UAE-based RAK Ceramics, one of the largest ceramics brands in the world, said its net profit for 2016 plunged 37.1 per cent to Dh216 million ($58.7 million) over last year amidst a challenging market environment.
Announcing the results for the year ended December 31, 2016, RAK Ceramics said the total revenue too fell 9.3 per cent to Dh2.8 billion year on year (YoY). The Emirati firm pointed out that the lower core revenues principally resulted from decreased sales in Saudi Arabia and India which were 41 per cent and 25.6 per cent lower YoY respectively.
The fall in Saudi sales reflects the significant decline in government project spending and business sentiment.
Lower sales in India reflect the company’s early stages in the process of rebuilding its senior leadership team and the impact of demonetisation on the economy. Lower non-core revenues reflect the sale of RAK Logistics and reduced construction activity in the UAE.
The Emirati group’s core revenues hit Dh2.4 billion, down 6.1 per cent YoY, while non-core revenues fell 26.1 per cent YoY.
RAK Ceramics pointed out that the continued growth in the UAE, the company’s largest market, where tiles and sanitaryware sales rose by 1.5 per cent YoY despite weakness seen in the third quarter of 2016, helped offset these factors.
Despite challenging global market and trade conditions, overall profitability improved with the consolidated gross profit margin increasing to 30.5 per cent from 28.2 per cent YoY; core margins rose 120bps to 30.5 per cent while non-core margins rose 770bps YoY.
Higher profitability however could not offset the decline in sales. On a like for like basis, that is. excluding provisions and write offs, net profit for the year was Dh 216 million a 37.1 per cent decline versus 2015 levels.
Group CEO Abdallah Massaad said: “We enter 2017 with much optimism. We expect sustained growth in the UAE and Europe and a turnaround in Saudi by the second half of the year. Our performance wasn’t unexpected and we were prepared for it.”