One of the biggest ceramics’ brands in the world, RAK Ceramics has listed a net profit of $8.22 million in its financial results for the quarter ended 31 March 2020 which saw an 18% drop on year on year comparisons.
RAK Ceramics was proactive in performing extensive measures intended to alleviate the consequence of COVID-19 and the resulting shutdowns across all its markets. RAK was one of the first UAE companies to embrace social distancing and initiate working from home guidelines to most of its executive employees.
The company also fully shut down production in India and Bangladesh in line with the government’s guidelines as of the end of March 2020 and decreased production in the UAE. Alternative sales methods have been adopted in markets where retail operations are closed. RAK’s website now holds a virtual reality showroom experience.
RAK Ceramics has adopted measures to control its liquidity by lessening optional expenses and placing non-essential CAPEX projects on hold.
Solid show despite market slowdown
RAK Ceramics produced solid revenues of $161.40 million that declined slightly by 2.7% when connected to the same period in 2019, primarily caused due to weaker sanitaryware and tableware income.
The total gross profit margin improved by 110 basis points due to advancements and competences in works in the tiles business. This was extensively driven by efficiencies in the UAE, where production lines were optimized to meet demand.
Reported net profit declined by 18.1% year on year to $8.22 million, with a margin of 5.1% due to a reduction in income and investments in enhanced branding and showrooms, as well as greater freight costs. Working capital and working capital days remained stable, reflecting the strength of the business.
Increased revenue from Saudi Arabia
Total income in Saudi Arabia expanded considerably as opposed to the same period in 2019, inspired by an 80.8% gain in tiles revenue. RAK Ceramics’ operations in Saudi Arabia adopted the UAE business model, which has shown to be efficient. The Organization is hopeful about long-term growth in Saudi Arabia Post-COVID-19 economic improvement.
“RAK Ceramics delivered satisfactory results in Q1 2020 considering the COVID-19 pandemic began to impact our business from the end of January.
– Abdallah Massaad
Group CEO, RAK Ceramics
The nature of the RAK Ceramics business is intimately connected to the construction and hospitality sector, which were profoundly altered by the pandemic. The company expects this situation to affect its performance in the next few months but are confident given it’s stable results in Q1. The firm’s strong foundations and a sound business model enables it 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 prioritizing 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 rakceramics(dot)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,” Mr. Massaad concluded.