RAK Ceramics posts 10.8% rise in Q1 2016 profits
The first quarter of 2016 represented a continued momentum in gross margin improvement for RAK Ceramics
RAK Ceramics posted a 10.8% increase in net profit to $17.9m (AED65.9m) in the first quarter of 2016 as compared to $16.1m (AED59.5m) for the same period in 2015 despite heightened levels of uncertainty in global markets.
Overall revenues remained stable at $200m (AED735.7m) in comparison to $202.5m (AED744.1m) for the quarter.
Growth was led by a 3.3% increase in the sale of tiles to $135m (AED496m), and a 0.5% increase in sanitaryware sales to $30.3m (AED111.5m) supported by restructuring efforts in ‘core markets’’ and the continued improvement of ‘non crore businesses’.
Revenue in core markets remained strong with a 5.9% increase in sales to $44m (AED161.7m) in the UAE driven by market demand for tiles.
In Bangladesh, sales increased by 6.8% to $16.6m (AED61m) on the back of investments to expand capacity in sanitaryware by 25% in 2015.
In India, restructuring efforts and depreciation of INR by 8.4% year on year placed downward pressure on Q1 2016 performance. Whilst revenues declined by 18.4% to $22m (AED81.1m), the foundations have been laid to revamp operations and drive future growth for the business following the full acquisition of its Indian subsidiary in late 2015 and the recent appointment of a new chief executive officer.
Despite a slower growing economy across Europe, RAK Ceramics’ sales to European countries rose by 7.5% year on year.
The first quarter of 2016 represented a continued momentum in gross margin improvement. Consolidated margin rose for the 4th consecutive period by 170 basis points to 30.2%.
Gross margin from ‘core businesses’ increased to 30.2%, driven by strong sales of tiles and supported by turnaround efforts in core businesses within key growth markets, a trend that originated in previous quarters.
Abdallah Massaad, RAK Ceramics’ group chief executive officer said: “RAK Ceramics has maintained its prudent approach of focusing on key growth markets during the first quarter of this year with capacity expansions, senior appointments and further consolidation of key assets in core markets.
"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.”
“As we continue delivering on our Value Creation Plan, we intend to retain our position in key markets, keep an eye on opportunities for further expansions and retain the highest calibre of manufacturing talent available in the market.” he added.