RAK Ceramics second-quarter profit rises 7.7%

RAK Ceramics, one of the largest ceramics lifestyle solutions providers in the world, on Wednesday reported a total revenue of Dh927 million during the second quarter, reflecting an increase of 32.3 per cent year-on-year basis.

The company also reported a net profit of Dh102.2 million, an increase of 7.7 per cent during Q2 2022 compared to same quarter last year.

“Despite the unprecedented economic environment and increased global volatility, RAK Ceramics achieved a remarkably strong performance in Q2 2022, supported by key strategic and operational initiatives realised during Q2 2022,” Abdallah Massaad, group CEO, RAK Ceramics, said.

“We remain focused on our goals to achieve a sustainable and continued growth in scale and profitability. In Q2 2022, we reinforced brand perception and customer experience, strengthened retail footprint and visibility, further increased production efficiencies and enhanced capacity utilisation,” he said.

“We remained diligent on optimizing logistics operations with better supply chain management and inventory control, to mitigate rising challenges. We were also successful in maintaining an adequate liquidity position for Q2 2022, despite consolidation activity and challenging environment, enabling us to comfortably meet pay-out commitments.

“We are also proud to announce that we have concluded the acquisition of KLUDI Group, launched the process of buying out RAK Porcelain’s minority positions, and approved RAK Ceramics Bangladesh expansionary project,” he said.

Strategic highlights

On May 31, 2022, RAK Ceramics completed the transaction of acquiring 100% stake in the Germany based KLUDI Group, inlcuding 49 per cent stake in our exisiting joint venture KLUDI RAK in UAE. This strategic acquisition represents an opportunity for RAK Ceramics to spearhead expansion and strengthen its core businesses across European markets, in addition to strengthening its position internationally as a ceramic lifestyle solution provider.

The company, to-date, has completed 40 per cent acquisition of RAK Porcelain following an all-cash proposal shared to all minority shareholders, of which 37 per cent were acquired as of June 30, 2022 and an additional three per cent stake was added in July 2022, bringing RAK Ceramics ownership position up to 90 per cent with further stake acquisitions currently under negotiations.

In support of expansionary plans, the company approved RAK Ceramics Bangladesh greenfield expansion project which is estimated to add a capacity of 4.8m sqm in Tiles annually starting Q1 2025 and 400k pcs in Faucets annually starting Q2 2024.

Financial performance

RAK Ceramics delivered a strong performance during Q2 2022 despite the unprecedented environment and increased global uncertainties.

Total revenue for Q2 2022 increased 32.3 per cent to Dh927 million and H1 2022 increased by 20.1 per cent to Dh1.71 billion compared to same period last year, driven by a strong growth across all core businesses. KLUDI Group consolidation, effective June 1, 2022, added Dh50.4 million in Q2 2022 revenue.

Reported net profit increased to Dh102.2 million for Q2 2022 and Dh171.9 million for H1 2022 due to higher revenue and gross profit margins.

Total gross profit margin increased by 0.3% year on year to reach 38.4 per cent for Q2 2022 and by 1.2 per cent year on year to reach 37.8 per cent for H1 2022 despite increase in production costs and the imposition of 12 per cent custom duty by Saudi Arabia, effective July 1, 2021.

Tiles revenue increased by 25.9 per cent year on year to reach Dh595.1 million in Q2 2022 and by 11.9 per cent year on year to reach Dh1.1 billion in H1 2022. Growth was driven by increase in volumes and in selling price across all markets — except for a stabilisation felt in H1 2022 figures for the Saudi Arabian market given introduction of custom duty and supply disruption in Q1 2022.

Sanitaryware revenue grew by 7.5 per cent in Q2 2022 and by 10.3 per cent in H1 2022 at Dh146.3 million and Dh301.2 million, respectively, driven by growth in all markets except the Saudi Arabian market.

Tableware revenue increased by 60 per cent year on year to Dh89.3 million in Q2 2022 and 70.3 per cent year on year to Dh164.9 million in H1 2022 following market rebound post-pandemic.

Segmental Review – Tiles and Sanitaryware

In the UAE, revenue grew by 24.5 per cent compared to same period last year, driven by growing construction demand and favourable real estate market conditions, increase in selling prices and an uplift in the brand’s retail presence.

RAK Ceramics’ position in Saudi Arabia increased by 25.6 per cent compared to same period last year. Company continues to focus on growing its presence in KSA by securing highly profitable projects and expanding its retail footprint.

In Europe, RAK Ceramics witnessed rigid growth in top-line following a strengthened brand positioning despite market slowdown; revenue increased by 1.8 per cent year on year while higher shipping costs weighing in on bottom-line performance.

In the Middle East (excluding UAE and KSA), RAK Ceramics continued its solid growth with revenue up by 27 per cent for the reported period compared to Q2 2021 underpinned by an increased brand exposure and expanding the distribution network.

In India, revenue up by 55.4 per cent year on year, driven mostly by increased tiles sales, on the back of increase in dealers network footprint and expansion in retail presence.

In Bangladesh, revenue increased by 11.3 per cent year on year supported by better brand visibility and price adjustments following increase in input costs and import freight. Despite the registered growth in revenues, higher energy costs and currency devaluation weighed in on Q2 2022 bottom-line.

Stable liquidity position

Net debt increased by Dh351m quarter-on-quarter to reach Dh1.32 billion as of June 2022, following the acquisition of KLUDI Group and RAK Porcelain during Q2 2022. The net debt to EBITDA increased from 1.93x to 2.37x quarter-on-quarter.

— muzaffarrizvi@khaleejtimes.com