RAK Ceramics, one of the largest ceramics lifestyle solutions providers in the world, has seen its first-quarter profit after tax drop 21.5% to AED62.9 million ($17.13 million).

 

The company’s revenue for the quarter fell 11.4% to AED781.6 million and EBITDA dipped 3.9% to AED151.1 million.

 

Tiles revenue saw a year-on-year decline of 14.8% to AED443.6 million, attributed primarily to lower volumes in Saudi Arabia and Europe. The logistics challenges triggered from the Red Sea crisis have impacted business in all export markets. Despite these challenges, we have been able to mitigate any major impact to the gross margins.  

 

Sanitaryware revenue

Sanitaryware revenue experienced a notable 12.7% year-on-year decline, mainly due to significant challenges faced in key markets such as Italy and the UK as Europe continues to struggle with recessionary pressures and inflationary trends impacting consumer spending. 

 

Additionally, the ongoing crisis in the Red Sea has led to a substantial rise in shipping costs and prolonged delivery timelines.

 

Tableware Division registered a slowdown in revenue at AED90 million on account of decreased hotel projects and spending due to ongoing regional conflicts. Despite a reduction in sales volume and overall revenue, Tableware segment registered a gross margin of 53.9%, a year-on-year improvement of 3.6%.

 

Faucets revenue witnessed a 4.7% year-on-year increase, reaching AED116.9 million mainly resulting from the continued efforts to enhance synergies. The gross margins also improved to 31.1%, thus registering a year-on-year growth of 4.5% due to cost efficiency and shifting production capabilities in UAE. 

 

Significant turbulence

Commenting on the results, Abdallah Massaad, Group CEO, RAK Ceramics said: “This quarter witnessed significant turbulence, marked with continued global geo-political and economic challenges. Major markets worldwide have been struggling to recover from recession thus dampening consumer spending. The ongoing challenge in red sea has added to the disruption of global value chains and squeezed profit margins for all businesses. 

 

“Despite these challenges, we are committed to invest in our brand, improve and strengthen our manufacturing capabilities and expanding our market outreach.”

 

Speaking about region-wise performance, he said the UAE market showed resilience registering an increase in market share and revenue growth. In KSA, the firm’s revenue dipped mainly due to continued local competition specifically impacting wholesale business. However, gross margins improved as the firm continue to focus on premium products and differentiation by focusing on Projects.

 

While European market witnessed a decline in revenue, mainly impacted in the Sanitaryware division, gross margins have sustained with nominal impact.

 

Local competition

In Bangladesh, the market witnessed intense local competition, gas supply shortage, elevated costs of living and currency devaluation. The company is working towards expanding its dealer networks and implementing several initiatives to increase penetration and brand visibility.

 

In India, despite revenue decline, the gross margin was stable, reporting nominal growth. Investments in market expansion and retail initiatives resulted in increased brand visibility and market share. 

 

“We remain confident in the long-term growth drivers of the business and will continue to ramp up our production facilities, while enhancing customer value, fortifying our brand presence, and improving production efficiency. We are well-positioned to take on the ongoing market challenges and we remain positive about accelerating growth and creating value for both shareholders and customers.”

 

Expansion projects

In the tiles division, the upgradation for RAK’s plant in India is nearing completion. In the UAE The company continues to invest in the latest technology to upgrade its plant to smart factories, thus increasing production capabilities for large format Tiles. Additionally, RAK continues to work towards setting up production presence in Saudi Arabia.

 

In the sanitaryware division, the company is upgrading the production facilities by adding new kilns allowing it to produce innovative products like smart toilets, aiming to enhance efficiency, decrease carbon emissions, and cut energy usage.--TradeArabia News Service