RAK Ceramics Q3 net profit spikes 42% to $20.53mln

Publish November 10, 2022
real estate

Total gross profit margin decreased by 3.2% YoY to reach 35% for Q3 2022 and remained almost stable YoY at by 36.8% for 9M 2022

UAE - RAK Ceramics, a leading ceramics lifestyle solutions provider in the world, has reported a 42.0% spike in Q3 2022 net profit to AED90.1 million ($20.53 million) and total revenue of AED906.4 million, a jump of 32.4% YoY.

Total gross profit margin decreased by 3.2% YoY to reach 35% for Q3 2022 and remained almost stable YoY at by 36.8% for 9M 2022 despite higher input prices, supply chain challenges, KLUDI Group consolidation and most recently disruption in Bangladesh operations.

Tiles revenue increased by 12.2% YoY at AED527.0 million in Q3 2022 and by 12.0% YoY to reach 1.63 billion in 9M 2022. Growth was driven by increase in volumes and in selling price.

Sanitaryware revenue

Sanitaryware revenue declined 2.7% in Q3 2022 due to the economic slowdown in European markets but increased by 6.1% in 9M 2022 at AED428.2 million, driven by an increase in selling price.

Tableware revenue increased by 33.5% YoY to AED90.3 million in Q3 2022 and 55.2% YoY to AED255.2 million in 9M 2022 given market post-pandemic rebound and introduction of differentiated products.

Faucets revenue stood at AED117.8 million in Q3 2022 and AED180.5 million in 9M 2022, out of which KLUDI Group revenue amounted to AED111.6 million and AED162.0 million, respectively, following consolidation effective June 1, 2022.

Solid performance

Commenting on the results, Abdallah Massaad, Group CEO, RAK Ceramics, said: “RAK Ceramics achieved a solid performance in Q3 2022 supported by strong operational capabilities despite navigating through challenging macro-economic conditions.

“This quarter we strengthened our foundation, especially in terms of brand positioning, productivity, efficiency and sustainability, to further solidify our growth and build shareholder value. Additionally, we progressed notably on various expansionary fronts, and we remain in line with our expansionary priorities set for this year. We also focused on advancing in terms of integration plan for KLUDI Group and on finalising our position in our Tableware subsidiary, RAK Porcelain; we foresee the fruits of such acquisitions to be seen progressively over the upcoming quarters.

“We were capable not just to withstand current market dynamics, but also to continue recording growth in top-line and increase in profitability. It is truly our diversification strategy and our strong brand equity that allowed us to be well positioned against current macro-economic headwinds and we continue to invest our efforts to maintain both.

“As we set to wrap up this year, we remain cautiously optimistic about the future and we are confident that we are in a good position. We continue to work relentlessly through these unprecedented times to protect our market share by expanding our offering and solidifying our retail presence, and to boost our operations by optimising production and investing in digital transformation.”

Strategic highlights

RAK Ceramics realised further advancements in terms of expansionary plans and Greenfield projects. In the UAE, the company is working on enhancement and additions to its capacity for Tiles, Sanitaryware and Tableware divisions; commercial production post completion of such projects are estimated to be materialised in 2023.

In Bangladesh, it acquired land in August 2022 for setting up a recently approved greenfield project.

As of September 30, 2022, the company acquired 4% stake in RAK Porcelain, bringing RAK Ceramics ownership position up to 91% following an all-cash proposal shared to minority shareholders.

In Saudi Arabia, RAK Ceramics signed a Conditional Investment Agreement with the Royal Commission of Jubail & Yanbu, which stipulates the allocation of Yanbu land to RAK Ceramics.

Sale of land

Additionally, RAK Ceramics executed contract for sale of land in Australia, for a consideration of A$28 million, which is equivalent to almost AED65 million, recording a net gain of AED18.5 million after tax for Q3 2022.

Operational Review

In the UAE, revenue grew by 28.2% YoY compared to same period last year, driven by growing real estate market and solid brand positioning following refurbishment showroom projects executed in Q3 2022.

E-commerce sales continue to pickup QoQ basis as the company’s online offering continues to grow and expand.

RAK Ceramics’ performance in Saudi Arabia remained strong with an increase of 15.1% YoY compared to same period last year, given its continuous focus to secure projects and to expand its retail footprint amidst optimistic market outlook for Saudi Arabia’s real estate sector.

In Europe, currency devaluation impacted revenue and reflected a 1.3% YoY decline, whereas revenue in local currency increased by 12.6% YoY. High inflation and energy crisis continue to impact activity in the European market.

In the Middle East (excluding UAE and KSA), RAK Ceramics continued its solid growth with revenue up by 19.3% YoY for the reported period compared to Q3 2021 underpinned by increased brand exposure and expanding the distribution network.

Macroeconomic conditions

In India, revenue declined by 14.4% YoY given challenging macroeconomic conditions, however performance remained strong given growth in dealers network footprint and improved efficiency albeit energy price increase.

In Bangladesh, revenue recorded 4.4% YoY growth compared to same period last year, slight increase hindered by devaluating currency albeit better brand visibility, increase in prices and product mix shift.

Net Debt position

Net debt increased QoQ by AED89 million in Q3 2022 to reach AED1.41 billion as of September 2022, following interim dividend payment of AED99.4 million and RAK Porcelain minority stake acquisitions of AED22 million. The net debt to EBITDA increased from 2.37x to 2.48x QoQ.

zawya

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