RAK Ceramics, one of the largest ceramics and porcelain lifestyle solutions providers in the world, has seen its third-quarter (Q3) net profit after tax slump 33.3% YoY to AED55.9 million ($15.22 million).
The impact of 9% UAE Corporate Tax was AED7.9 million. 9M profits decreased 29.0% YoY to AED169.9 million. The impact of 9% UAE Corporate Tax was AED22.3 million.
RAK’s group revenue experienced a YoY decline of 4.1% to AED802.5 million in Q3 2024, owing to ongoing global geopolitical tensions, political unrest in Bangladesh majorly impacting business, market volatility, higher interest rates, and currency devaluation.
Gross profit margin
Gross profit margin saw strong improvement of 250bps year-on-year (YoY) to 41.2% for Q3 2024. EBITDA decreased by 13.5% YoY in Q3 2024 to AED146.2 million.
In 9M 2024 EBITDA decreased by 9.8% YoY to AED434.2 million. Net debt increased by AED14.0 million quarter-on-quarter in Q3 reaching 1.57 billion. The net debt to EBITDA ratio also increased from 2.50x in Q2 2024 to 2.61x in Q3 2024, mainly due to lower LTM EBITDA.
Segmental performance highlights
Tiles division saw a 350bps increase in gross margin to 42.5% YoY. However, there was a slight decline of 1.5% in revenue for the same period – specifically on account of lower volumes in India, Bangladesh and European markets.
Sanitaryware division experienced a YoY decline of 4.5% in revenue at AED117.5 million, as major markets such as Bangladesh, Europe, and the UK struggled with weaker demand triggered from ongoing geopolitical tensions.
Tableware division revenue declined 7.8% YoY at AED85.3 million, due to the slowdown in overall demand and decline of new hotel projects due to ongoing regional conflicts as well as revenues in major markets like Egypt, Asia, and Africa being further affected by ongoing supply chain challenges and currency depreciation. However, the gross profit margin improved by 270bps YoY to 52.7%, following a change in the profit mix.
Faucets revenue declined by 5.3% YoY to AED108.8 million and gross margin also declined by 360bps YoY as a result of weakened demand in Europe amid ongoing geopolitical tensions, decline of the Chinese real estate sector and impact from the new sanctions on Russia.
Tiles & Sanitaryware market highlights
UAE: Registered a YoY revenue growth of 13.6% in Q3 2024, primarily due to the growth in the real
estate sector.
Saudi Arabia: Experienced a moderate revenue decline of 6.5% YoY in Q3 2024, due to the
continued price war situation and local competition. Additionally, the rise in transportation cost has impacted RAK Ceramic’s margins and revenue adversely. However, with the relief in levy of customs duty on our exports and with a change in our product mix, we are able to maintain our margins by implementing sustainable pricing.
Europe: Revenue declined by 8.7% YoY in Q3 2024, due to demand being impacted by inflation and recessionary pressures and the ongoing geopolitical crisis. The continued rise in transportation cost also remains a challenge, impacting our ability to maintain healthy margins.
India: Revenue declined by 7.2% YoY as inflation, higher interest cost and reduced consumer spending led to overall weakened demand, especially due to lower volumes in the Tiles segment.
Bangladesh: Revenue declined drastically by 31.7% YoY in Q3 2024, mainly triggered by political instability in the country, which had a significant impact on overall market and economic conditions. Further, the continued gas crisis impacted our production leading to losses in Bangladesh.
Weak demand
Abdallah Massaad, Group CEO, RAK Ceramics said: “We continued to see significant headwinds across our operations in Q3, with ongoing geopolitical tensions and political instability, as well as inflationary and recessionary pressures in key markets leading to reduced consumer spending and overall weaker demand. Ongoing supply chain challenges, FX pressures due to currency depreciation, low cost and local competition across some markets and the rise in transportation costs also impacted our margins and revenue adversely.
“At the same time, we continue to be committed to investing in our brand and improving our margins. We will remain focused on offering premium, differentiated designs and products, launching new products for markets, expanding our retail presence, and strengthening our brand awareness through events and engagements.
“Looking ahead, our priorities lie in protecting our market share, optimizing our operations, further diversifying our offering, accelerating our digitalization and growing our production capabilities.”
Strategic highlights
Expansion & greenfield projects
In the UAE, the company continues to invest in upgrading its tiles production facilities to allow it to produce differentiated and large format tiles.
The firm is also investing in its UAE Sanitaryware production facility to improve efficiencies and allow it to reduce its carbon emissions and reduce its energy consumption.
In Saudi Arabia, RAK Ceramics continues to work towards setting up a production facility in KSA.--TradeArabia News Service
