Hello, everyone, and welcome to the RAK Ceramics second-quarter and H1 2026 earnings call and webcast. This is Mohamad Haider from Arqaam Capital, and we are happy to be joined today by Mr.

Abdallah Massaad, Group CEO from RAK Ceramics, and Mr. P.K.

Chand, Group CFO. Over to you, Mr.

Abdallah.

Thank you, Mohamad. Good afternoon, everyone, and welcome to RAK Ceramics second-quarter 2026 earning conference call and webcast.

We appreciate you joining us today. Our Q2 performance demonstrated resilience despite ongoing regional disruptions.

Strong demand across the UAE, Saudi Arabia, and Bangladesh helped offset the impact of export restrictions and supply chain challenges. Throughout this quarter, our priority was clear: increasing our market share across the region while making every effort to support customers worldwide.

Backed by strong brand, product quality, and regional manufacturing footprint, we responded quickly to changing market condition, leveraging locally sourced raw material, alternative logistics routes, and other practical solution to maintain reliable supply and service across our network. Our total revenue reached 822.8 million dirhams in the second quarter 2026.

For the first half of 2026, revenue stood at 1.58 billion dirhams. The second quarter 2026 gross profit margin improved to 41% compared to 40.6% in the second quarter 2025, and in the first half of 2026, it was stable at 40.2% in line with the prior year.

A higher share of project-based business supported both revenue and margin, with growing demand for large-format porcelain tiles offering higher average selling price and improved profitability. Our net profit after tax increased by 2.9% year-on-year to 68.3 million dirhams compared to 66.4 million dirhams in the second quarter 2025.

Now let me give you a brief overview of our key market and business segments. The UAE continues to be our largest market with 42% contribution, delivering strong top line with a healthy margin amid the current regional conflict.

This is followed by Europe, which contributes 22% of our consolidated revenue, followed by India, Saudi Arabia, and Bangladesh. In term 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 efficiencies. Let me now address the impact of the ongoing regional conflict of our on our business and the proactive actions we implemented in response to mitigate disruptions.

The crisis management measures we put in place in the first quarter remain firmly in effect through the second quarter: strict control of costs, disciplined liquidity management, and logistic optimization. Regional tensions and the disruption of the Strait of Hormuz continued to affect shipment routes outside the GCC along with inbound raw material.

In response, we activated alternative shipping routes through Jeddah, Oman, and Khorfakkan to keep our supply lines running. On productions, we optimized output to avoid building excess inventory once export sales paused, and we shifted our commercial focus towards high-end projects and retail in the UAE and Saudi Arabia and the GCC.

A slowdown in tourism-led hospitality demand affected our tableware business in the UAE and the GCC. Looking ahead to the third quarter, we expect to continue gaining market share across the UAE, Saudi Arabia, and the wider GCC, supported by ongoing constraint in import availability and taking RAK Ceramics as a reliable supplier where we are able to cater to the project a high-end product where it is satisfactory.

While regional tension and tighter liquidity conditions may continue to create uncertainty and place some pressure on working capital, our strong brand, products quality, and regional manufacturing footprint position us as a reliable partner for customers. The actions we have taken to strengthen our operations give us confidence in our ability to navigate the quarter ahead.

Now let me walk you through our financial performance in the second quarter 2026 across our key market and segment. In the UAE, we witnessed robust demand driven by project and retail channels, demonstrating resilience amid regional geopolitical challenges.

We expect the market share to increase, supported by import disruptions. Saudi Arabia also registered strong growth of 11.6% in Q2 2026 in revenue driven by project and wholesale channels due to strategic shift from volume-based ceramics to quality of sales led by value creation.

In Bangladesh, revenue rose by 20.7% in the second quarter 2026, supported by political stability and an improvement business environment following the formation of the new government earlier this year. In Europe, revenue fell down due to supply chain disruption that led significantly higher freight costs.

In India, revenue fell 15.8% in the second quarter 2026 due currency headwinds and supply constraint in Morbi. From the segment standpoint, our tiles division recorded 1.7% year-on-year growth in revenue supported by strong growth in the UAE, Saudi Arabia, and Bangladesh.

Sanitaryware revenue declined by 6.9% year-on-year due to lower sales in India, Europe, and other export markets. Faucets revenue rose 2.5% year-on-year driven by growth across most market, partially offsetting weaker performance in Asia and Africa.

Tableware revenue declined by 13.3% year-on-year due to the ongoing regional conflict, while export demand remained resilient. Now turning to our strategic initiatives across the group.

In the UAE, we remain focused on enhancing our product portfolio and integrating technology to meet rising global demand for cost-effective, high-quality tiles. Our sanitaryware facility continues to be modernized with energy-efficient technology, reducing carbon emission and reinforcing our sustainability commitments.

In Saudi Arabia, we are making steady progress in our greenfield production facility in Yanbu, which is expected to completed in the second quarter 2027. We continue to work closely to maintain our presence in giga projects while increasing our conversion rate in small- and medium-sized private sector projects.

We are also focusing on premium and differentiated product offerings to strengthen our retail and project channel and enhance margins. In Europe, we are focused on an operational cost optimization strategy to strengthen margin resilience and drive cost efficiencies.

We remain committed to improving Kludi operational performance and are progressing with our cost optimization strategy. In India, we are accelerating retail and company-owned company-operated store execution in line with our expansion roadmap and focusing on geographical expansion by adding new dealers to strengthen our presence across more districts and grow our institutional business reach.

In Bangladesh, we are implementing focused initiatives to recover lost market share while improving operational efficiency to restore and sustain profitability. I will now hand over to our Group CFO, Mr.

P.K.

Thank you, Mr. Abdallah.

Mr. Abdallah has already covered the strategic and operational highlights of the second quarter of 2026.

I will now walk you through the financial performance for the second quarter and first half of 2026, focusing on revenue, gross profit margins, and key balance sheet highlights. We will begin with slide 11.

We are pleased to share that our second-quarter 2026 results reconfirmed the group's resilience. Robust demand in the UAE, KSA, and Bangladesh helped offset the impact of lower export sales and supply chain disruptions caused by ongoing regional conflicts.

In addition, a central crisis management team and disciplined cost actions continue to protect service levels and mitigate margin pressure. Total revenue remained resilient in the second quarter of 2026 with a marginal year-on-year decline of 0.5% to 822.8 million dirhams.

However, quarter-on-quarter revenue increased by 8.2%. In the first half of 2026, revenue declined by 1.2% year-on-year to 1.58 billion dirhams.

In the tiles and sanitaryware segment, revenue remained broadly stable year-on-year at 595.6 million dirhams in the second quarter of 2026, despite ongoing regional conflicts and supply chain disruptions, supported by better performance in UAE, Saudi Arabia, and Bangladesh markets. In the first half of 2026, revenue declined by 1.4% to 1.13 billion dirhams.

Tiles revenue grew by 1.7% year-on-year to 482.5 million dirhams in the second quarter of 2026, driven by strong growth in UAE, Saudi Arabia, and Bangladesh markets, while other export markets were impacted by ongoing regional conflicts. In the first half of 2026, revenue declined by 3% to 913.8 million dirhams.

Sanitaryware recorded a year-on-year revenue decline of 6.9% to 113.1 million dirhams in the second quarter of 2026 and by 2.9% to 220.4 million dirhams in the first half of 2026, primarily due to lower sales in India, Europe, and other export markets. Tableware recorded a year-on-year revenue decline of 13.3% to 73.6 million dirhams in the second quarter and by 10.8% to 152.3 million dirhams in the first half of 2026.

While export demand remained resilient, the regional market continued to face weaker hospitality demand amidst lower tourism, impacting UAE and rest of GCC revenue by 44.4% year-on-year. Faucets revenue grew by 2.5% year-on-year to 125.4 million dirhams in the second quarter and by 6.2% to 248.4 million dirhams in the first half of 2026, primarily driven by growth across most markets, partially offset by weaker performance in Asia and Africa due to ongoing regional conflicts.

We continued to progress with our cost optimization strategy. Other revenues remained stable year-on-year to 48.6 million dirhams in the first half of 2026.

We will now turn to slide 14. Overall gross profit margin for the second quarter of 2026 increased by 40 basis points year-on-year to 41.0% and remained stable in the first half of 2026 at 40.2%, despite underutilization of manufacturing facilities in the UAE and India due to supply chain disruptions and natural gas shortages in India linked to ongoing geopolitical issues.

Tiles margin in the second quarter of 2026 increased by 30 basis points year-on-year to an all-time high of 42.9%. In the first half of 2026, it also increased by 30 basis points to 42.1%, driven by improved margins across key markets and supported by a favorable product mix.

In sanitaryware, the gross profit margin increased by 230 basis points year-on-year to 34.9% in the second quarter. In the first half of 2026, it increased by 130 basis points to 34.5%, supported by higher sales in the UAE market.

In tableware, gross profit margin in the second quarter decreased by 210 basis points year-on-year to 53.9%, mainly due to lower regional sales and higher freight costs. In the first half of 2026, it increased by 70 basis points year-on-year to 55.6%.

Faucets gross profit margin decreased by 390 basis points year-on-year to 23% in the second quarter of 2026 and by 320 basis points in the first half of 2026 to 22.5%, driven by lower revenue and capacity underutilization. Profit before tax for the second quarter of 2026 amounted to 85.7 million dirhams, a decrease of 1.1% from 86.7 million dirhams in the same quarter last year.

In the first half of 2026, profit before tax decreased by 8.3% year-on-year to 138.7 million dirhams. The decrease was primarily driven by softer export revenue in tiles and sanitaryware, as well as weaker hospitality demand amidst lower tourism, which impacted the tableware business in the UAE and rest of GCC markets.

The profit margin for the first half of 2026 decreased to 8.8% compared to 9.4% in the last year. Net profit after tax in the second quarter of this year increased by 2.9% year-on-year to 68.3 million dirhams.

Net profit margin increased to 8.3% compared with 8% last year. In the first half of 2026, net profit after tax decreased by 7.6% year-on-year to 106.5 million dirhams.

The EBITDA for the second quarter of this year decreased by 2.1% year-on-year to 157.5 million dirhams. EBITDA margin decreased to 19.1% compared with 19.5% last year.

In the first half of 2026, EBITDA decreased by 3.9% year-on-year to 284.5 million dirhams, while the margin decreased to 18% compared with 18.5% in the last year. Overall working capital increased by 29 million dirhams to 1.43 billion dirhams in June 2026 compared with March 2026, due to higher trade receivables following an 8.2% quarter-on-quarter increase in sales.

Trade receivable days increased from 86 days in March 2026 to 89 days in June 2026 due to higher UAE sales where credit terms are longer compared to export sales. Inventory days decreased from 261 days in March 2026 to 260 days in June 2026 quarter-on-quarter, as sales were supported by inventory buffers in Europe and India.

The trade payable decreased from 64 days in March 2026 to 61 days in June 2026. Other payable days increased from 137 days in March 2026 to 141 days in June 2026 due to increase in provisions.

Net debt decreased by 41 million dirhams to 1.52 million dirhams compared with March 2026. Net debt to EBITDA also decreased from 2.53 times in March 2026 to 2.48 times in June 2026.

As far as capex spending is concerned, we spent 100.1 million dirhams in the first half of 2026, of which 19 million dirhams related to upgrade of large-format tiles and sanitaryware plants, and 22 million dirhams was spent on ongoing greenfield tiles project in Saudi Arabia. Capex guidance for 2026 is 250 to 275 million dirhams, including 100 to 125 million dirhams for the greenfield project in Saudi Arabia.

The total estimated capex for Saudi Arabia greenfield project excluding working capital is 250 million dirhams. We continue to maintain comfortable liquidity and remain well positioned to meet our financial obligations.

Now we will move to slide 19. Over the past 12 months, the company's share price has remained stable.

The stock is currently trading at a P/E multiple of 10.2 times, reflecting investors' confidence and long-term value. The board proposed to distribute an interim cash dividend of 10 fils per share, representing 99 million dirhams, to be paid to shareholders.

The current dividend policy as approved by the shareholders is to pay a minimum dividend payout of 20 fils per share for the financial year 2026 to be paid on a semi-annual basis. This concludes the overview of financial performance for the quarter.

Now I will hand back the call to Mr. Abdallah for his closing remarks, including our priorities for the coming quarters of 2026, before we open for questions.

Thank you, P.K. As we look ahead, our priorities remain clear: strengthening market leadership, enhancing profitability, and creating long-term value for shareholders.

We continue to see opportunities to expand our presence across our core market, supported by our strong brand, product quality, and manufacturing capability. We remain focused on operational excellence, accelerating Kludi transformation into a globally recognized premium faucets brand, and investing in growth through retail expansion, digital transformation, and sustainability initiatives, while remaining disciplined capital allocation and a strong balance sheet.

We are also strengthening our position in the premium and luxury segments through our international design hubs in key design capitals, including London, Frankfurt, Dubai, and Milano, alongside strategic designer collaboration. Building on the success of our Elie Saab partnership, the launch of the Roberto Cavalli collaboration further enhances our multi-brand luxury offerings and reinforces our appeal to architects, designers, and discerning customer globally.

As we move forward, we remain focused on capturing growth opportunities across our regional market, while continuing to support customers internationally. We are closely monitoring the evolving geopolitical environment and responding with agility through local sourcing, alternative logistic routes, and operational flexibility.

Together with our regional manufacturing footprint, these actions positions us to maintain reliable supply and navigate uncertainty with confidence. Thank you for your continued trust and support.

We look forward to updating you on our progress in the quarters ahead. I will now hand over the call back to operators.

Thank you, Carla. Thank you, Abdallah and P.K.

Chand, for the presentation. What you did in the UAE was really impressive, the higher sales, the higher margins.

If we wanted to understand this, was it because of the lower imports into the UAE that vacated some market share for you? Or was it a strategy that you are adopting, and these levels will maintain even after things settle down?

Mohamad, thank you for the question. Honestly speaking, we in the UAE we have, 11 showrooms and we have a design hub.

We appointed a specification team. We have a strong project team and retail and wholesale.

For sure with what happened put a lot of pressure on us on exporting and really it was tough for us. Some containers in the beginning we were forced to pay more than $13, $14,000 per container.

We put all our effort to sell locally because it is not viable for us to sell or to support the sales with the higher transportation cost. No doubt that also the difficulties of importing goods also supported us.

Together with our, focus, pressure, as well as all the contractors which they don't want the project to delay neither by paying extra cost, because also importing is becoming very costly and the containers were scattered everywhere, and the uncertainty also drove them, to to work with us. Now it is very difficult to say this will continue or not because already we have built a good repo.

We supported. We absorbed some of the costs.

We did not pass it to the contractors. Whoever was not working for us for any reason, now we are working, he's happy, we are delivering, we are reliable supplier.

It's very difficult to say that this will continue or will not continue. Probably part will not, part yes, mostly will be there.

It's something where we're doing our best in order to maintain it for the long term, the positioning of the market share we have.

That's very clear, Abdallah. One follow-up.

Have you adopted any change in the pricing strategy during this conflict? Because the margins doesn't show any price discounts, whereas costs are going up, not specifically, for RAK Ceramics, across the board.

We're seeing higher insurance costs, higher war premiums, but we can't really see it in your margins. Is it there and UAE is offsetting it, or was it the case?

You pushed where it is. Actually, we by selling directly to projects and by selling directly to customer, we have a higher margin than selling in export market.

By lowering the export sales, yes, the cost increased, but selling more, we sold almost 40% more to the projects. I believe in the UAE we are 26% overall increase in revenue.

The increase of cost get offsetted by the increase in sales in a direct B2C, which we are doing directly. Now, what we did, we could have even increased our prices, but to be honest, we took a stand that we will not increase the prices for the UAE projects, to gain more market share and to also show to, not the community we say, but to see that we are supporting and we have enough margin to cover it.

Thanks a lot, Abdallah, and congrats again.

Thank you.

Thank you, management, for organizing the call. This is Khaled Al-Odan from SNB Capital.

Just a quick question on Saudi. We know that your local competition is trying to uplift their brand.

How do you think about the competition in Saudi, and given the new facility in Yanbu, how are we foreseeing this heightened competition stance?

Yes, thank you for the question. As Saudi today is a different than Saudi, I don't want to say 5 years back, yeah?

It was like that the demand is much higher than the capacity. Today, with the installed capacity in Saudi is even more than the demand in Saudi.

Therefore, you have two direction, and this is where we facing and we faced it during our journey as RAK Ceramics. When the supply will be more than the demand, prices will go down and depends if you position your product as a commodity or as a premium.

Therefore, as a competition is very tough in Saudi. The prices decreased a lot, especially with the foreign groups producing cheap and selling cheap, even affected, I believe, the whole local factories in Saudi.

For us, we look at it differently. We are a branded product.

We work on differentiation, on quality, on and that's why even in our factory in Yanbu, we are the first company in Saudi which we are investing in the biggest press with the Continua. There is no we're coming with a different technology, not focusing on having the lowest costs, but having the differentiated products where we can balance between a good cost and a differentiated product.

It is a tough market, but we will do whatever possible in order to cater to the premium and differentiated projects.

Clear. Just follow-on following question on this point.

We know that the local competition, the largest market share, Saudi Ceramics, is trying to uplift the brand and try to compete with RAK Ceramics rather than the foreign local players. How can we see the competition in a year or two, given that this large local player is trying to gain market share from us?

Look, if you look at us today, and this what I mentioned, we already having our design center in Dubai, in design hub in Dubai, in London, in Milano, in Frankfurt, now we're doing in India, we are also doing one in Saudi Arabia, working as a global specification. We supplied to airports, hotels, wherever you go today traveling, if you turn a plate, you will see RAK Porcelain definitely in any of the travel, including Saudi airlines or now lately we won also Delta Airlines worldwide.

What I can say is, it's established brand internationally seen, and already tested with reliability, plus our expertise and, design diversification, collaboration with Elie Saab, with Roberto Cavalli now. All of this gives us, enough tools for us to be positioned as a premium.

Then competition is always healthy, yeah? Whenever they we're very happy that brands are uplifting.

It's good to compete with others, then whoever works better, the result will be in his favor.

Clear. Thank you.

We're confident about maintaining our market share and hopefully growing it. All I'm

absolutely right. Also what I didn't This is in tiles.

In sanitaryware, we are seeing a big hike in our sanitaryware and faucets, Kludi branded. We acquired I believe 4, 5 years back the Kludi brand, which it's established since 100 years, and with our expertise in sanitaryware, we launched the Kludi under sanitaryware under Kludi brand.

Today, we are very, very, very happy to see many, many hotels and highest end branded developers are using Kludi. This will support us, as I said, with our multi-brand strategy and the diversification with a full solution provider.

We are confident that we will be able to get our market share.

If you want I will take the whole installed capacity, between all the factories, if we take the we are around about 60% of the installed capacity. Again, here it's not accurate because what we are producing is a high-end and high large sizes.

By number of square meter is 61. If I take it, it will go up to 80% capacity utilization if we take into consideration the kind of product which we are producing.

Look, we are seeing, and yesterday was an announcement of the Wynn project to be finished or opened in September 2027. The good question is very clear.

We have a lot of projects coming in. We are supplying to the majority, I believe, if we took the outlet of Wynn, probably most of the tableware used inside hopefully will be our RAK Porcelain products.

In tiles, we are supplying and we are actively following and actively working on all projects, not only in Ras Al Khaimah and the UAE, but on the region.

Look, for us till now, we already

100 million we have spent.

As a till now, we did not see any increase in cost. The construction started and contracts has been signed.

Till now, I don't know if any increase here and there in freight, but no more.

All of this, I wish we have we can predict. We are living day by day, week by week.

For us, this is a target which we have it in front of us. In my opinion, I don't see any fluctuation in our margin with the way we are handling, working, the whole team on monitoring well.

I believe our margin will be sustained, and we are all positive that things will ease and things will be normalized.

Look, we are doing, as you said, in India we got also BCG supporting us in the transformation. We are now, we did not say, but we are also working on opening our design center.

We have put up all key account management, strengthening the sales team, renovating and updating our capacity. We saw I believe if you look at the market in term of revenue where we grew actually more than the average of what the Indian market had revenue.

I believe by this half of second half will be a better second half for us, and looking forward, we are on looking to improve further in India.

You have it, P.K.?

In

India.

In India, tiles was 70%. The sanitaryware we didn't operate.

It's a 70% capacity utilization in India. Yeah.

We do not give any you are saying about the utilization? Tax rate.

It will be around this what has been the effective tax rate for the first half. Percentage-wise, it should be almost same.

I believe we already answered this questions, and again, it's mainly the growth in the UAE, Saudi, and Bangladesh. In UAE in specific, for sure the projects are continuing.

We did not see, at least around us or wherever we go, we saw that projects are continuing, and for sure the imported material was difficult or uncertain, and we were well positioned with our product availability and our securing our raw material, were able to produce and supply.

It will not a matter of decrease, but for sure it will be produced locally and supply. The whole idea was to over take means the fluctuation in transportation, and the local supply will give advantage to the Saudi market.

Look, honestly, maybe somebody has or his research can give more. For us, we are seeing all the project which started are in progress, and therefore everything depends on how the situation will develop and how the conflict will be cleared for a long-term view.

From our side, focusing on our business, following our approach to this project, we see there's a continuation of the project which started.

Okay. Look, tableware business is related for us we sell in local market, means in the UAE, and we export worldwide again, yeah?

The outlook is very good, as you mentioned, we already won Delta Airline contract. We are supplying worldwide.

Yes, the supply or if we look at the region, not only the UAE, in term of hospitality business is down, and for the time being. Now we are in summer.

We are all hopeful after summer things will improve, and therefore the impact on the business should recover faster. In term of margin, it is marginal because also we are paying higher raw material costs and even freight and to deliver our material, especially our biggest market is Europe, and the transportation to Europe as well as the import got impacted.

This is a short term where we have a very healthy and a big opportunity going forward.

Thank you, Mohamad. Thank you, everyone.

Thank you, everyone.