RAK Ceramics second-quarter net profit rises on revenue increase

The company maintained its profitability despite rising global economic challenges

Ras Al Khaimah, June 19, 2013 - Workers change the filters the machines that press tiles at the RAK Ceramics factory in Ras Al Khaimah, June 19, 2013. (Photo by: Sarah Dea/The National)

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RAK Ceramics, one of the world’s biggest producers of ceramic products, reported a second-quarter net profit increase of about 4 per cent as revenue rose despite rising global economic challenges.

Net profit attributable to the owners of the business during the period stood at Dh91 million ($24.77m), compared with Dh87.8m in the same quarter of the previous year, the company said in a statement to the Abu Dhabi Securities Exchange, where its shares are traded.

Total revenue increased more than 32 per cent to Dh927m, driven by strong growth across all core businesses.

“The company remains focused on our core businesses and continued growth in scale and profitability,” group chief executive Abdallah Massaad told the National.

“In the second quarter, we strengthened our retail footprint and visibility, and increased production efficiencies and enhanced capacity utilisation.”

Ceramics manufacturers around the world are facing headwinds as supply chain challenges, raw material shortages, high energy prices, currency volatility and inflation hit sales volumes and profits, Mr Massad said.

“We are fortunate to be in a stable region, where we can get our raw materials, energy and manpower,” he said.

Revenue increases across all of RAK Ceramics' main markets were driven by higher sales volumes and selling prices, the company said.

UAE revenue in the first half of the year grew by 24.5 per cent annually, driven by growing construction demand, favourable property market conditions and an improvement in the brand’s retail presence.

In Saudi Arabia, revenue in the first six months rose close to 26 per cent, with the company planning to further grow its presence in the kingdom.

“We continue to focus on expanding our presence in Saudi Arabia by securing highly profitable projects and expanding our retail footprint,” said Mr Massad.

In the Middle East, excluding the UAE and Saudi Arabia, revenue was up 27 per cent in the January to June period, while revenue in India grew 55.4 per cent a year.

RAK Ceramics said rising input and freight costs had been challenging, especially in markets such as Bangladesh, where higher energy costs and currency devaluation weighed on profitability despite a strong growth in revenue.

“To mitigate some of these challenges relating to costs, we have increased production efficiencies and enhanced capacity utilisation,” said Mr Massad.

“We have been diligent in optimising logistics operations, with better supply chain management and inventory control.”

In May, RAK Ceramics fully acquired German-based Kludi group and bought a 49 per cent stake in UAE joint venture Kludi RAK.

After these acquisitions, the company's debt rose by Dh351m quarter-on-quarter in the April-June period to Dh1.32bn.

The acquisitions give RAK Ceramics an opportunity to expand across Europe and strengthen its position internationally, it said.

The company is also working on a greenfield expansion project in Bangladesh.

The project is expected to add 4.8 million square metres in tile manufacturing capacity annually from the first quarter of 2025, and produce 400,000 faucets a year from the second quarter of 2024.

We are fortunate to be in a stable region, where we can get our raw materials, energy and manpower
Abdallah Massaad, group chief executive, RAK Ceramics

Locally, RAK Ceramics has completed the acquisition of 40 per cent of RAK Porcelain through an all-cash deal that was offered to all minority shareholders.

The company acquired a 37 per cent stake on June 30, with the additional 3 per cent added in July to bring its ownership position up to 90 per cent. Negotiations are under way over the acquisition of the remaining 10 per cent.

“We remain focused on our goals to achieve a sustainable and continued growth in scale and profitability,” said Mr Massad.

Founded in 1989, RAK Ceramics operates in more than 150 countries. It specialises in the manufacture of ceramic wall and floor tiles, tableware, sanitary ware and taps.

Updated: August 03, 2022, 9:36 AM