RAK Ceramics net profit falls 28% against 2010
Ceramic giant sees expenses erode earnings as Iran venture continues
RAK Ceramics said net profits in the second quarter fell by a third against the same period last year, reducing profits for the first half of the year to more than a quarter that of 2010.
The world’s biggest manufacturer of ceramic products and sanitary ware, based in Ras Al Khaimah, said after-tax income reached AED62m from AED93m in last year’s second quarter, despite a rise in come that reached AED880.7m, up 4%. Cost of sales increased in this period, indicating a rise in raw material costs, as profit from its main operating activities declining from AED107m to AED74.1m.
Sales costs include a write-down on its finished goods to a “net realisable value” of AED38.94m.
In the last six months the company has seen net profit fall 28% against last year, from AED193m to AED139.59m. Revenues declined in this time to leave gross profits lower at AED410m, with its returns from operating activity shedding 17.4% to AED160.3m.
RAK Ceramics, chaired by HH Mohammed bin Saud bin Saqr al Qassimi, sells around $1bn annually in ceramics products into around 150 countries.
The company said it remains positive amid “challenging economic circumstances” and believes it can retain the same profit level achieved in 2010 overall. However, its capital work-in-progress has declined sharply, from AED166.35m to AED40.74m, since the start of the year.Earlier this year, the company's chief financial officer, Manish Joshi, said the company would not need to raise additional financiing after securing an $225m Islamic loan last October.
RAK Ceramics’ financial statements show that it has invested an extra AED25.7m since the start of the year into a venture in Iran, as well as extra funds to subsidiary RAK Paints.
Hettish Karmani, an analyst at Global Investment House in Kuwait, retained a ‘strong buy’ recommendation for the stock on 1 August, though the bank has already this year cited the effects of higher operating expenses on the company’s profits. Shares remained static at AED 1.7 this morning in Abu Dhabi.