JEDDAH — RAK Ceramics P.S.C., a global hi-tech manufacturer of lifestyle ceramics solutions, overall revenues declined by 1.1% reaching AED 803.8 million in Q2 2015, same level as in H1 2015 of AED 1.55 billion. Non-core revenues increased in Q2 2015 by 11% to AED137.3 million (20.9% increase in H1 2015 to AED255.2 million) and core tiles and sanitary activities in the core focus markets also witnessed strong growth. UAE local market tiles sales recorded a 9.5% increase and reached AED 121.8 million in Q2 2015 (9.5% increase in H1 2015 to AED242.1 million) and sanitaryware local UAE sales increased by 6.7% to AED36.4 million (5.2% increase in H1 2015 to AED 69.0 million). Sales in Saudi Arabia have also rebounded as Tiles sales increased by 5.0% to AED 88.9 million compared to the first quarter of 2015. Overall net profit for the period declined by 5.7% to AED 85.9 million (2.4% decline in H1 2015 to AED 146.4 million), after considering a total net losses of AED 13.7 million from restructuring activities such as the divestments of stakes in RAK Pharma and Moshfly in Bangladesh, RAK Laticrete in the UAE, in addition to impairment provision in Sudan, Al Hamra Aluminium and RAK Gypsum. During the period, RAK Ceramics strengthened operational efficiencies through controlling operating costs and enhancing technology. Savings from non-core operations turn-around and raw material, procurement and freight savings allowed the company to increase blended gross margins to 27.7% in Q2 2015 (28.3% in H1 2015) and core gross margins to 30.6% in Q2 2015 (30.4% in H1 2015). In Q2 2015, RAK Ceramics sold RAK Gypsum and Al Hamra Aluminium and 15 townhouses in Al Hamra Village for AED 25.2 million, underscoring the management's commitment to unlock hidden value and focus on core activities. RAK Ceramics continue to execute the exits from the markets in Sudan and China, in line with the announced restructuring strategy, and expect to complete the transactions in the second half of 2015. Expansion Strategy Strengthening core businesses is on track, where RAK Ceramics is seeking to gain greater control of the companies it invests in. RAK Ceramics announced acquiring the remaining 20% of RAK Iran last week, gaining full operational and financial control over the Iranian facility, which is ready to fully integrate into RAK Ceramics' overall operations. Global sanitaryware expansions have been planned with an increase in production of 22% in the UAE, 52% in India and 25% in Bangladesh; in line with refocused strategy to support revenue growth by expanding high margin core businesses. A proactive strategy to restructure distribution capabilities in Saudi Arabia is underway; focusing on high end products and B2B sales. RAK Ceramics aims to broaden its footprint in the Kingdom and expects a gradual recovery in sales back to historical run rates. Abdallah Massaad, Chief Executive Officer of RAK Ceramics, said: “We promised last year to continue creating long-term value for our stakeholders by sustaining growth and executing a solid restructuring strategy. Our results come in line with our refocused strategy which aims at expanding high-margin core businesses to unlock hidden value and improve shareholder profitability. Growth in 2016 is expected to be driven by planned expansions and higher demand in the Middle East and Asia.” — SG
