontinuation of the company’s rough grading business.
Abdallah Massaad, Group CEO, RAK Ceramics commented
“Our performance this quarter was stable and in line with expectations. Tile and sanitaryware sales were strong in the UAE, Saudi Arabia, India and Europe. Our tableware business has performed well, driven by growth in the US market and the taps and faucets business has also shown growth in the UAE and Europe.
Looking ahead to the remainder of the year, we are optimistic about our ability to execute on our Value Creation Plan, increase our profitability in core and value markets, drive product innovation and to optimise our production.”