RAK Ceramics' Q2 revenue down 5.9% amid tiles sales slump

Oct 02, 2023

Announcing its financial results for the three-month period ended June 30, 2023, RAK Ceramics said its reported net profit contracted by 26.5%

UAE-based RAK Ceramics, one of the largest ceramics’ brands in the world, has registered a revenue of AED872 million ($237.3 million), down 5.9% over last year amid an unfavourable market cycle, currency depreciation and rising interest cost.

Announcing its financial results for the three-month period ended June 30, 2023, RAK Ceramics said its reported net profit contracted by 26.5% to AED 75.1 million due to currency depreciation and challenging trading conditions in the tile and sanitaryware segments.

Gross margin for Q2 2023 decreased by 110bp to 37.3% mainly due to lower revenue while for H1 2023 it remained stable year on year at 37.6%, it stated.

The group's ebitda decreased by 5.5% to AED155.3 million in Q2. However, its ebitda for the first half increased by 6.3% year on year to AED312.4 million and ebitda margin improved by 60bps year on year to 17.8%.

On the six-month period, RAK Ceramics said its revenue increased by 2.6% year on year to AED1.75 billion mainly driven by Faucets business consolidation. However, its net profit fell to AED155.2 million due to lower revenue and margins.

The Emirati group said the net debt increased by AED148 million to AED1.45 billion in June compared to AED1.3 billion in December 2022 mainly due to increase in working capital. Net Debt to ebitda remained stable at 2.4x ebitda compared to Q1 2023.

According to RAK Ceramics, the tiles revenues declined 16.4% year on year to AED497.4 million due to increasing competition, liquidity constraints, and economic uncertainties hampering growth in markets.

The markets in the UAE, Middle East, Germany and Italy continued to perform.

The board of directors has even proposed an interim dividend distribution of 10 fils per share (AED 99.4 million) for H1 2023, it stated.

Commenting on the results, Group CEO Abdallah Massaad said: "We are sailing against a challenging backdrop of increased competition intensity, higher inflation, rising interest rates and currency fluctuation. Our results for the second quarter reflect these difficulties."

"However, we have been actively managing risks and leveraging opportunities. As we witness a dynamic shift in global trends and customer preferences, we are steering our product offering away from the conventional ceramic tiles into porcelain tiles," he stated.

"We foresee a substantial surge in global demand for porcelain tiles especially with regard to the upcoming premium real estate projects globally. We are actively fueling growth with ongoing investments in upgraded production facilities, the inauguration of new showrooms, an expanded product range, and plans to extend the distribution network globally," said Massaad.

The UAE market continues to perform strongly. "In addition, our Tableware division delivered robust performance, mainly driven by the European market, and we are optimistic about its future prospects," he added.

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