RAK Ceramics reports net profit of AED 315.5 million
RAK Ceramics PJSC, one of the largest ceramics’ brands in the world, has announced its financial results for the year ended 31 December 2017.
RAK Ceramics reported total revenue of AED 2.9 billion for 2017, an increase of 2.2 per cent YoY. Core revenues increased 7.6 per cent YoY to AED 2.6 billion while non-core revenues declined 34.0 per cent YoY, following the sale of Electro RAK LLC, RAK Warehouse Leasing LLC and divestment from other non-core assets as part of the Value Creation Plan.
Higher core revenues principally resulted from increased sales in the United Arab Emirates, India and Bangladesh which were up 20.1 per cent, 10.8 per cent and 21.1 per cent higher YoY respectively. The increase in revenue from the United Arab Emirates reflects market position and ability to capitalise on the improvement in demand for construction activity in the lead up to Expo 2020. Higher sales in India were driven by the company’s successful transformation of its leadership as well as its investment in expanding its distribution network in an important and high growth market. Strong growth in Bangladesh, support by dominant market leading position, increased product demand and backed by production capacity expansions which completed in 2016. The tableware business continues to show growth with revenues increasing by 35.9 per cent YoY to AED 237.8m driven by the consolidation of Restofair (a catering supplies company) within the larger group.
”2017 was an important year for us as we really started to see the benefits of our Value Creation Plan, resulting in a reported net profit of AED 315.5 million, a great achievement for the business driven by strong growth in the UAE. One of the core principles of the Value Creation Plan was to divest from non-core businesses, such as RAK Warehouse Leasing and Electro RAK, and invest in the growth of our core business. This has resulted in core business rebounding, seeing core revenues grow by +7.6 per cent year on year to AED 2.6 billion. Core business growth was led by robust sales in UAE and Bangladesh markets and our tableware business, which remains a high growth and high margin global leader in the industry. We are pleased to report that our return on equity reached an all-time high in 2017 and look forward to continuing our growth momentum,” said Abdallah Massaad, Group CEO, RAK Ceramics.
Massad added that another objective of the Value Creation Plan was to gain greater control over assets. Seeing the growth opportunity in India, part of the company’s stake in RAK Ceramics Bangladesh was sold down to fund a controlling stake in an Indian manufacturing plant in Morbi, Gujrat. RAK Ceramics is the only multinational ceramics producer in India.
“Looking ahead to 2018, there are a number of external factors that might affect our business with increased competition, gas and oil price volatility and geo-political headwinds. However we see that GDP is growing in all of our core markets and the UAE and KSA have higher government infrastructure budgets this year: positive trends for growth,” said Massad.
Core gross profit margins rose 200bps to 32.5 per cent due to improvements in production efficiencies across all tile plants. The consolidated gross margin increased by 110bps YoY to 31.5 per cent, while EBITDA and reported net profit margins increased by 130bps and 990bps respectively.
Reported net profit of AED 315.5 million was the result of an increase in core revenue coupled with gross profit margin enhancements on the back of greater efficiencies throughout the business and stringent cost management.
Net gain on the sale of RAK Warehouse leasing, Electro RAK, and other assets amounted to AED 27.4 million. On a like for like basis, net profit for the year increased 33.5 per cent YoY to AED 288.2 million.
Return on equity reached an all-time high in 2017 at 11.4 per cent. Net debt decreased by 15.2 per cent to reach AED1.4 billion, equivalent to 2.6x EBITDA, and capital expenditure was lower in 2017 as a majority of projects are scheduled for 2018. These enhanced shareholder returns are driven by a rebound in the core business, coupled with exits from non-core and underperforming operations.