RAK Ceramics first-quarter net profit rises 3% despite higher input and energy costs

▶ The company plans to boost production capacity at its factories in the UAE, India and Bangladesh

RAK Ceramics, one of the world’s biggest producers of ceramic products, reported a rise of more than 3 per cent in first-quarter net profit as revenue grew despite rising cost pressures and global supply chain challenges.

The comprehensive income attributable to owners of the company for the three months through to the end of March climbed to Dh74.4 million ($20.3m), the company said.

Quarterly earnings before interest, taxes, depreciation and amortisation increased by 2.9 per cent to Dh129.7m while revenue at the end of the reporting period jumped 8.3 per cent to more than Dh783m.

“RAK Ceramics achieved a strong set of results in first quarter of 2022 despite the ongoing economic challenges weighing in, namely on input prices, energy costs and supply chain,” group chief executive Abdallah Massaad said.

The financial performance was supported by key initiatives realised in the first quarter of this year, he said.

These initiatives are aimed at driving further top-line growth by enhancing the company’s brand positioning, strengthening its profitability through increased production efficiencies and improving liquidity by tightening its collection policy.

Manufacturers around the world are facing headwinds as global supply chain challenges remain and energy prices continue to rise amid a commodities super-cycle. Oil rallied to slightly below $140 a barrel this year before giving up some gains. Emirates NBD, Dubai’s largest bank, expects crude to average $120 a barrel this year.

The sharp rise in energy prices has stoked inflation, reducing consumer spending power and adding to raw materials and input costs for manufacturers.

There is “no doubt” that manufacturers have been negatively affected by inflation this year, Mr Massaad said.

“We already got hit. This year, inflation came and [there was] also uncertainty and disruption in supply chain. I believe this situation is bit more complicated than inflation [impact alone],” he said.

“Fortunately, we are in a stable region, a place we can get our raw materials, energy and we are able to get our manpower … and be efficient.”

RAK Ceramics has been successful in adjusting prices selectively to partly offset additional costs while still maintaining the company’s market share across different locations, he said.

“We deal with it today market by market, month by month and any developments [taking place].”

The company remains focused on positioning itself as a trusted lifestyle solution provider as it works on expanding and optimising its portfolio, he said.

Founded in 1989, RAK Ceramics serves clients in more than 150 countries through its network of operational centres in Europe, the Mena region, Asia, North and South America and Australia. It specialises in the manufacture of ceramic wall and floor tiles, tableware, sanitaryware and taps.

The company, which plans to set up a manufacturing unit in Saudi Arabia this year, said its position in the Arab world’s biggest economy continued to strengthen, despite the imposition of a Customs duty of 12 per cent.

Its tiles and sanitaryware revenue in the kingdom rose by about 20 per cent in the first three months of the year.

The company’s revenue in the UAE remained stable, with an increase of about 1 per cent during the first quarter, supported by the launch of its e-commerce platform, the company said.

In Europe, revenue increased by about 9 per cent, driven by a rise in selling prices that partially offset the increased logistics and input costs.

RAK Ceramics, which signed an agreement in March to fully acquire Germany’s Kludi Group at a valuation of €39m ($42.9m), is looking to purchase more assets, Mr Massaad said.

“We are still looking for acquisitions, no doubt,” he said.

“Not only acquisitions, greenfield [projects] and acquisitions.”

Mr Massaad said the company was excited about the Kludi deal, which is expected to be concluded by the end of this month.

“We do see a lot of growth potential in this company,” he said.

RAK Ceramics, which invested less than Dh100m in capital expenditure last year, intends to increase spending this year as it looks to boost production capacity at its factories in the UAE, India and Bangladesh.

“It will depend of what [development] comes during the year. I can’t give you a number but it will be much more than Dh100m,” Mr Massaad said.

“We are in growth mode.”

Revenue for the company at the end of the reporting period increased by 8.3% to exceed Dh783m