RAK Ceramics Announces Second Quarter 2016 Financial Results
Ras Al Khaimah, United Arab Emirates, 4 August 2016
- Continued focus on driving efficiency through long term value creation, strengthening core businesses and increasing margins despite challenges
- Group net revenue decreased by 5.9%, mostly from a decline in non-core revenues
- Consolidated gross margin rose to 29.5%, an increase of 220 bps YoY
- European sales increased by 11.1% QoQ, showing positive impact of control on improving operations
RAK Ceramics PJSC (Ticker: RAKCEC: Abu Dhabi), one of the world’s largest hi-tech manufacturers of lifestyle ceramics solutions, today announced its results for the second quarter ended 30 June 2016.
Despite a slowdown in construction activity in the GCC and the impact of geopolitical uncertainty in some of the regional export markets, RAK Ceramics continued to successfully deliver on its long term Value Creation Plan in the first half of 2016. Integrating the European distribution alongside continued expansions in Bangladesh and the UAE were some of the main initiatives in the quarter confirming efforts from the Group to continue strengthening its core businesses in strategic markets.
Results in Q2 reflect current market conditions. Overall, the Group’s consolidated net revenue reached AED 757 million in Q2 2016, decreasing by 5.9% YoY, mainly due to a decline in non-core revenues (3.6% decrease in H1 2016 to AED 1.49 billion). Consolidated gross margin for the period rose to 29.5%, increasing by 220 bps YoY, driven by improved non-core margins according to plan (H1 2016 at 29.8%, increasing by 190 bps YoY).
EBITDA for Q2 2016 decreased by 7.6% YoY at AED 144.3 million (held strong with a slight decrease of 0.8% in H1 2016 to AED 282.6 million). EBITDA margin in Q2 2016 remained stable at 19.1% (in H1 2016, it increased by 50 bps at 18.9%).
Restructuring across Core Businesses in Focus Markets Bear Fruit
During the period, RAK Ceramics performed a series of restructuring activities across Asia and Europe. In India, a new CEO was appointed and over the coming months will be building a team to strengthen Indian operations. Europe achieved a significant milestone with the integration of the British and German teams under the RAK Ceramics Group, following the acquisition of both subsidiaries in February 2016; cost synergies expected in 2017. Additionally, consolidation of the Italian subsidiary is underway and is expected to be complete in Q3 2016.
Despite a slower growing economy across Europe, overall sales increased by 11.1% QoQ, showing positive impact of control on improving operations. Tiles sales increased by 11.7% and sanitaryware sales increased by 9.4% QoQ in Q2 2016.
A Strong Global Competitor
Abdallah Massaad, RAK Ceramics’ Group Chief Executive Officer said: “We are focused as a group to strengthen the company’s global presence by carrying out strategic global initiatives despite the ongoing challenges in our region. There are a number of encouraging signs that will support RAK Ceramics’ growth and we have an ambitious plan for the Group’s future development. In Q2, we maintained our approach of focusing on increasing efficiencies by strengthening our core businesses, consolidating our operations in core markets and streamlining costs. With 25 years of ceramics expertise, the company is in a very strong position to capitalise on its global network, wide product range and revitalised brand proposition to deliver long term growth. RAK Ceramics is a real global competitor with solid foundations.”
Key highlights for the period (Q2 2016)
- Overall revenue decreased by 5.9% to AED 757 million. Non-core revenues decreased by 30.2% to AED 96.1 million. Core revenues decreased 0.9% to AED 660.6 million.
- Reported net profit decreased by 24.1% YoY to AED 65.3 million but normalized net profit decreased by 12.6% at AED 83.5 million where provisions and impact of strategic decisions were excluded.
- Revenues by Segment:
- Overall tiles revenues decreased by 5.3% YoY to AED 487 million.
- Tableware revenues increased by 41.7% YoY to AED 51.2 million.
- Sanitaryware revenues rose by 5.3% YoY, to 122.4 million.
- Revenues by Country / Region:
- Revenues from the UAE rose by 4.6% YoY to AED 165.4 million.
- India fell by 27.9% YoY to AED 73.6 million in Q2 2016.
- Bangladesh increased by 3.1% YoY to AED 63 million.
- Europe increased by 11.1% QoQ to AED 118.3 million compared to Q1 2016.
- Consolidated gross margin at 29.5%, an increase of 220 bps YoY.
- Core gross margin was 29.7% compared to 30.3%. Non-core gross margin increased to 27.6% compared to 12.6%.
- EBIDTA decreased by 7.6% at AED 144.3 million.