RAK Ceramics third-quarter net income drops on higher expenses

Quarterly revenue, however, increased marginally, driven by recovery in Saudi Arabia and markets in Europe

RAK Ceramics on Wednesday said third quarter net profit dropped as expenses rose and operating income fell. Pawan Singh / The National

RAK Ceramics, one of the world's biggest producers of ceramics, reported a 15 per cent drop in third-quarter net profit as expenses rose and operating income fell amid the pandemic-induced slowdown.

Net income for the three months to the end of September declined to Dh33 million ($9m) from Dh39m reported at the end of the same period last year, the company said in a statement to the Abu Dhabi Securities Exchange, where its shares trade.

Selling and distribution expenses climbed to Dh107m for the period, from Dh98m in the year earlier period. Quarterly operating income fell 29 per cent to Dh66.82m from a year earlier.

Total revenue, however, increased 0.2 per cent year-on-year to Dh625.7m in the third quarter, driven by growth in Saudi Arabia and European markets. Excluding the tableware business, revenue increased 4.8 per cent on annual basis, the company said.

Despite headwinds, business has picked up pace in the third quarter, as production bounced back to pre-Covid-19 levels and core business revenue is growing, Abdallah Massaad, group chief executive of RAK Ceramics told The National on Wednesday.

"[However,] we don’t know the outlook yet," Mr Massaad said. "No one can predict these days, [but] as of today, things are going well and every day is better [than the last]. We are cautiously optimistic."

The second quarter was "shock for everyone" but all of the company's business lines are now stable, Mr Massaad said.

“There is no escaping that our business was heavily impacted earlier in the year, but we are confident in our ability to adapt, recover and deliver value to our shareholders in the long term."

RAK Ceramics exports its products including sanitary ware and tiles, to more than 150 countries through a network of distributors in Europe, the Middle East and North Africa, Asia, Americas and Australia. The company also has production plants in India and Bangladesh.

Sales in Saudi Arabia improved, with third-quarter revenue from the kingdom, the Arab world's largest economy, rising 95.8 per cent to Dh137.8m on an annual basis.

The imposition of anti-dumping duties on tiles from China and India by the GCC Industrial Cooperation Committee since June this year also supported revenue growth during the quarter, the company said.

Revenue in Europe increased 12.9 per cent to Dh91.5m, while India rebounded to pre-Covid levels of Dh66.7m.

The company said it scaled up production in the UAE to meet demand from Saudi Arabia. In Bangladesh, production has resumed at 100 per cent capacity, while in India it's 80 per cent, Mr Massaad said.

RAK Ceramics will explore opportunities to enter new markets when there's more global market stability and visibility on future trends, he said. It has no plans to exit any export market or close down any of its business lines.

“We know that the market is not growing, but we are trying to increase our market share with our strong fundamentals and innovations," Mr Massaad said.

The company launched an anti-microbial sanitary ware product line in the third quarter as customers become more hygiene conscious during the pandemic.