Dubai: Higher impairment charges related to its real estate assets hit UAE’s building materials supplier RAK Ceramics, which recorded a net loss of Dh126.2 million for 2020. That compares with Dh205.2 million in 2019.
For 2020, it has recommended a cash dividend of 7.5 per cent.
But the company – one of the biggest names in tiles and sanitaryware in the region - will be taking a lot of heart from its showing between October to December, with all its key markets in positive territory. In particular, there was Saudi Arabia, where RAK Ceramics saw full-year revenues up 57.9 per cent as its focus on “retail and wholesale sales” paid off. Plus, the Kingdom had imposed anti-dumping duties on cheap ceramic imports from China and India, and that too worked in RAK Ceramics’ favour.
In Saudi Arabia, the company is benefiting from the past buyouts of two distributors and taking on that activity directly, the CEO said.
“We were able to capitalise on the opportunity in Saudi Arabia and enhance our business in that market, while managing costs and delivering stable revenue in other markets,” said Abdallah Massaad, Group CEO. “Our operations in Europe and India have improved, reflected in our gross profit margins.
“Given our ability to act decisively during times of crisis, we were able to implement measures to manage the impact of COVID-19 which allowed us to achieve an accelerated recovery starting from Q3-2020 where we reached pre-COVID-19 levels of operation and performance.”
COVID-19 and real estate
The pandemic brought about reduced demand for its products in the first six months, as construction sites and developer clients slowed down on new orders.
There was also the parallel “slump in real estate”, which led RAK Ceramics to revalue its land assets and resulted in an impairment loss of Dh213.2 million. There was also a provision of Dh23.1 million related to one of its hotel assets.
The first-half demand decline was directly responsible for 2020 revenues being lower by 8.7 per cent to Dh2.35 billion. (To place things in some perspective, if the second quarter numbers are excluded, revenues increased 1 per cent to Dh1.94 billion.)
"In the UAE, projects are coming back, but the market conditions are still difficult,” the CEO said. “What we are doing internally is focusing on improving the working capital management and that’s helped us a lot in 2020.
"While 2020 showed everyone that it’s become difficult to predict anything, we believe the momentum from the fourth quarter is there. We remain a long-term player – being one of the world’s biggest ceramic companies is built on that.”