RAK Ceramics yesterday said that its focus on core sanitary ware, tableware and ceramics businesses in the GCC, Bangladesh and India led to a 9 per cent year-on-year increase in net profit in the first quarter.
Net profit for the first three months ended March rose to Dh65.9 million even as turnover dropped by 1.1 per cent to Dh735.7m.
The Ras Al Khaimah-based company said that sales of its ceramics products segment were up by 2.8 per cent, led by improved sales and higher margins generated by its tiles business. Sales of tiles increased by 3.3 per cent to Dh496m, while sales of sanitary ware increased by 0.5 per cent to Dh111.5m.
The company said that its core revenue (discounting some of its discontinued operations) remained strong, increasing by 5.9 per cent in the UAE to Dh161.7m. In Bangladesh, sales were up by 6.8 per cent to Dh61m on improved capacity, but revenue from India dropped by 18.4 per cent to Dh81.1m – partly because of restructuring but also as a result of the rupee’s depreciation against the US dollar.
RAK Ceramics said that despite the decline, “the foundations have been laid” for revamping its operations in the country, including the appointment of a new chief executive.
The company also completed the buyout of stakes held by joint venture partners in two of its three European distribution businesses in Germany and Britain during the quarter, arguing that taking overall control of these will “lead to better end-market visibility, a more optimal product mix and ultimately improved European sales performance”.
European sales were up by 7.5 per cent year-on-year.
The company’s chief executive, Abdallah Massaad, said that it was focused on its key growth markets, where it had expanded capacity and senior appointments.
“While global financial conditions have presented the business with a challenging economic environment, we are confident that we will see a solid performance in the next three quarters thanks to our ongoing efforts to strengthen the business, reduce losses and increase margins,” he said.
Anoop Fernandes, a senior analyst at Bahrain’s Securities & Investment Company, argued that RAK Ceramics has done well to hold its own in a difficult market, noting that GCC competitors such as Saudi Ceramics and Al Anwar Tiles had significant declines in both sales and profit. He said that Saudi Ceramics recently reported a 17 per cent decline in revenue and a 20 per cent fall in gross profit.
“Saudi companies are facing a lot of pressure from Chinese imports,” said Mr Fernandes. “It’s a huge market that imports about half of its requirements. There is pressure on the pricing side because of imports and there is demand weakness. Project awards have been very weak and they [the Saudi government] are rationalising expenditure.”
RAK Ceramics’ Saudi sales declined by 9.1 per cent, but increased across the rest of the GCC by 8.4 per cent.
“These are decent results when you look at that. It has a diversified exposure to different markets and that gives it some edge.”
Mr Fernandes added that the appointment of a chief executive should give its Indian business a fillip, as the business had been without a chief for some time. Moreover, Indian government duties recently imposed on products imported from China should help to stabilise that market.
The private equity firm Samena Capital owns a 30.6 per cent stake in RAK Ceramics.
mfahy@thenational.ae
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