RAK Ceramics reports slide in first quarter profit

Company halts production in India and Bangladesh as customers in the construction and hospitality sectors face hit from Covid-19

RAK Ceramics is implementing a raft of measures to mitigate the impact of Covid-19 on its business. Courtesy RAK Ceramics

RAK Ceramics, one of the world's biggest producers of ceramics, reported an 18 per cent drop in its first-quarter net profit as impairment losses climbed and revenue decreased as the coronavirus pandemic hit.

Net profit for the three months ending March 31 plunged to Dh30.2 million, the company said in a statement to Abu Dhabi Securities Exchange where its shares trade. Impairment losses on trade receivables and dues from related parties rose almost five-fold to Dh6m while revenue dropped 3 per cent to Dh593m.

Selling and distribution expenses increased 10 per cent year-on-year to Dh104.1m. Finance costs also rose.

“The nature of our business is closely linked to the construction and hospitality sector[s], which were heavily affected by the pandemic,” Abdallah Massaad, group chief executive of RAK Ceramics, said on Wednesday.

“We expect this situation to impact our performance in the next few months but we are confident given our stable results in the first quarter, our strong foundations and a sound business model, we will be able to face this unprecedented challenge and move forward.”

RAK Ceramics is implementing a raft of measures to mitigate the impact of Covid-19 on its business in different markets. The company completely shut down production in India and Bangladesh and reduced its production in the UAE. It also took measures to manage its liquidity, including cutting discretionary expenses and placing non-essential capex plans on hold.

Total revenue in Saudi Arabia increased significantly when compared to the same period in 2019, driven by an 80.8 per cent increase in tiles revenue. The company is optimistic about long-term growth in Saudi Arabia once the economic recovery gets under way, it said in the statement.

Companies across the world are reporting lower profits in the first quarter due to the pandemic. The global economy could experience the worst recession this year since the 1930s. The International Monetary Fund last month projected a 3 per cent contraction in 2020 and said the outlook for the world economy is worse than during the 2008 global financial crisis.

Founded in 1989, RAK Ceramics exports to more than 150 countries through a network of hubs in Europe, the Middle East and North Africa, Asia, North and South America and Australia.