RAK Ceramics posts net profit of Dh73.4m
Looking ahead, RAK Ceramics will continue to focus on mitigating energy costs and improving profitability in Europe and Saudi Arabia.
RAK Ceramics has announced its financial results for the six months period ended June 30, 2019, with reported net profit growing by 33.1 per cent year on year in Q2 2019 to Dh73.4 million.
This was driven by improved gross margins and the reversal of a Dh22.1 million receivable provision created in 2017, which has now been received. Total revenue decreased by 6.8 per cent to Dh1.29 billion compared to H1 2018; however, total revenue increased by 7.6 per cent quarter on quarter. Sanitaryware revenue increased by 6.7 per cent year on year driven by sales in Saudi Arabia, India, and Europe. Tableware revenue increased by 3.8 per cent driven by growth in US and GCC markets. Total gross profit margin increased by 100bps year on year to 34.2 per cent, driven by an increase in tiles gross profit margins by 130bps to 29.9 per cent. In addition, EBITDA increased by eight per cent year on year to Dh239.8 million.
Tiles margins increased by 130bps year on year to 29.9 per cent driven by continued improvements in operations, while sanitaryware margins remained stable at 38.4 per cent. Tableware margins decreased by 3.3 per cent year on year to 54.8 per cent, due to changes in the product mix.
Speaking to Khaleej Times, Abdallah Massaad, group CEO of RAK Ceramics, said that he was happy with the results, given the challenging market conditions at the moment.
"Our focus is not just on revenues; we have to look at several other factors such as our market position," he said. "It is true that we had a bad first quarter, but we have recovered. Our sales have improved and our first priority right now is to improve our margins. Our sales in sanitaryware are also doing really well. Despite the increase in energy prices, we have improved our margins by implementing several sustainability initiatives that have made the business more agile, operationally efficient, and profitable."
Looking ahead, he added that the group will continue to focus on mitigating energy costs and improving profitability in Europe and Saudi Arabia. There will also be a dedication focus on expansion in key markets.
"India is an important market for us, because it our export hub to several other regional markets," said Massaad. "We are also looking at Asia, which is a very interesting market. We are also pleased with our operations in the European market, namely the UK, Italy, and Germany."
RAK Ceramics continues to evaluate strategic options for adding a secondary manufacturing facility in Saudi Arabia, which will enable it to produce at low cost and supply the growing local market as well as key export markets in Europe. The greenfield production facility in Morbi, Gujarat began commercial production of RAK Ceramic's mega slab tiles in early 2019 and has reached 70 per cent production utilisation. A second Morbi plant producing ceramic tiles has achieved a production utilisation of 92 per cent. The contribution of India's exports increased from 3.5 per cent of total revenue in H1 2018, to 15.5 per cent of total revenue in H1 2019.