Operator: where you may type your question into the Q&A text box. If you have joined us via the telephone lines today, you may press star one on your telephone keypad. I will now hand it over to Mohamad Haidar from Arqaam Capital to begin. Please go ahead.
Mohamad Haidar: Hello, everyone, and welcome to the RAK Ceramics Q3 and nine-month 2026 earnings call and webcast. This is Mohamad Haidar from Arqaam Capital, and we are joined today by Mr. Abdallah Massaad, Group CEO of RAK Ceramics, and Mr. Manoj Aheeray, Group Chief Strategy Officer of RAK Ceramics. Over to you, Abdullah.
Abdallah Massaad: Thank you, Mohammed. Good afternoon, everyone, and welcome to RAK Ceramics earnings call for Q3 2026. Thank you for joining us. We delivered revenue growth and strong profitability in Q3 despite continued regional disruption. Strong demand in the UAE, the wider Middle East, and India helped offset pressure on exports and higher operating costs. Revenue grew by 4.4% to AED 861.5 million, while net profit after tax increased by 15.5% to AED 78 million.
Abdallah Massaad: Gross profit margin remained broadly stable at 40.3%. For the first nine months, revenue reached AED 2.45 billion, with both revenue and net profit ahead of last year. Our regional manufacturing presence helped us respond to customer demand as imports remain constrained. Higher project sales supported by cost control contributed to the quarter performance. We maintained a strong focus on working capital, with the receivables days remaining stable and inventory days improving.
Abdallah Massaad: While net debt increased from the end of June, we remain focused on maintaining healthy liquidity and strong financial discipline. As we move into the final quarter, our focus is on converting regional project demand into sales, clearing delayed shipments, and progressing our turnaround plans. Now, let me give you a brief overview of our key market and business segments. The UAE continues to be our largest market with 44% contribution, delivering strong top-line growth and healthy margin amid the current regional conflict. This is followed by Europe, which contributed 20% of our consolidated revenue, followed by India, Saudi Arabia, and Bangladesh. In terms of our segments, tiles continue to be our primary driver of revenue, followed by faucets, sanitaryware, and tableware. At the bottom, you will see our production capabilities, where we remain committed to continuous investment to enhance capacity and operational efficiency.
Abdallah Massaad: We benefited from our regional production base during supply chain disruption, enabling us to maintain product availability, respond to local project needs, and stay close to customers through our distribution network. This strengthens our ability to compete across both our core regional and international markets. Now we go to the regional disruption continue to affect the business in Q3. The impact varied across our markets. In the UAE, strong project demand and constrained imports created opportunity to gain market share. We focused on premium products and local projects to capture that demand. At the same time, disruption around the Strait of Hormuz increased shipment costs and affected both exports and inbound materials. We used alternative routes through Jeddah, Khor Fakkan, and Oman to increase local sourcing. In Saudi Arabia, SABER certification delays impacted deliveries, and we are working to streamline the process and support timeline project execution.
Abdallah Massaad: Higher energy costs in India and gas shortages in Bangladesh affected production. We recovered part of the higher cost in India and explored alternative energy and gas supply option in Bangladesh. Tableware was impacted by weaker regional hospitality demand, partly offset by aviation business and premium partnership. Looking ahead, we see further opportunities in gaining market share in the UAE and GCC. We remain cautious about freight and material costs and hospitality demand. Our response remain focused on reliable supply and cost control. Going to the segment performance, turning to our segments, Tiles were the main contributor to revenue growth this quarter. Project demand in the UAE and the Middle East, together with India recovery, helped offset export disruption and production constraint in Bangladesh. Large slabs and premium products remain important to our sales mix, supported by consistent availability.
Abdallah Massaad: In Sanitaryware, GCC demand provided some support, but weaker demand elsewhere, higher freight costs, and Bangladesh gas shortages affected performance. Upgrades to our UAE facility are aimed at improving product quality and cost efficiency while strengthening the range we offer to customers. In Faucets, demand in the UAE and the Middle East helped offset weakness in Europe and other export markets. Component delivery delays also affected operations. Premium projects are supporting the KLUDI brand, while the transformation program continues to focus on operational performance and cost efficiency. Tableware continued to face weaker hospitality demand in the region. Growth in aviation and the Americas partly offset this pressure. Our focus is on developing aviation accounts and premium partnership while integrating Cookplay to broaden our offering and customer reach.
Abdallah Massaad: Across all segments, we are focusing investment and commercial effort on products and channels where we can improve profitability and build lasting customer relationships. The market performance, now focusing on our Tiles and Sanitaryware business across our key markets. The UAE remains strong, supported by construction activity, project demand, and demand for slabs. Constrained imports also created opportunities to gain share. In the wider Middle East, we are strengthening our local sales presence and customer relationships to build on similar opportunities. In Saudi certification delays impacted deliveries, and we are working to streamline the process and support timely project execution. Europe and other export markets faced weaker demand, strong competition, and higher freight costs. We are managing these pressures while progressing changes to improve the profitability of our European operations. India returned to growth, supported by dealer expansion and continued retail investment.
Abdallah Massaad: We are building on this momentum through stronger market coverage and continued showroom upgrades. In Bangladesh, gas shortages disrupted production and affected sales. Targeted change to distribution, pricing, and operating efficiencies are underway to support market share and profitability. These different conditions call for a focused approach in each market. We are expanding where demand is stronger and addressing the operating issues that are holding back performance elsewhere. On strategic updates, our strategic initiatives address both current operating challenges and longer-term competitiveness. In the UAE, we are progressing product and manufacturing upgrades, including energy-efficient technology. These investments support quality, lower operating costs, and our sustainability objectives. In Saudi Arabia, the Yanbu greenfield tiles project remains on track for completion in Q2 2027. Alongside this investment, we are strengthening premium retail and project sales, including private sector opportunities.
Abdallah Massaad: In our European distribution business, the turnaround focuses on cost reduction and a more efficient business model. Separately, we continue to execute Kludi's transformation program to improve operational performance and cost efficiency, with profitability as the objective. In India, we are expanding company-owned stores and our dealer network to reach more districts while developing institutional sales. In Bangladesh, targeted changes across channels, pricing, and operations are aimed at recovering market share and improving profitability. We will continue to monitor progress closely and maintain discipline in how we allocate capital. I will now hand over to Mr. Manoj Aheeray, our Chief Strategy Officer, to take you through the financial performance for this quarter. Manoj.
Manoj Aheeray: Thank you, Mr. Abdallah, and good evening, everyone. I will focus on our financial momentum and our responses. Q3 revenue reached around AED 862 million, up about 4% year on year and 5% from Q2. Stronger regional sales helped to offset weaker exports. Gross margin remained stable at 40% despite higher input and logistic cost. EBITDA rose about 5% to AED 176 million, with EBITDA margin broadly stable at 20%. Profit before tax increased about 13% to AED 98 million, while net profit after tax grew around 16% to AED 78 million. Overall, local sourcing, alternative shipping routes, and a partial cost recovery helped to manage the pressure. Cost control and liquidity management remains priorities for the group. I will move to the financial snapshot for nine months. The stronger third quarter performance helped to offset the earlier weaknesses, demonstrating the group's continued resilience.
Manoj Aheeray: Nine months revenue was AED 2.45 billion, up close to 1% with a gross margin unchanged at around 40%. EBITDA remained flat at AED 461 million, with EBITDA margin broadly stable at 19%. Profit before tax was broadly stable at AED 237 million. If you see the nine months, higher operating cost limited earning growth, while net profit after tax increased about 1% to AED 185 million. The focus is on improving profitability across the business. I will move to the next section, revenue performance in Q3 2026. Our sales priority is converting the regional demand into the deliveries. That is the message. Tiles and sanitaryware revenue reached about AED 635 million, up by 5% year on year and 7% from Q2. Within these businesses, UAE revenue grew roughly by 33%, the wider Middle East nearly 40%, and India about 12%. Europe improved from Q2, but remained below last year.
Manoj Aheeray: Saudi revenue declined by 17% on account of SABER certification delays, while Bangladesh revenue declined by 12% due to the disruption in gas supply. Tableware revenue was about AED 76 million, down by 11% year on year, but slightly ahead of Q2. Faucets declined around 3% to AED 115 million. Other revenue roughly doubled to AED 37 million. Overall management actions focus on shipment clearance, aviation, and premium accounts, including cost efficiency and subsidiary turnaround plans. Reliable supply and timely execution remains a priority for the group. I will go to the revenue performance for nine months 2026. The nine months picture highlights the resilience performance of our group. Tiles and sanitaryware revenue rose close to 1% to AED 1.77 billion gross. Faucets grew about 3% to AED 363 million. Tableware declined around 11% to AED 228 million, while other revenue rose about 28% to AED 85 million.
Manoj Aheeray: In terms of markets, UAE sales increased by around 19% year on year, supported by project segment. Further, Bangladesh sales increased by 7% despite Q3 gas supply disruption. Europe declined by 19% year on year, while India quarterly recovery has not yet offset earlier weaknesses, and Africa remained below last year. Plan is that the dealer expansion in India, Europe distribution business turnaround, and operating improvements in Bangladesh remains the priorities. These actions should support broader, more profitable growth for coming days. I will move to the gross profit margin. We are focusing on our product mix and efficiency to protect margins. Group gross margin for Q3 and nine months remains stable at a 40% region, despite the higher direct cost and a supply chain disruption and related cost.
Manoj Aheeray: Tiles margin was close to 42%, broadly stable year on year, supported by higher sales in the UAE sales, where margins are higher. Sanitaryware was around 36%, slightly lower than last year, but better than Q2. Both recorded a modest nine-month improvement. Tableware margin fell to around 47% from 54% on account of higher raw material and freight cost. Its nine-month margin showed a resilience, and it remains above 50%. This is a sort of a recovery. Faucets recorded about 26%, in line with last year. Although the nine months margin remained lower year on year, raw material and freight costs continued to pressure these businesses. On a note, UAE factory upgrades, better sourcing, and a KLUDI transformation, and a subsidiary turnaround initiatives are aimed at improving the cost efficiency, strengthening the margin for long term. I will move to the profitability bridge.
Manoj Aheeray: Q3 profit before tax rose around 13% to AED 98 million. Gross profit increased by about AED 14 million, while the higher administrative and selling expenses absorbed around AED 5 million of that gain. After tax, net profit was AED 78 million, up by 16%. Over nine months, profit before tax remained near AED 237 million. Gross profit and administrative and selling expenses each increased by roughly AED 7 million. After tax, net profit was about AED 185 million, up around by 1% margin. Here, the stand I look at more of a cost control, manufacturing efficiency, and turnaround execution remains a central focus to improve underlying earnings. Coming to the balance sheet and capital allocation, our priority is always a cash conversion alongside a disciplined investment thesis. Working capital was about AED 1.45 billion, around AED 25 million above June. Working capital days rose from 183 days to 187.
Manoj Aheeray: Receivable days remained broadly stable, while the inventory days improved to 256 days. Trade payable days were unchanged. UAE tax payment reduced our other payables, which is a periodic payoff. Net debt increased around AED 72 million, grossing to AED 1.5 billion, mainly reflecting an interim dividend and UAE tax payments. The equation drives to the leverage rose by about 2.56x EBITDA from roughly 2.48x in June. Nine-month CapEx was about AED 163 million, including AED 59 million in Saudi Arabia for greenfield project and AED 47 million for plant and warehouse upgradation in the UAE. Full-year guidance remains AED 225 million to AED 250 million. In nutshell, we will keep close control on collection, inventory, and spending while progressing growth projects. I will move to the share price and our shareholders' value analysis. Our focus is consistent returns and long-term shareholder value.
Manoj Aheeray: The end of October share price was around AED 2.28 versus AED 2.49 at year-end. With a market capitalization at about AED 2.27 billion, the shares traded at around 10 times earning compared with roughly 11.5 times at year-end. Enterprise value to EBITDA was broadly unchanged at around 6.5 times band. Here, with the turnaround delivery, cash generation, and disciplined investment remains our priority. I will now hand back to Mr. Abdallah for the closing remarks. Thank you.
Abdallah Massaad: Thank you, Manoj. Our Q3 results demonstrate the group resilience, with revenue and earning growth supported by strong regional demand despite continued disruption. Looking ahead, we will build on this momentum by capturing UAE and GCC opportunities and supporting tableware recovery. We will remain agile, closely monitor the geopolitical environment, and respond quickly to changing conditions. Local sourcing, alternative logistic routes, and our regional manufacturing footprint will help us maintain reliable supply and service. We will continue Kludi's transformation and our subsidiary turnaround plan to improve profitability while maintaining cost discipline and strengthening liquidity. Investment in Yanbu and retail expansion will support future growth. Our design hubs in London, Frankfurt, Dubai, and Milano, together with our Elie Saab partnership and the Roberto Cavalli collection, strengthen our premium and luxury offering and our reach among architect designers and customers globally.
Abdallah Massaad: Across the group, we are expanding AI adoption, improving manufacturing efficiency, and embedding sustainability in our operations. We remain confident in RAK Ceramics' long-term growth prospects and our ability to deliver sustainable value for shareholders. Thank you for your continued trust and support. I will now hand over the call back to the operator for questions.
Operator: Thank you. We will now begin the Q&A session. As a reminder, if you have joined us via Zoom and would like to ask a question, you may use the raise hand function, or you may type your question into the Q&A text box. If you have joined us via the telephone lines, you may press star followed by 1 on your telephone keypad.
Mohamad Haidar: Thanks, Alex. I will start with a few questions from my side. Abdallah, thank you for the call. Really impressive results in Q3. I am trying to understand the gross margins, which were impressive. Given what is happening around us, and we are speaking to other companies, they are all feeling the impact. I am not sure if RAK Ceramics is also feeling it when it comes to higher transportation costs and higher raw material input costs, higher war premium, and insurance. What is the trick behind the intact margins, close to 40% in Q3? Is it only because UAE is selling higher, or it is also because you are doing something else on the cost front?
Abdallah Massaad: Thank you, Mohamad, for your question. Look, as we always discuss, we are always in continuous improvement. We are always on continuous investment, how we can be more efficient and more creative. To be honest with you, Mohamad, our margin in the UAE historically is better than the margin when we export, which is, we have to add transportation on top, and we have our own sales team. We sell directly to the projects where we have a better margin. Also, we have our showroom, which we sell, again, at a good margin. So, what happened, our cost, as you said, increased, cost of raw material, and inflation, insurances, everything, we faced it. But we tried to change our formulas by using more local content, local raw material, as I mentioned, more efficiency.
Abdallah Massaad: Even by having, we did not increase the prices in local markets, so our margin in the UAE gets reduced, means in the end market UAE, while the increase of volume supported us in maintaining the gross profit margin. Now, if I look at the sanitaryware, for example, where the raw material increased, but we have invested initially in high-pressure casting and the new technology, where helped us improving the efficiency and the recovering, so that we were able to offset the increase in raw material and the expenses from the efficiency we got it. So it is a blend, so there is no one straight answer, Mohamad.
Mohamad Haidar: That is very clear, Abdallah. Thank you. I will switch to the Q&A box. We have a few questions. It is also a follow-up to my question. The first question says, "UAE revenues increased 33% yearly, while project sales grew 55%. How much of this momentum reflects structural market share gains versus temporary import disruptions? How should we think about the sustainability of this growth into 2027?
Abdallah Massaad: Mohamad, again, we are doing our job. Our job was, okay, let us. We have a significant market share in the UAE. We had more than 30% market share in the UAE. While this issue happened, we thought from, honestly, two angles. One angle that we do not want to increase the prices because we are a company in the UAE, during this difficult time, come and impose increase in cost on top of the issues probably the developer, contractor is facing. Already we have a good margin. We thought, let us maintain our prices. Let us support the developers and contractors during this period. Also, at the same time, we are expecting, and this is what we are discussing, that, look, we are standing by, we are supporting, and we are not looking for short term. We are looking for long term.
Abdallah Massaad: We are showing that we are a partner, a long-term partner, which we can rely on us. Therefore, we supported the continuation and the supply of the projects, where I believe our market share today, without putting a number, but we crossed the 50% in this case. We are expecting that this service, quality, design, solution which we are providing, this will allow us to gain more market share for a long time, and it is not only a temporary option. For sure, some people, whenever possible, they will find the cheaper option, they will buy. We cannot guarantee, but at least no doubt that we will benefit in the long term of the action we did in the short term.
Mohamad Haidar: Thank you, Abdallah. We also have a few questions on Saudi, but before we move to Saudi, I have one follow-up on the UAE. I mean, knowing that you are a premium manufacturer of ceramics and you usually sell at higher prices than your competitors, the market share that you have gained, is it for a similar quality product or it is because other products are missing, so people are shifting to your products, which are more premium and higher price? We are just trying to understand that.
Abdallah Massaad: Honestly, Mohamad, we gain from both. There are projects who they wanted only imported high-end branded products. These people we won. Also some projects which they were buying cheaper product and by the additional freight, the costs became, if they can get it on time, almost similar to ours. So, one angle is good, is that the high-end, even some branded projects which they were reluctant to try us, they tried us and they are satisfied. Honestly, also our launch of sanitaryware of KLUDI supported this, you know?
Abdallah Massaad: Initially, after the acquisition of KLUDI, which was only in faucets, we started investing in sanitaryware, and this helped us by positioning KLUDI also as a premium sanitaryware, where most of the developers and most of the high-end projects today, I can say we are specified or we supplied already KLUDI on top of RAK Ceramics tiles. So, I can say from both sides. That is why the higher end, which they tried us, I believe they will stick to us, after seeing the project. The low-end projects, which, if there are opportunities to have a lower rate, they might shift.
Mohamad Haidar: That is very clear, Abdallah. Thank you. Moving to the questions on Saudi. Given the SABER certification delays affecting shipments in August and September, what proportion of the deferred deliveries is expected to be recovered in Q4? Is there any risk of these delays extending into 2027?
Abdallah Massaad: Look, honestly, I can tell you that this problem is sorted out. We had issue during this quarter in the supply, but fortunately, and the good news that already started and we are supplying with no restriction. It is a normal action that some projects might have, was not able to wait, but that is not significant. We will try our best to recover it during this quarter as per our plan.
Mohamad Haidar: Thank you. A third question. With the Yanbu manufacturing facility targeted for completion in Q2 2027, how should we think about the production ramp-up, initial utilization levels, and the timeline for achieving meaningful profitability?
Abdallah Massaad: Look, Mohamad, honestly, when we looked at Saudi, before the profitability, it is the market share and it is a strategic move for us in order to have, on a strategic base, to have a base in Saudi. Any issues like SABER, borders, increase of transportation, at least we have a base there. On the other hand, it is, again, look what happened with us. If we have issues in exporting from the UAE, we have another place where we can export. So, I can put it from this perspective. Regarding the ramping up, look, we are running RAK Ceramics since 1991, you know? We have a very experienced team, and I don't think from the day we get the factory, within a month's time, we will be in a full stabilization mode, hopefully.
Mohamad Haidar: That's very clear. Thank you. Alex, over to you for the audio questions.
Operator: Thank you. We do have a Zoom question from Muish Zafar. Please unmute yourself locally, introduce yourself, and proceed with your question.
Mehwish Zafar: Thank you, Alex. Thank you, management, for the call today. Congratulations on the excellent set of numbers. My question is more generalized. I am just trying to understand from your point of view, how do you see the market in the coming next three to four years? Most of the developers have delayed their launches. We have seen Emaar and Aldar, they have kind of slowed down their new launches, and the new launches would convert into actual properties over the next three to four years. So, probably the demand for the sanitaryware, which comes at the end of the cycle, would probably be lesser than expected, pre-conflict expectations. I am just trying to get an idea, have you had done some sensitivity analysis on that front? If the project launches are delayed at a certain time period, how would it affect you in the next two to three years?
Mehwish Zafar: If you can just give us a general understanding of the current dynamics and the impact on your future sales and margins, of course.
Abdallah Massaad: Thank you for your question. Look, if we go historically since 1991, since we are in the operation, we always say that RAK Ceramics is naturally hedged and always even in our earning calls or even in our conference investments. They sometime they were comparing us to local players and they said, "Look at the X and Y in the specific country, they have a better margin than you." Sometimes they do not have this fluctuation in currencies or impact from a multiple jurisdiction. As you know that RAK Ceramics, we have multiple production base. Today we have in the UAE, as we have also in India, in Bangladesh, and now in next year, 2027, we will have also a manufacturing plant in Saudi. Yes, I know and I believe that the UAE is a very resilient market.
Abdallah Massaad: Now when you go to the hotels, you can see that it is occupied, the flights are full, and the recovery is very fast. Yes, I agree with you that during this period, maybe the last six months, maybe the launch of the new projects in the same pace are not there, but I can assure you the projects which are in pipeline and started this for the next two years, we have enough in our place. Also at RAK Ceramics, we are not fully focused today because we are not able to export. We are selling in the UAE and GCC the maximum, but we have a spread in 160 countries. We will make sure that we will be agile and we will be in a full flexible mode in order to stabilize and maximize our opportunities everywhere.
Mehwish Zafar: Sure. Just one question regarding your UAE business, since it is the major part of your revenue. I am just wondering, at this point in time today, do you have a clear visibility for the next 2 to 3 years? Of course, if you have contracted today, so you have the complete confidence that you would be generating X amount of sales in the next 2 years or so. Is there any probability where you can clearly or visibly see the earnings for the next 2 years or so?
Abdallah Massaad: Look, earnings, let us keep, we do not give our views and forecast. This is not for us. We are working for a short term and long term and make assure that, be assured that we are doing all our best in order to maintain our growth and work for the best interest of our stakeholders. It is not the first time where today crisis happened in 2008, and I believe RAK Ceramics, we came back. At that time, in the UAE, especially the real estate was badly impacted, but as RAK Ceramics, you can see that we were able to recover and we increased our market share and we were able to grow even in many times where we have any market correction or any impact, we were able to come out stronger. Even during COVID, it was the same.
Abdallah Massaad: Today, we are in the crisis, whatever we say, or in a place where the visibility is not very clear and no one can tell you what is in the next 3 years will happen. We can say one thing, that we have our contingency plan A, plan B, plan C. We are every day looking at the situation and moving, and our in our back mind is the best interest of our stakeholders.
Mehwish Zafar: Mm-hmm. Get it. Shukran. Thank you very much. That is clear.
Abdallah Massaad: Welcome. Thank you.
Operator: Thank you. As a reminder, if you would like to ask a question, you may raise your hand or you may type your question into the Q&A text box. If you have joined us via the telephone lines, you may press star one on your telephone keypad.
Mohamad Haidar: Next, we have a question in the chat box. I will take it. From Mukesh Jidu. "Congratulations on good set of results. Could you please share the Q3 sales volume, average selling prices, and capacity utilization for tiles, sanitaryware, tableware, and faucets, and how each has moved year-on-year?
Manoj Aheeray: Question. See, for the first nine months of 2026, tiles utilization was almost near to the 70% compared to 66% for full year 2025. Sanitaryware was 53.3% compared to 64%. Figure covers the practical operating capacity and compare in nine months with full year. As far as tableware is concerned, it is same around 66% capacity utilization. Faucets is clocking to around 63%.
Mohamad Haidar: Thank you, Manoj.
Operator: At this time, there are currently no further questions.
Mohamad Haidar: Abdallah, back to you for any final remarks.
Abdallah Massaad: Thank you very much for the support. I hope you wish us good luck in Q4 and going forward.
Mohamad Haidar: Thank you, Abdallah and Manoj, and for everyone who participated, and we look forward to have you with us next quarter.
Abdallah Massaad: Thank you.
Manoj Aheeray: Thank you very much.
Operator: Thank you all for joining. You may now disconnect.
