RAK Ceramics' first-quarter net profit doubles on revenue growth

The company's first-quarter revenue surpassed pre-pandemic levels to touch a five-year high

RAS AL KHAIMAH , UNITED ARAB EMIRATES – Oct 23 , 2016 : Different types of ceramic tiles at the RAK Ceramics factory in Ras Al Khaimah. ( Pawan Singh / The National ) For Business. Story by Michael Fahy. ID No - 58687  *** Local Caption ***  PS2310- RAK CERAMICS08.jpg
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RAK Ceramics' first quarter net profit more than doubled as revenue for one of the world's biggest ceramics manufacturers surpassed pre-pandemic levels to touch a five-year high, boosted by a surge in sales in Saudi Arabia.

Net profit to shareholders increased to Dh60.7 million ($16.5m) in the three months to March 31, up from Dh25.7m in the same period last year. Revenue for the reporting period grew 22 per cent to Dh722.8m, which was its highest level for the quarter since 2016, driven by "growth in all core markets".

"The company has returned to a state of steady growth," a directors' report filed to the Abu Dhabi Securities Exchange, where its shares are traded, said.

Total gross profit margin for the first quarter of the year reached an all-time high of 35 per cent driven by an increase in revenue, an improvement in efficiencies and the optimisation of production lines.

"During the pandemic, we had to optimise our production ... [but] the moment demand came back, we were ready," Abdallah Massaad, group chief executive of RAK Ceramics, told The National on Monday.

"We did not stop and we invested in technology ... where it paid us. From an efficiency perspective, it also helped us a lot."

Despite an improving global economic outlook this year, it is still difficult to predict how demand will shape up, given the world is still dealing with the pandemic.

"Covid-19 is not yet gone so we are cautiously optimistic. We see growth and we have grown vis-à-vis first quarter [of 2020] which was not really impacted by Covid," Mr Massaad said. "From a macro [economic] perspective we will see how things improve."

The company is also closely watching inflation in different markets, which is not a worry at the moment, he added.

RAK Ceramics manufactures ceramic tiles, kitchenware and sanitaryware from production bases in the UAE, India and Bangladesh.

The company reported a 78.5 per cent increase in sales in Saudi Arabia, which last year introduced anti-dumping duties on ceramic tile imports from India and China.

"Capitalising on this demand, the company invested in differentiated tiles and new showrooms, developing significant brand equity in the market. RAK Ceramics is now the go-to provider of premium ceramic products in the kingdom," the directors' report said.

In the UAE, production levels hit a five-year high as operations were uninterrupted despite the impact of Covid-19, the company said.

Revenue in India was up 67 per cent after the company "implemented several initiatives to streamline the business", including the adoption of an improved sales strategy.

However, surging Covid-19 infections in India and Bangladesh are expected to affect the company's revenue. India is currently dealing with a brutal second wave of the pandemic, with the daily infection rate climbing above 400,000 and fatalities topping 4,000, forcing some Indian states to impose lockdowns.

RAK Ceramics has continued its operations in Bangladesh but has shut one of its three production units in India, Mr Massaad said.

Even if the company has to close all three of its Indian facilities, the impact on revenue will not be significant since India's production is for the local market, he said.

"The health and safety of our employees remain a priority as we manage our businesses in that market," the company said.