RAK Ceramics posts drop in Q2 profit as revenue falls due to currency depreciation

Revenue during the quarter fell by 6 per cent year-on-year to Dh872 million

RAK Ceramics' revenue in the first half of 2023 increased by nearly 3 per cent to Dh1.75 billion. Photo: RAK Ceramics

RAK Ceramics, one of the world’s biggest producers of ceramic products, reported a 26 per cent annual drop in its second-quarter net profit as revenue for the period declined.

Net profit attributable to the shareholders of the company declined to Dh69.6 million ($18.95 million) for the three months to the end of June, the company said in a statement to the Abu Dhabi Securities Exchange, where its shares are traded.

Revenue during the quarter dropped by 6 per cent year-on-year to Dh872 million amid challenging trading conditions for its tiles and sanitary-ware segments, it said.

The drop in revenue was caused by “market pressure, currency depreciation and rising interest cost”, RAK Ceramics said.

Second-quarter revenue from its tiles business declined 16.4 per cent year-on-year to Dh497.4 million due to “increasing competition, liquidity constraints and economic uncertainties hampering growth in markets,” the company said. However, its markets in the UAE, Middle East, Germany and Italy, continued to perform.

Its sanitary ware revenue for the quarter also fell 8.9 per cent year-on-year to Dh133.2 million as inflation and higher borrowing costs push households to defer major renovation work and prompt property developers to slow down projects, according to the bourse filing.

“The UAE market is the only bright spot,” the company said.

Tableware revenue during the quarter increased 3 per cent on an annual basis to Dh92 million due to the introduction of differentiated products and demand in Europe, while the faucets segment generated revenue of Dh116.5 million, out of which the Kludi Group contributed Dh110.6 million.

RAK Ceramics in March said it planned to acquire 100 per cent of Germany’s Kludi Group as it seeks to expand its operations internationally.

First-half net profit attributable to the shareholders of the company dropped to Dh143 million, from Dh147.8 million in the same period last year.

However, the revenue in the six-month period increased by nearly 3 per cent to Dh1.75 billion.

The rise in first-half revenue was “mainly driven by faucets business consolidation”, the company said.

Earnings before interest, taxes, depreciation, and amortisation in the first half of the year increased by 17.3 per cent year-on-year to Dh312.4 million.

The company’s board proposed an interim dividend distribution of 10 fils per share (Dh99.4 million) for first half of 2023.

Founded in 1989, RAK Ceramics serves clients in more than 150 countries through its network of operational centres in Europe, the Mena region, Asia, North and South America, and Australia.

The company has the capacity to produce 118 million square metres of tiles, five million pieces of sanitary ware, 24 million pieces of porcelain tableware and 2.5 million pieces of faucets a year at its manufacturing plants in the UAE, India, Bangladesh and Europe.

Ceramics manufacturers globally are facing headwinds as supply chain challenges remain amid shortages of raw material and high energy prices. Currency volatility and inflation have hit customers amid tough global economic conditions.

Looking ahead, RAK Ceramics said it will continue to make progress on its expansion plans across its various markets.

In the UAE, the company’s tableware capacity expansion (additional 10 million pieces) remains on schedule, it said. “Completion is expected in Q3 2023, while commercial production is targeted in Q4 2023,” the company said.

Meanwhile, progress continues on its greenfield projects, it added.

In Bangladesh, the design of its factory layout is expected in the third quarter, while its greenfield project in Saudi Arabia is “following its course” as it seeks finalisation of the factory layout plan and for all necessary clearances to be obtained, it said.