RAK Ceramics factory. RAK Ceramics on Wednesday reported net profit of Dh30.2 million for the first quarter of 2020. Image Credit: Gulf News Archives

Dubai: RAK Ceramics on Wednesday reported net profit of Dh30.2 million for the first quarter of 2020, down by 18.1 per cent year on year.

The company attributed lower profits to decrease in revenue and investments in upgraded branding and showrooms, as well as higher freight costs.

Total gross profit margin increased by 110 bps (1.1 per cent) 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.

Working capital and working capital days remained stable, reflecting the strength of the business.

The company delivered stable revenues of Dh592.8 million that decreased marginally by 2.7 per cent when compared to the same period in 2019, primarily due to lower sanitaryware and tableware revenue.

Saudi grwoth

Total revenue in Saudi Arabia increased significantly when compared to the same period in 2019, driven by an 80.8 per cent 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.

“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,” said Abdallah Massaad, Group CEO, RAK Ceramics.

“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.”

Covid-19 impact

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.

The company has 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.

“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,” said Massaad.