Industry, Logistics & Shipping

RAK Ceramics 2016 net profit plunges 37pc

UAE-based RAK Ceramics, one of the largest ceramics brands in the world, said its net profit for 2016 plunged 37.1 per cent to Dh216 million ($58.7 million) over last year amidst a challenging market environment.

Announcing the results for the year ended December 31, 2016, RAK Ceramics said the total revenue too fell 9.3 per cent to Dh2.8 billion y-o-y.

The Emirati firm pointed out that the lower core revenues principally resulted from decreased sales in Saudi Arabia and India which were 41 per cent and 25.6 per cent lower y-o-y respectively.

The fall in Saudi sales reflects the significant decline in government project spending and business sentiment.

Lower sales in India reflect the company’s early stages in the process of rebuilding its senior leadership team and the impact of demonetisation on the economy in the fourth quarter of 2016. Lower non-core revenues reflect the sale of RAK Logistics and reduced construction activity in the UAE.

The Emirati group's core revenues hit Dh2.4 billion, down 6.1 per cent y-o-y, while non-core revenues fell 26.1 per cent y-o-y.
RAK Ceramics pointed out that the continued growth in the UAE, the company’s largest market, where tiles and sanitaryware sales rose by 1.5 per cent y-o-y despite weakness seen in the third quarter of 2016, helped offset these factors.

Sales in Bangladesh grew 10.5 per cent y-o-y as the company benefited from increased tile capacity which came online mid-year. The tableware business had a robust performance with revenues increasing by 20.1 per cent y-o-y to Dh175 million on new product introductions including a successful line of cutlery.
Despite challenging global market and trade conditions, overall profitability improved with the consolidated gross profit margin increasing to 30.5 per cent from 28.2 per cent y-o-y; core margins rose 120bps to 30.5 per cent while non-core margins rose 770bps y-o-y.

Higher profitability however could not offset the decline in sales. On a like for like basis, i.e. excluding provisions and write offs, net profit for the year was Dh 216 million a 37.1 per cent decline versus 2015 levels.
During 2016, the company recorded total provisions of Dh 185 million at both a local and international level.

Overall 2016 sentiment was characterised with “prudence” as the main markets in which RAK Ceramics operations were impacted by major macro events such as project spending cuts in Saudi Arabia, Brexit uncertainty in Europe and the impact of demonetisation on the Indian ceramic tile sector and consumer demand.
Group CEO Abdallah Massaad said: "We enter 2017 with much optimism. We expect sustained growth in the UAE and Europe and a turnaround in Saudi by the second half of the year. Our performance wasn’t unexpected and we were prepared for it."

"We closely monitored the global trade environment in 2016 and weighed it up against our performance. We had to take exceptional measures, including cost reduction initiatives in the UAE, to ensure long term profitability and to deliver on our promise of unlocking value to shareholders," noted Massaad.

"At the same time during 2016, we continued to make investments that will help propel the business forward in 2017, including expanding tile capacity in Bangladesh as well as sanitaryware capacity in the UAE, investments in product development and our corporate rebranding,” he added.-TradeArabia News Service