RAK Ceramics revenue stable but net profit down in Q2
Rising energy and global expansion costs offset by sale of RAK Warehouse
Ceramics giant RAK Ceramics registered ‘stable’ revenue of $195.79 million with core revenues growing by 2.6% to $184.69 million in Q2 2018.
In its results statement, RAK Ceramics revealed that 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 to an all-time high of 34.4% and core gross margins increased by to an all-time high of 34.7% compared to Q2 2017, “despite an increase in raw material costs and energy prices,” the company added.
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 during the period.
“Reported net profit for the quarter was AED 55.1 million ($15 million) compared to AED 113.2 million ($30.82 million) in Q2 2017, however net profit in Q2 2017 included AED 34.8 million ($9.47 million) of net extraordinary gain from the sale of RAK Warehouse,” the company added. “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.”
Overall the company reported that 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 UAE, Saudi Arabia, India and Europe increased by 2.7%, 17.2%, 2.2% and 6.0% respectively year on year.
“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,” said RAK Ceramics. “Sanitaryware revenues in India increased by 12.9% year on year and tile revenues increased 1.7% year on year.”
The company told investors that: “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%.”
“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,” commented Abdallah Massaad, Group CEO, RAK Ceramics. “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.”
