RAK Ceramics profit jumps amid market challenges

16/05/2016 05:23 AST

RAK Ceramics on Sunday announced its results for the first quarter ended March 31, 2016, showing a 10.8 per cent increase in net profit to Dh65.9 million from the year-ago period's Dh59.5 million, despite heightened levels of uncertainty in global markets.

Overall revenue was relatively unchanged at Dh735.7 million from Dh744.1 million. Growth was led by a 3.3 per cent increase in the sale of tiles to Dh496 million and a 0.5 per cent increase in sanitaryware sales to Dh111.5 million supported by restructuring efforts in core markets and the continued improvement of non-core businesses.

Overall core revenue increased by 2.9 per cent to Dh644.7 million from the year-ago period's Dh626.4 million, while non-core revenue reduced to Dh91 million partly due to the sale of RAK Logistics, against last year's Dh117.7 million.

Consolidated Ebitda rose by 6.7 per cent to Dh138.3 million from the year-ago period's Dh129.6 million, and Ebitda margin increased to 18.8 per cent from 17.4 per cent as a result of higher gross margins and reduced general, selling and administrative expenses.

Revenue in core markets remained strong with a 5.9 per cent increase in sales to Dh161.7 million in the UAE driven by market demand for tiles. In Bangladesh, sales increased by 6.8 per cent to Dh61 million on the back of investments to expand capacity in sanitaryware by 25 per cent in 2015.

In India, restructuring efforts and depreciation of the rupee by 8.4 per cent year-on-year placed downward pressure on first-quarter performance.

Whilst revenues declined by 18.4 per cent to Dh81.1 million, the foundations have been laid to revamp operations and drive future growth for the business following the full acquisition of its Indian subsidiary in late 2015 and the recent appointment of a new chief executive officer.

Despite a slower growing economy across Europe, RAK Ceramics' sales to European countries rose by 7.5 per cent year-on-year. The first quarter of 2016 represented a continued momentum in gross margin improvement. Consolidated margin rose for the fourth consecutive period by 170 basis points to 30.2 per cent from 28.5 a year ago.

Gross margin from 'core businesses' increased to 30.2 per cent from 29.8 per cent, driven by strong sales of tiles and supported by turnaround efforts in core businesses within key growth markets, a trend that originated in previous quarters.

Abdallah Massaad, RAK Ceramics group chief executive officer, said: "RAK Ceramics has maintained its prudent approach of focusing on key growth markets during the first quarter of this year with capacity expansions, senior appointments and further consolidation of key assets in core markets. While global financial conditions have presented the business with a challenging economic environment, we are confident that we will see a solid performance in the next three quarters, thanks to our ongoing efforts to strengthen the business, reduce losses and increase margins."

"As we continue delivering on our value creation plan, we intend to retain our position in key markets, keep an eye on opportunities for further expansions and retain the highest calibre of manufacturing talent available in the market." he added.

Khaleej Times