RAK Ceramics announces stable Q1 2020 financial results
Measures to manage impact of Covid-19
RAK Ceramics was proactive in implementing a raft of measures designed to mitigate the impact of Covid-19 and the corresponding lockdowns across all its markets.
It was one of the first UAE companies to adopt social distancing, and apply working from home model to most of its administrative employees.
The company also completely shut down production in India and Bangladesh in line with the government’s guidelines as of the end of March 2020, and reduced production in the UAE. Alternative sales channels have been opened in markets where retail operations are closed, and the company’s website now includes a virtual reality showroom experience.
RAK Ceramics has taken measures to manage its liquidity, reducing discretionary expenses, and placing non-essential capex plans on hold.
Stable performance despite market slowdown
RAK Ceramics delivered stable revenues of AED 592.8mn that decreased marginally by 2.7% when compared to the same period in 2019, primarily due to lower sanitaryware and tableware revenue.
Total gross profit margin increased by 110 bps due to improvements and efficiencies in operations of the tiles business. This was largely driven by efficiencies in the UAE, where production lines were optimised to match demand.
Reported net profit decreased by 18.1% year on year to AED 30.2mn, with a margin of 5.1% due to decrease in revenue and investments in upgraded branding and showrooms, as well as higher freight costs.
Working capital and working capital days remained stable, reflecting the strength of the business.
Growth in Saudi Arabia
Total revenue in Saudi Arabia increased significantly when compared to the same period in 2019, driven by an 80.8% increase in tiles revenue. RAK Ceramics’ operations in Saudi Arabia followed the UAE business model, which has proved effective. The Company is optimistic for long-term growth in Saudi Arabia post-Covid-19 economic recovery.
Abdallah Massaad, Group CEO, RAK Ceramics commented: “RAK Ceramics delivered satisfactory results in Q1 2020 considering the COVID-19 pandemic began to impact our business from the end of January.
The nature of our business is closely linked to the construction and hospitality sector, which were heavily affected by the pandemic. We expect this situation to impact our performance in the next few months but we are confident given our stable results in Q1, our strong foundations and a sound business model, we will be able to face this unprecedented challenge and move forward.
To manage the impact of Covid-19, we have implemented cost efficiency measures across all our operations, while prioritising the health and safety of our workforce. We have also taken measures to ensure our liquidity is managed and to mitigate the closure of retail channels by launching alternative options, including a virtual reality showroom experience on our website www.rakceramics.com.
Contingency plans are in place and are being constantly updated to reflect the evolving situation. I believe that the strong foundation we have built up to date will help us navigate the current challenging environment and enable us to deliver value to our shareholders in the long term.”