Good afternoon, everyone, and welcome to the RAK Ceramics Q3 and nine months 2025 earnings call and webcast. My name is Rika, and I will be coordinating your call today. During the presentation, you can register to ask a question if you have joined online by using the written question box in the top right-hand corner of your screen. I would now like to hand over the call to your host, Mohamad Haidar, with Arqaam to begin. Please go ahead.
Hello, everyone. This is Mohamad Haidar from Arqaam Capital, and we are delighted to welcome you to RAK Ceramics third quarter and nine-month 2025 earnings call and webcast. From RAK Ceramics, today we have Mr. Abdallah Massaad, Group CEO, and Mr. P K Chand, Group CFO. Over to you, Abdallah.
Thank you, Mohamad. Good afternoon, everyone, and welcome to RAK Ceramics third quarter and nine-month 2025 earnings conference call and webcast. We appreciate you joining us today. Our third quarter performance has been strong, once again demonstrating the resilience of our business despite a challenging macroeconomic environment. Total revenue increased by 2.8% year-on-year to AED 825 million, driven by strong demand from the U.A.E. and across the Middle East. For the nine months of 2025, total revenue also grew by 2.8% year-on-year, reaching AED 2.4 billion. Gross profit margin decreased marginally by 70 basis points year-on-year in the third quarter to 40.5% and increased by 20 basis points in nine months 2025 to 40.3%. We have sustained healthy margins supported by effective cost management.
Profit before tax increased by 42.4% year-on-year to AED 86.6 million, and the net profit after tax increased by 20.7% year-on-year to AED 67.5 million. For the nine months, net profit after tax stood at AED 182.7 million compared to AED 169.9 million last year, despite higher corporate tax following the introduction of the Domestic Minimum Top-up Tax effective 3rd January 2025. Let me now give you a brief overview of our consolidated revenue by market and segment standpoint. The U.A.E. continues to be our largest market, delivering strong top-line growth and healthy margins. This is followed by Europe, which contributes 23% of our consolidated revenue, with India and Saudi Arabia also playing key roles.
In terms of our segments, Tiles continue to be the primary driver of revenue, followed by Sanitaryware, Faucets, and Tableware. At the bottom, you will see our production capabilities, where we remain committed to continuous investment to enhance capacity and operational efficiencies. Slide seven. Now, let me walk you through our financial performance across our key market and product lines. In the U.A.E., we witnessed strong demand driven by the real estate and construction sector. Operational efficiencies in our Tile plants also helped us to sustain healthy gross margin, strengthening our leadership in the local market. In Saudi Arabia, revenue declined due to intensified competition and oversupply from local tile manufacturers. However, our margin improved by 240 basis points due to favorable product mix.
Moving to Europe, revenue declined by 4.9% year-on-year, reflecting weak demand in the U.K. and Italy amid challenging macro conditions and continued recessionary concerns. In contrast, Germany performed well with 14.9% increase in local currency revenue, highlighting our traction in higher value markets. In India, the market continues to demonstrate resilience supported by infrastructure development, reduced interest rate, and growing disposable income. We are moving ahead with turnaround measures to regain profitability. In Bangladesh, we are seeing steady recovery owing to restoration of gas supply. Our revenue grew by 52.2% year-on-year, reflecting normalization of the revenue levels, which were impacted severely from the political crisis last year. From a segment standpoint, our Tiles division recorded growth in both volume and value, primarily driven by robust performance in the U.A.E., India, Bangladesh, Germany, and Africa.
The Sanitaryware division experienced a revenue growth supported by strong demand in the U.A.E. Faucet division revenue grew by 8.8%, mainly driven by performance in the U.A.E, Europe, and Asia. We are progressing towards our plan of cost optimization by shifting major European Faucets production facility to U.A.E. The Tableware division has shown resilience, with volume growth of 4.8% despite the revenue decline. Gross margin improved by 130 basis points year-on-year, supported by higher sales to the airline industry and premium hospitality projects. Looking ahead, our diversified footprint continue to provide resilience. We are focused on capturing opportunities in high growth regions, particularly in the U.A.E. and wider Middle East, while taking corrective measures in more challenging markets. In the U.A.E, we are seeing increased competition due to lower cost imports under free trade agreements.
Our focus is on differentiating through premium products and introducing high-tech innovations that represent breakthroughs in the industry. In Saudi Arabia, market oversupply and liquidity issues have triggered a price war, particularly in residential and commercial segments. We are focusing on premium and differentiated offerings to boost margins, especially in retail and project channels. In Europe, consumer sentiment is weak, but we are taking proactive steps by engaging with architects and designers through our design hubs. This will help us tap into higher value segments with our new collections. In India, the reduction in exports has created domestic oversupply. We are actively working on enhancing our retail presence and in-store experience to better connect with customers. We are working on a plan to introduce product offering from the U.A.E. In Bangladesh, the overall economic sentiment is improving.
New development initiatives have been reactivated to support in regaining our lost market share. Across all these markets, we are also prioritizing brands enhancement through showroom expansion and strengthening our dealer network. Now, move to our strategic initiatives. In U.A.E., we have completed the upgrade of our advanced Continua+ slabs technology, strengthening our leadership in large format surface. Our facility will be able to produce now 1.6 times 3.2 m, with a capability to grow the sizes to 1.8 m times 3.6 m. This facility will be a great addition to us, where the slabs, where it's a product substituting natural stone, granite, marble, quartz used in the kitchens with a more, if you want to say, hygienic product. With the new facility, this will be a great opportunity for us to cater this segment and also strengthen our position to export from here.
The new facility includes the latest TCR 2180 system, a seven-layer dryer powered by kiln heat recovery, the region's longest 300-m kiln, and smart automated quality inspection system. Our Sanitary ware facility is also being modernized with energy-efficient systems that align with our sustainability goals. In Saudi Arabia, we are making steady progress on the Greenfield project in Yanbu, with expected completion by first quarter 2027. This will strengthen our local presence and drive efficiency. In September 2025, RAK Ceramics showcased its latest innovation at Cersaie 2025 in Bologna, Italy, one of the world's leading ceramics exhibition. In October 2025, RAK Porcelain Group, our Tableware division, announced a strategic acquisition of Bankook Design Chambre, the owner of the renowned Cookplay brand, expanding our premium Tableware portfolio and strengthening its presence in the European market.
Actually, our new welcome brand, Cookplay, is very known to target and cater Michelin star restaurants with a unique design and unique proposition. We are very excited about this acquisition, where it will support RAK Porcelain to strengthen and to increase its market share in the HORECA and retail segment. As part of KLUDI transformation, we are moving forward with our cost optimization strategy, including relocating major European production to the U.A.E. to improve operational leverage. I will now hand over to our CFO, Mr. P K Chand. Please, P.K., it's yours.
Thank you, Mr. Abdallah, and good afternoon, everyone. I appreciate you joining us today. Mr. Abdallah has already covered the strategic and operational highlights of the third quarter. I will now take you through the financial performance for the third quarter and nine months of 2025, focusing on revenue, gross profit margin, and key balance sheet highlights. We will begin with slide 11. We are pleased to share that third quarter of 2025 continued to deliver a strong performance and demonstrated the resilience of our business. Total revenue for the third quarter of 2025, and also for the nine months of this year, increased by 2.8% to AED 824.9 million and AED 2.43 billion, respectively, primarily driven by robust performance in our Tiles, Sanitary ware, and Faucets segment. Tiles and Sanitary ware revenue increased by 3% year-on-year to AED 603.5 million in the third quarter of 2025.
While in nine months, it increased by 3.8% year-on-year to AED 1.75 billion. This was supported by strong performances in United Arab Emirates, Middle East markets, and recovery in Bangladesh market. Tiles revenue grew by 2.5% at AED 479.7 million in the third quarter of 2025, led by robust performance in U.A.E., Bangladesh, German, and African markets. In nine months, the revenue increased by 4.5% year-on-year to AED 1.40 billion. Sanitaryware revenue recorded growth of 5.3% year-on-year to AED 123.8 million in the third quarter of 2025, supported by strong demand in U.A.E., Saudi Arabia, Bangladesh, and Middle East markets. In nine months, the revenue increased by 0.9% year-on-year to AED 350.7 million. Tableware revenue reported a modest decline in revenue of 0.6% to AED 84.8 million for the third quarter of 2025. In nine months, revenue declined by 4.4% year-on-year to AED 255.6 million.
This decline is mainly on account of revenue loss in glassware business since third quarter of last year. Excluding glassware business, there is underlying growth of 2% in the third quarter of 2025, and in nine months, the growth is 2.5%. Faucets revenue grew by 8.8%, mainly driven by performance in U.A.E. and Europe, at AED 118.3 million in the third quarter of 2025. In nine months, the revenue increased by 5.1% year-on-year to AED 352.3 million. We continue to progress towards our plan for cost optimization by shifting major E.U. Faucets production facilities to the United Arab Emirates. Other revenue decreased by 3.1% year-on-year to AED 66.7 million in nine months of 2025, driven by decrease in our ceramic trading business. Now we will turn to slide 14.
Overall gross profit margin for the third quarter of 2025 decreased by 70 basis points year-on-year to 40.5% due to lower margin in Tiles and Faucets segment. However, it increased by 20 basis points in nine months, supported by improvement in efficiencies and higher sales in U.A.E. market. Tiles margin for the third quarter of 2025 declined by 100 basis points year-on-year to 41.6%, mainly due to lower margin in India and Bangladesh plants. However, for nine months, the Tiles margin increased by 130 basis points to 41.7%, primarily attributable to improved operational efficiencies and increased sales in the U.A.E. market. Sanitaryware margin in the third quarter of 2025 improved by 280 basis points to 36.6%, and in nine months it increased by 230 basis points at 34.5%, supported by improved operational efficiencies and higher sales in U.A.E.
The Tableware margin in the third quarter of 2025 improved by 120 basis points year-on-year at 54%, and in nine months it improved by 170 basis points at 54.6%, supported by higher sales to the airline industry and premium hospitality projects. Faucets gross profit margin increased by 660 basis points year-on-year at 22.3% in the third quarter of 2025, and in nine months by 610 basis points at 24.3% due to lower margins in the European market on account of continued transformation activities in Europe. Profit before tax for the third quarter of 2025 amounted to AED 86.6 million, representing an increase of 42.2% compared to AED 60.8 million in the corresponding quarter for 2024.
For the nine months of 2025, profit before tax rose by 22.2% to AED 237.8 million . This improvement was primarily driven by higher revenue, increased gross profit margin, lower export freight cost, and reduced interest expense. Consequently, margin increased to 9.8% for the nine months period of 2025, compared to 8.2% in the same period of last year. Net profit after tax increased by 20.7% year-on-year at AED 67.5 million in the third quarter of 2025. In nine months, the profit after tax is AED 182.7 million , an increase of 7.6% year-on-year. The increase is despite implementation of the newly introduced Domestic Minimum Top-up Tax under the OECD Global Pillar Two rules, effective from 1st January 2025.
The effective tax rate for U.A.E.-based entities increased from 9% to 14%. These have resulted in an incremental tax impact of AED 23.9 million during the nine months of 2025 for U.A.E.-based entities. Net profit margin for nine months of 2025 is 7.5%, compared to 7.2% in nine months of last year. EBITDA for the third quarter of 2025 increased by 14.7% year-on-year to AED 167.7 million , and in nine months it increased by 6.9% to AED 464.1 million . In nine months of 2025, EBITDA margin has increased to 19.1% year-on-year, compared to 18.4% in the last year.
Overall working capital increased by AED 23 million t o AED 1.49 million in September 2025 compared to June 2025. The trade receivables decreased from 88 days in the second quarter 2025 to 84 days in the third quarter due to strict credit control. Inventory days, however, increased from 265 days to 266 days quarter-on-quarter due to increase in finished goods stock. Trade payables decreased from 68 days in the second quarter 2025 to 62 days in the third quarter 2025, mainly due to CapEx payments. Net debt increased by AED 82.7 million to AED 1.64 billion compared to June 2025, due to U.A.E. corporate tax payment of AED 31.4 million for the year 2024, higher CapEx and working capital.
Net debt to EBITDA also increased from 2.59x in June 2025 to 2.63x in September 2025. CapEx spending has been AED 215.6 million in the nine months of 2025, out of which close to AED 134 million relate to up-gradation of large format tiles manufacturing plants. CapEx guidance for 2025 is revised to AED 275 million-AED 300 million . We continue to maintain comfortable liquidity and remain well-positioned to meet our financial obligations. Over the last 12 months, the company's share price has remained stable. The stock is currently trading at a P/E multiple of 10.92x , reflecting investor confidence and long-term value. This concludes with our financial overview for the quarter.
I will now hand the call back to Mr. Abdallah for his closing remarks before we open for questions.
Thank you, P.K. As we discussed, our third quarter performance shows strong revenue growth, sustained healthy margin, and stronger profitability. We are seeing encouraging signs across our core markets, particularly in the U.A.E., supported by robust real estate and construction activity. While challenges persist in other regions, we have been able to safeguard our margin and remain agile in our execution. Our ongoing cost optimization initiatives focus on innovation and commitment to sustainability will continue to strengthen our position in the market. We remain committed to staying ahead as the preferred global supplier of high-quality, differentiated products. As always, we remain dedicated to delivering sustainable value for our shareholders, partners, and customers. Thank you again for your attention and continued support. I will now hand over the call back to the operator for the Q&A session.
Thank you. We will now begin the question and answer session. If you would like to ask a question, you can do so by pressing star one on your telephone keypad. Otherwise, you can type a written question in the Q&A box provided online today. We have the first question. What is the utilization rate for every segment, Tiles, Sanitaryware, [audio distortion], Tableware for each countrywise?
You know, as we discussed, we have installed capacity, then we have products where we are focusing or which segments. Say, in Tiles, today, almost the capacity utilization is around 70% from the installed capacity. Having said this, we have MC9, where we have two kilns, where we are upgrading the line from ceramics to porcelain tiles. When we go to Sanitaryware, it's again the same, where we are under transformation, where we both, like high pressure casting and lower energy consumption. So if I look at the installed capacity, how much we are utilizing, somewhere between 60%- 70%. Looking at the Tableware. Tableware, again, is the same thing, where from the installed capacity, we are utilizing somewhere between 80%- 90% capacity.
Thank you. As a reminder, if you would like to ask any further questions, you can type your questions in the Q&A box provided online today. That is star followed by one if you have joined on the phone. Otherwise, you can type a written question in the Q&A box provided online today.
Abdallah, hi. This is Mohamad Haidar from Arqaam. The U.A.E. is doing well and continues to do well. Should we expect similar outlook in 2026 and even for the next two, three years, given how the real estate sector is performing?
Mohamad, thank you for your question. I do not like to predict, but what we see around us and that the construction, the new projects. Even yesterday, I believe, some project launched by Emaar, I believe people, they were queuing from the last evening. So, in few hours, the new launch is getting sold. The prices are still increasing. Demand is there. We can see it with all the infrastructure, the traffic coming to Ras Al Khaimah itself, and you see the projects coming is never heard of. So, can I say anything might happen? But for me, and I believe, I think for the next at least two years horizon, I believe there is nothing where I can see there is some reducing or some slowdown in real estate.
Thank you, Abdallah. Very clear.
Thank you. That is one final reminder. It is star followed by one if you do wish to ask any questions, otherwise you can type a written question in the Q&A box provided online today. We have Richa Kumari with SICO. What is your outlook for the net debt EBITDA?
Look, I believe here today, anywhere between 2.5, 2.3, at a time 3.5, especially we are having also the project in Saudi funding. So honestly speaking, if you see that now the interest rate is going down, so it is not in a somewhere going into the other direction. For us, we saw earlier higher level. But for us as on today, between somewhere 2.5x to 3.5x multiple is a comfortable scenario for us.
Thank you. One final reminder. If you would like to ask a question, you can type your question in the Q&A box provided online today. I would like to conclude the question and answer session now and hand it back to Mohamad for some closing remarks.
Thank you, Rika. Abdallah and P.K., thank you for your time today. Very informative. Thank you everyone for joining us. We look forward to have you with us next quarter.
Thank you very much.
Thank you. I can confirm that does conclude today's call. Thank you all for attending. You may now disconnect and please enjoy the rest of your day.