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RAK Ceramics Announces Q2 2023 Financial Results
August 2023
RAK Ceramics Announces Q2 2023 Financial Results
  • Revenue in Q2 2023 decreased 5.9% year on year to AED 872 million due to market pressure, currency depreciation and rising interest cost
  • Gross margin of 37.3%, a 110bps erosion due to lower revenue and change in product mix in Q2 2023
  • EBITDA decreased by 5.5% to AED 155.3 million. EBITDA margin improved 10bps to 17.8% in Q2 2023. EBITDA for first half year of 2023 increased by 6.3% year on year to AED 312.4 million.
  • Reported net profit decreased to AED 75.1 million in Q2 2023
  • Net debt to EBITDA at period end remained stable at 2.4x.
  • The Board of Directors proposed an interim dividend distribution of 10 fils per share (AED 99.4 million) for H1 2023.

Ras Al Khaimah, United Arab Emirates, 4 August 2023: RAK Ceramics PJSC (Ticker: RAKCEC: Abu Dhabi), one of the largest ceramics lifestyle solutions providers in the world, announced today its financial results for the quarter ended 30 June 2023. As a result of unfavourable market cycle, currency depreciation and rising interest cost, RAK Ceramics reported revenue of AED 872.0 million, a decrease of 5.9%. Net profit for the period contracted by 26.5% to AED 75.1 million.

Operational Review

  • Tiles revenues declined 16.4% year on year to AED 497.4 million due to increasing competition, liquidity constraints, and economic uncertainties hampering growth in markets. The markets in the UAE, Middle East, Germany and Italy continued to perform.
  • Sanitaryware revenues were 8.9% lower year on year at AED 133.2 million. Inflation and higher borrowing costs are pushing households to defer major renovation work and property developers to slow down projects. The UAE market is the only bright spot.
  • Tableware revenue increased 3.0% year on year to AED 92.0 million thanks to the introduction of differentiated products and demand in Europe.
  • The Faucets segment generated revenue of AED 116.5 million, out of which KLUDI Group contributed AED 110.6 million.

Commenting on the results, Abdallah Massaad, Group CEO, RAK Ceramics said:

“We are sailing against a challenging backdrop of increased competition intensity, higher inflation, rising interest rates and currency fluctuation. Our results for the second quarter reflect these difficulties.

However, we have been actively managing risks and leveraging opportunities. As we witness a dynamic shift in global trends and customer preferences, we are steering our product offering away from the conventional ceramic tiles into porcelain tiles. We foresee a substantial surge in global demand for porcelain tiles especially with regard to the upcoming premium real estate projects globally. We are actively fueling growth with ongoing investments in upgraded production facilities, the inauguration of new showrooms, an expanded product range, and plans to extend the distribution network globally.

On a brighter note, the UAE market continues to perform strongly. In addition, our Tableware division delivered robust performance, mainly driven by the European market, and we are optimistic about its future prospects. ”

 

Strategic Highlights

RAK continues to make progress on its expansion plans across its’ various markets.

UAE Expansion projects: The Tableware capacity expansion (additional 10 million pieces) remains on schedule. Completion is expected in Q3 2023 while commercial production is targeted in Q4 2023.

Bangladesh Expansion projects: Construction works to upgrade and enhance capacity is continued during the quarter. Commencement of production is however pushed by a quarter to Q2 2024.

Greenfield projects: In Bangladesh, the land mutation certificate as well as other necessary approvals and permissions have been received. The civil engineers and consultants have been appointed. Design of the factory layout is expected Q3 2023, after which construction will commence. In Saudi Arabia, the greenfield project is following its course. An application has been filed with Ministry of Energy to support with gas allocation approval alongside finalization of the factory layout plan and obtaining all necessary clearances.

 

Financial Highlights

Q2 2023 group revenues declined 5.9% to AED 872.0 million due to currency depreciation and challenging trading conditions in the Tile and Sanitaryware segments. H1 2023 revenue increased by 2.6% year on year to AED 1.75 billion mainly driven by Faucets business consolidation.

Gross margin for Q2 2023 decreased by 110bp to 37.3% mainly due to lower revenue while for H1 2023 it remained stable year on year at 37.6%.

EBITDA decreased by 5.5% to AED 155.3 million in Q2 2023. However, EBITDA for H1 2023 increased by 6.3% year on year to AED 312.4 million and EBITDA margin improved by 60bps year on year to 17.8%.

Reported net profit decreased to AED 75.1 million during Q2 2023 and H1 2023 decreased to AED 155.2 million due to lower revenue and margins.

Net debt increased AED 148m to AED 1.45 billion in June 2023 compared to AED 1.30 billion in December 2022 mainly due to increase in working capital. Net Debt to EBITDA remained stable at 2.4x EBITDA compared to Q1 2023.

 

Sustainability

Further, RAK Ceramics continues to make long term investment towards waste utilization and energy consumption as it is deeply committed towards sustainability and reducing overall environmental footprint.