Core Revenues Increase Nearly 8% for RAK Ceramics in 2017
Higher core revenues principally resulted from increased sales in the United Arab Emirates (UAE), India and Bangladesh, which were 20.1%, 10.8% and 21.1% higher than 2016, respectively.
RAK Ceramics recently reported total revenue of AED 2.9 billion (approximately $788.2 million) for 2017, an increase of 2.2% over 2016. Core revenues increased 7.6% compared to the prior year, to AED 2.6 billion (~ $706.6 million), while non-core revenues declined 34% following the sale of Electro RAK LLC, RAK Warehouse Leasing LLC, and divestment from other non-core assets as part of the Value Creation Plan (VCP).
Higher core revenues principally resulted from increased sales in the United Arab Emirates (UAE), India and Bangladesh, which were 20.1%, 10.8% and 21.1% higher than 2016, respectively. The increase in revenue from the UAE reportedly reflects market position and ability to capitalize on the improvement in demand for construction activity in the lead up to Expo 2020. Higher sales in India were driven by the company’s successful transformation of its leadership, as well as its investment in expanding its distribution network in an important and high-growth market. The tableware business continues to show growth, with 2017 revenues increasing by 35.9% over 2016 to AED 237.8 million (~ $64..6 million), driven by the consolidation of Restofair (a catering supplies company) within the larger group.
“2017 was an important year for us as we really started to see the benefits of our Value Creation Plan, resulting in a reported net profit of AED 315.5 million [~ $85.7 million], a great achievement for the business driven by strong growth in the UAE,” said Abdallah Massaad, group CEO. “One of the core principles of the Value Creation Plan was to divest from non-core businesses, such as RAK Warehouse Leasing and Electro RAK, and invest in the growth of our core business. This has resulted in core business rebounding, seeing core revenues grow by 7.6% year on year to AED 2.6 billion [~ $706.6 million]. Core business growth was led by robust sales in UAE and Bangladesh markets and our tableware business, which remains a high growth and high margin global leader in the industry. We are pleased to report that our return on equity reached an all-time high in 2017 and look forward to continuing our growth momentum.
“Another objective of the Value Creation Plan was to gain greater control over our assets. Seeing the growth opportunity in India, we sold down part of our stake in RAK Ceramics Bangladesh to fund a controlling stake in an Indian manufacturing plant in Morbi, Gujrat. RAK Ceramics is the only multinational ceramics producer in India.
“Looking ahead to 2018, there are a number of external factors that might affect our business with increased competition, gas and oil price volatility and geo-political headwinds. However, we see that GDP is growing in all of our core markets and the UAE and KSA have higher government infrastructure budgets this year: positive trends for growth.”
Reported net profit of AED 315.5 million (~ $ 85.7 million), an increase of 924.4% over 2016, was reportedly the result of an increase in core revenue coupled with gross profit margin enhancements on the back of greater efficiencies throughout the business and stringent cost management. Extraordinary net gains on the sales of RAK Warehouse leasing, Electro RAK, and other assets amounted to AED 27.4 million (~ $7.4 million). On a like-for-like basis, net profit for 2017 increased 33.5% to AED 88.2 million (~ $24 million).
According to RAK, 2017 brought the tangible results of the VCP first initiated in 2014. More specifically, the group reported that it was successful in achieving these objectives:
- Core business growth and non-core divestment: Non-core revenue contribution to total revenues has steadily declined to an all-time low of 8.4% as a result of the divestment of non-core and non-performing operations.
- India turnaround: After implementing management changes, revenues in India have increased by 10.8% contributing to overall core revenue growth. In December 2017, the company acquired additional manufacturing facilities in Morbi, Gujarat.
- Tableware performance: The tableware business continues to show growth, with 2017 revenues increasing by 35.9% compared to 2016, to AED 237.8 million (~ $64.6 million), driven by the consolidation of Restofair (a catering supplies company) within the larger group.
- Cost efficiencies and margin improvements: Core gross profit margins increased by 2%, supported by higher margins in the tile business. The exits of non-core business supported the increased the blended gross profit margin to 31.6%.
- Integration of Saudi Arabian distribution operations: Acquisition of distribution JV’s has achieved full control over operations, with a strong focus on post-acquisition integration and the expansion of the client network.
- Optimized UAE production: Investment in technology to reduce cost of production through modernization of the plants.
For additional details, visit http://corporate.rakceramics.com.