RAK Ceramics, one of the largest ceramics lifestyle solutions providers in the world, has seen its 2023 net profit rise 3.7% to AED320.9 million, but its revenue declined 1.7% to AED3.45 billion.
This was mainly due to an unfavourable market cycle, currency depreciation, and rising interest costs.
The company’s fourth-quarter (Q4) revenue decreased 3.8% at AED866.4 million, mainly due to lower sales in tiles and faucets whereas sanitaryware revenue increased 2.9% YoY.
Gross profit margin
FY 2023 gross profit margin increased by 30bps YoY at 37.9% while Q4 gross profit margin increased by +70bps YoY to 35.6% due to increased sales and change in product mix in the UAE.
EBITDA for FY 2023 increased by 12.2% to AED647.4 million compared to AED577.2 million in the previous year. Margins increased to 18.7% compared to 16.4% in 2022. EBITDA for Q4 increased by 20.7% YoY to AED166.0m and margin increased 390bps YoY to 19.2%.
The reported net profit before one off gain increased 3.7% YoY to AED320.9 million in 2023 compared to the previous year. (Last year profit included a net one-off gain of AED30.8 million).
Net Profit margin for 2023 is 9.3% compared to 8.8% in last year. Net profit before one off net gain increased to AED81.8m in Q4 2023 versus AED65.3 million in Q4 2022. Net profit margin for Q4 is 9.4% compared to 7.2% in last year.
Net debt increased by AED120.3 million in December 2023 at AED1.42 billion compared to December 2022 due to the payment of the dividend (AED221.7 million) and Capex of AED273 million. Net debt to EBITDA also improved from 2.26x in December 2022 to 2.20x in December 2023.
• Tiles revenue saw a YoY decline of 8.3% at AED1.99 billion, primarily influenced by heightened competition from regional players and increased imports from India, impacting our core markets – mainly Saudi Arabia and the Middle East.
• Sanitaryware revenue experienced a YoY decline of 7.1% at AED512 million owing to headwinds, notably in European markets – the UAE continued to perform well.
• Tableware revenue increased significantly, reaching AED392 million YoY, an 11% raise compared with 2022. The increase was driven by the boost in demand from HORECA sector driven by the rising tourism, especially in the UAE.
• In 2023, Faucets generated a revenue of AED456.2 million, mainly impacted due to the challenges faced in European market. Last year revenue accounted for 7 months as the consolidation was effective June 2022.
Commenting on the results, Abdallah Massaad, Group CEO, RAK Ceramics, said: “Despite global macro-economic and geopolitical challenges, our commitment to product differentiation and leveraging brand recognition has allowed us to focus on maintaining margins. In the UAE, growth in real estate sector backed by rising tourism allowed us to achieve a notable 17.8% YoY revenue growth in 2023 overcoming challenges and competition from imports. This was mainly owing to our strategic emphasis on adaptability, customer-centric solutions, and an unwavering commitment to quality.
“We have also strategically expanded into new market distributions to ensure the recovery of market share following a revenue dip in KSA due to significant price variations from local manufacturers backed by Chinese investors.
“High interest rates have continued to make trading conditions difficult in some geographies, notably Europe and India whereas in Bangladesh, impact to real estate sector and currency devaluation resulted in decline in our revenue.
“However, our continuous efforts to invest in upgrading our production facilities, strengthening our brand presence, enhancing customer value, and improving production efficiency will empower us to navigate these challenges and maintain our strong growth trajectory.”
Upgradation under way
RAK Ceramics is upgrading tile production facilities in the UAE and India, with the goal of bringing in production efficiencies driven by innovation and allowing a shift in its production capabilities from Ceramics to Porcelain Tiles. In parallel, we continue to work towards setting up production presence in KSA.
For Sanitaryware, the upgrade efforts are under way in UAE to enhance the overall product offering.
The approvals are under way for the Faucets Greenfield plant in Bangladesh with construction expected to commence in Q2 2024.
The expansion project in Tableware for additional capacity of 10 million pieces in UAE is completed with plans to increase scale of production in phases.