RAK Ceramics (RAKCEC) Q2 2024 earnings summary

Executive summary

• Revenue declined 10.9% YoY to AED 777 million in Q2 2024 and 11.2% YoY to AED 1.56 billion in H1 2024, driven by geopolitical tensions, inflation, high interest rates, currency devaluation, and supply chain disruptions, with export markets impacted by the Red Sea crisis and logistics costs.

• Gross profit margin improved by 110bps YoY to 39.6% in Q2 2024, supported by lower UAE gas prices, operational efficiencies, and product mix changes.

• Net profit after tax for Q2 2024 was AED 51 million (down from AED 75.1 million), and H1 2024 net profit after tax was AED 113.9 million (down from AED 155.3 million), impacted by the new 9% UAE Corporate Tax.

• U.A.E. remains the largest revenue and margin contributor, while Europe and Saudi Arabia faced declines from oversupply, local competition, and logistics challenges.

• Board proposed an interim cash dividend of 10 fils per share (AED 99.4 million) for H1 2024.

Financial highlights

• Q2 2024 EBITDA was AED 136.9 million, down 11.9% YoY; H1 2024 EBITDA was AED 288 million, down 7.9% YoY, with EBITDA margin stable at 17.6% in Q2 and improved to 18.5% in H1.

• Tiles revenue dropped 13.4% YoY in Q2 2024 to AED 430.6 million; Sanitaryware revenue fell 12% YoY to AED 117.2 million; Tableware revenue remained stable at AED 92.2 million; Faucets revenue decreased 6% YoY to AED 109.5 million.

• Gross margin for H1 2024 rose to 39.4% from 38.5% YoY; Tableware margin up to 52.2%, Faucets margin up to 30.7%.

• Net debt increased to AED 1.55 billion in Q2 2024, up AED 187.1 million QoQ, mainly due to dividend payments, acquisition, and higher working capital; net debt/EBITDA rose to 2.50x.

• H1 2024 EPS was AED 0.11 (vs. AED 0.14 in H1 2023); shares trading at P/E of 11.27x.

Outlook and guidance

• Relief from Saudi customs duties is expected to improve margins and volumes in that market.

• Anticipate project order ramp-up in India post-election and continued focus on premium products, retail expansion, and production upgrades.

• CapEx guidance for 2024 is AED 250–300 million.

• Plans to accelerate digital transformation, expand retail presence, and implement sustainability initiatives.

• Confident in long-term growth drivers, especially in the UAE, and expects new production facilities to add value.