UAE-based Rak Ceramics, one of the largest ceramics’ brands in the world, has posted a net profit of Dh110.3 million ($30 million) in the first half (H1) of the year, a year-on-year decrease of 8.5 per cent.

However, net profit increased by 98.8 per cent quarter on quarter to Dh 73.4 million owing to the reversal of a receivables provision amounting to Dh22.1 million.

Total revenue during the period decreased by 6.8 per cent to Dh 1.29 billion compared to H1 2018. However, total revenue increased by 7.6 per cent quarter on quarter.

In the first half of 2019, Rak Ceramics continued to implement initiatives that have made the business more agile, operationally efficient and profitable, despite increasing energy costs.

Gross profit margins increased by 100bpsyear on year to 34.2 per cent.

Tiles margins increased by 130bps year on year to 29.9 per cent driven by continued improvements in operations, while sanitaryware margins remained stable at 38.4 per cent.

Tableware margins decreased by 3.3 per cent year on year to 54.8 per cent due to changes in the product mix.

Tiles revenues were lower year on year per management expectations, owing to difficult Mena market conditions and demand seasonality given the Eid period, a company statement said.

The sanitaryware and tableware businesses continued to perform well, with revenues increasing by 6.7 per cent and 3.8 per cent respectively year on year.

Reported net profit grew by 33.1 per cent year on year in Q2 2019 to Dh 73.4 million. This was driven by improved gross margins and the reversal of a Dh 22.1 million receivable provision created in 2017, which has now been received.

Saudi Arabia expansion update

Rak Ceramics’ continues to evaluate strategic options for adding a secondary manufacturing facility in Saudi Arabia, which will enable it to produce at low cost and supply the growing local market as well as key export markets in Europe.

India turnaround on track

The greenfield production facility in Morbi in the Indian state of Gujarat began commercial production of Rak Ceramic’s mega slab tiles in early 2019 and has reached 70 per cent production utilisation.

A second Morbi plant producing ceramic tiles has achieved a production utilisation of 92 per cent. The contribution of India’s exports increased from 3.5 per cent of total revenue in H1 2018, to 15.5 per cent of total revenue in H1 2019.

Abdallah Massaad, Group CEO, Rak Ceramics said: “We have seen an improvement in our gross margins during the period due to continued investment in operational efficiencies. Despite high energy costs, we remain focused on running an efficient and profitable business.”
 
“Looking ahead to the remainder of 2019, we will continue to focus on mitigating energy costs and improving profitability in Europe and Saudi Arabia. Our business in India is on the right track and we hope to establish it as a hub moving forward.

“Rak Ceramics is also always on the lookout for opportunistic acquisitions, as we optimise production and protect our growth in India, Bangladesh and the UAE,” he added. – TradeArabia News Service