EFG Hermes One on One Conference PresentationMarch 6-8th 2017
Disclaimer
This information contained in the enclosed presentation summarizes preliminary and introductory information on RAK CeramicsPSC (the Company). This presentation has been prepared for information purposes only and is not and does not form part of orconstitute any prospectus, offering memorandum or offering circular or offer for sale or solicitation of any offer to subscribe foror purchase or sell any securities nor shall it or any part of it form the basis of or be relied on in connection with any creditevaluation or third party evaluation of any securities or any offerings or contract or commitment whatsoever.
The information contained herein has been prepared by the Company. Some of the information relied on by the Company isobtained from sources believed to be reliable but does not guarantee its accuracy or completeness. All potential recipients of theenclosed presentation are expected to be aware that the information contained herein is preliminary as of the date hereof,supersedes any previous such information delivered and will be superseded by any such information subsequently delivered. Theinformation contained herein is subject to change without notice. The Company is under no obligation to update or keep currentthe information contained herein. No person shall have any right of action (except in case of fraud) against the Company or anyother person in relation to the accuracy or completeness of the information contained herein.
Some of the information in this presentation may contain projections or other forward-looking statements regarding futureevents or the future financial performance of The Company. These forward-looking statements include all matters that are nothistorical facts. The inclusion of such forward-looking information shall not be regarded as a representation by the Company orany other person that the objectives or plans of the Company will be achieved. Future events are subject to various risks whichcannot be accurately predicted, forecasted or assessed. No assurance can be given that future events will occur or that thecompany’s assumptions are correct. Actual results may differ materially from those projected and past performance is notindicative of future results. The Company undertakes no obligation to publicly update or publicly revise any forward-lookingstatement, whether as a result of new information, future events or otherwise. Accordingly all potential recipients are expectedto conduct their own due diligence on the information provided.
These materials are confidential and are being submitted to selected recipients only for the purpose described above. They maynot be taken away, reproduced (in whole or in part), distributed or transmitted to any other person without the prior writtenconsent of the Company. These materials are not intended for distribution to, or use by any person or entity in any jurisdiction orcountry where such distribution or use would be contrary to local law or regulation and must not be acted on or relied on bypersons who are not relevant persons. If this presentation has been received in error it must be returned immediately to theCompany.
2
2016 Financial Review
3
2016 Financial Highlights
Group Revenue• 2016 AED2.8bn, -9.3% YoY• Core Revenue -6.1% YoY• Non Core Revenue -26.1%
YoY
Gross Margins• Csldtd. 30.5%, +230bps
YoY• Core 30.5% +120bps YoY• Non core 30.3% +770bps
YoY
EBITDA• AED485.7mn, -18.2% YoY• EBITDA margin 17.4% -
190bps YoY
Like for Like Net profit
• AED216mn vs.343mn, -37.1% YoY
Total Provisions
• AED185mn vs 53 mn taken during the year for inventory, receivables and others
Reported Net Profit
• AED31mn, -90.1% YoY
CAPEX
• Continued investment of AED 215 vs AED 267 mnYoY
Working capital
• Reduced AED 173 mn at 1.68 bn (234 days) vs 1.86 bn (228 days) in Dec’15
Gearing
• Net debt +3.0% YoY at 1.66 bn.
• Net Debt to EBITDA ratio at 3.42x vs 2.71x end 2015
4
5
2016 Revenue Breakdown
Focus Markets – Quarterly Sales Trends
111 118 112 120 122 122 118129 131
114 115
34 29 29 33 36 34 34 33 35 32 40
Q2-
2014
Q3-
2014
Q4-
2014
Q1-
2015
Q2-
2015
Q3-2
015
Q4-
2015
Q1-
2016
Q2-
2016
Q3-2
016
Q4-
2016AED
MIL
LIO
NS
UAE
Tiles SW
3732 36 35 36
3241
36 36 36
50
23 22 22 22 2520
25 25 27 2328
Q2-
2014
Q3-
2014
Q4-
2014
Q1-
2015
Q2-
2015
Q3-2
015
Q4-
2015
Q1-
2016
Q2-
2016
Q3-2
016
Q4-
2016
AED
MIL
LIO
NS
Bangladesh
Tiles SW
101 105116
94 94 9483 76 68 68 58
10 10 10 6 8 7 6 5 6 5 5
Q2-
2014
Q3-
2014
Q4-
2014
Q1-
2015
Q2-
2015
Q3-2
015
Q4-
2015
Q1-
2016
Q2-
2016
Q3-2
016
Q4-
2016AED
MIL
LIO
NS
India
Tiles SW
88 8770
85 89115
82 77 7440 256 8 8 8 10 8 4 7 7 3 3
Q2-
2014
Q3-
2014
Q4-
2014
Q1-
2015
Q2-
2015
Q3-2
015
Q4-
2015
Q1-
2016
Q2-
2016
Q3-2
016
Q4-
2016AED
MIL
LIO
NS
Saudi Arabia
Tiles SW
6
7
Provisions Breakdown
UAE
Inventories, 49.8,
40%
UAE
Receivables, 6.2,
5%
Saudi
JVs, 17.3, 14%
Germany,
6.1, 5%
Lebanon,
2.5, 2%
Iran,
24.4, 20%
Iraq,
2.6, 2%
Non Core,
11.8, 9%
Other,
3.2, 3%
Extraordinary Breakdown
by Geography
Items Amount –AED Mns
In COGS
Provision for slow moving or obsolete inventory
70.7
Write Off of Inventories 18.0
In G&A
Provision for impairment loss on trade receivables / amounts due from related parties
61.7
Impairment charge on goodwill 12.9
In Share in Results of Equity Accounted Investees
Provision for impairment in shares in results
21.7
Total 185.0
Of Which is Extraordinary 132.0
2016 Operating Review
8
2016 Operational Highlights
Capacity Expansions in Growth Segments• 20% increase in SW Capacity in UAE
• 42% increase in Tile Capacity in Bangladesh
Raw Material Savings• AED30mn saved in raw materials, packing and shipping.
B’desh & Tableware• B’desh tile GM +240bps through lower COP & product mix
• Tableware growth on new product introductions. US market tapped for growth
Projects and Retail Channels• UAE Project sales team strengthened resulting in sales +6% YoY. Showroom renovations to pay off 2017.
Product Design• Fewer tile collections launched (53 vs 160 in ‘15) to enhance brand image & product positioning. SW collection in process to launch at ISH fair.
Capacity & headcount right sizing• Some production lines halted over H2/16.
• UAE headcount lower to match capacity reduction
Rebranding• Launch across UAE, Europe, India and Australia. Common look and feel to enhance brand perception
Integration of European Distribution • Sales teams reorganized• New Frankfurt showroom and office
• Italy as main distribution hub
UAE Tile Production Mix Revamp
• One Ceramic plant converted to GP in Q3. Ceramic/GP production mix now 63/37 from 74/26 at end Q3/16.
9
2016 Operational Lowlights
10
Sanitaryware Margins
GM fell from 43.5% to 41.3% due to declining ASP & change in product mix
Italian logistics shift
Poor execution of shift to Italy as main distribution hub led to lost sales and reputational hit in Q3/16
Delay in sale of Non Core assets
Warehouse Leasing, Electro RAK & Acacia Hotel. Electro RAK sale concluded in Jan ’17 for AED45mn
Iran
Delays in Govt clearances, poor project planning, delays in installing machinery and building up management team
Inventory Mgmt
26mn SQM of tile inventory at year end in UAE, 32.2 mntotal vs 28.4mn sqm
Relative Gas Costs
UAE gas costs higher by 7.7 mn YoY as mix of Dolphin supply increased to 53% vs.47%. Spread we pay vs. gas in Europe is near record
Continued poor performance of India
Loss after tax in 2016 AED 3.4 mn vs. profit after tax 2.3 mn YoY
IT
Delay in SAP enhancements
Implementation issues in Bangladesh & Italy
Reduced sales volume
Tiles volume was low at 77 mn vs 86 mn sqm
KSA revenue -41.0% YoY.
2017 Outlook
11
2017 Group Initiatives and Outlook
12
UAE local market• Grow market share, pursue project channel penetration and grow retail channel. Flagship showroom in Dubai in planning stage.
India• Morbi JV expected 2017 • Strategic tie up under discussions
• Planning projects team as additional sales channel
Iran• Ramp up production near 65% capacity and develop regional sales.
• New integrated ERP
Product Differentiation• Further enhance tile product range, launch new strategic
• SW collection and build on Tableware success with new products and cutlery
Branding• Rolling out branding to Bangladesh and KSA.
• Continue investing in Brand image in UAE & India
Supply Chain Mgmt
• Restructure current setup with clear responsibilities to improve operational efficiency & improve working capital
Cost efficiencies• Energy (Co Generation)• Productivity initiatives• Overhead cost control
Dealers• Strengthen the vertical• Increase sales/marketing support
• Attract new customers• Re-evaluate KSA setup
Acquisitions
• GCC & Europe on opportunistic basis
Appendix
2011-2016 Financial Highlights
13
Revenue Growth and Composition
3,3383,168
3,5153,125 3,079
2,793
2011 2012 2013 2014 2015 2016
AED
Millions
Total Revenues
2,723 2,766 2,792 2,5072,092 1,929
381 395 427451
449 492
0 00
35 146
233 7296
296422
197
2011 2012 2013 2014 2015 2016
AED
Millions
Revenue by Segment
Tiles Sanitaryware Porcelain Others
SW 5-Yr CAGR +5.2%
Tiles ,
67%Sanitary
Ware ,
14%
Tableware
, 5%
Other
Revenues
and
eliminatio
ns, 14%
2016 Revenue by Segment
UAE,
28.0%
Europe,
17.8%India,
13.0%
Banglades
h, 11.6%
Saudi
Arabia,
10.5%
All Others,
19.1%
2016 Tile & SW Revenues by Country
5 Yr CAGR -3.5%
14
Tiles 5-Yr CAGR -6.7%
Performance by Segment
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
UAE Bangladesh India
AED
MIL
LIO
NS
Tile Revenues by Location
2011 2012 2013 2014 2015 2016
5 Yr CAGR +1.3%
5 Yr CAGR -1.7%
0
50
100
150
200
250
300
350
400
RAK Ceramics
UAE
Bangladesh IndiaAED
MIL
LIO
NS
SW Revenues by Location
2011 2012 2013 2014 2015 2016
5 Yr CAGR +4.7%
5 Yr CAGR +10.4%
5 Yr CAGR -3.3%
15
5 Yr CAGR -4.5%
Figures above based on gross revenues before eliminations Figures above based on gross revenues before eliminations
Gross Margins by Location
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
Tile - UAE Tile - Bangladesh Tile - India
Tile Gross Margins by Location
2011 2012 2013 2014 2015 2016
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
SW - UAE SW - Bangladesh SW - India
SW Gross Margins by Location
2011 2012 2013 2014 2015 2016
16
Figures above based on gross revenues before eliminations Figures above based on gross revenues before eliminations
Gross Margins by Product
53.8% 54.8% 54.7% 57.0% 53.8% 54.2%
22.0% 21.8% 20.4%22.1%
22.5% 21.5%
7.8% 7.8% 10.2%8.2%
9.4% 9.8%
5.9% 6.0% 5.7% 4.9% 6.4% 6.4%7.3% 4.1% 4.5%
6.5% 6.0% 5.7%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
2011 2012 2013 2014 2015 2016
Tile COGS Breakdown
Materials Energy/Fuel/Utilities
Labour Repairs & maintenance
Depreciation
46.5% 47.6% 49.5%57.3%
51.6% 55.2%
19.8% 19.8%23.6%
23.0%25.1% 21.5%
12.6% 12.1%
11.5%
14.1%13.5% 11.9%4.1%
11.0%6.2%
3.7%7.4%
4.7%
5.6%
3.6% 3.9%
3.5% 4.3%5.7%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
2011 2012 2013 2014 2015 2016
Sanitaryware COGS Breakdown
Materials Labor
Energy, fuel & utility Repairs & maintenance
Depreciation
17
Figures above based on gross COGS before eliminations Figures above based on gross COGS before eliminations
Historical Returns
3.8%4.1%
5.0% 4.8%5.2%
0.5%
2011 2012 2013 2014 2015 2016
ROA
10.0% 10.0%11.1%
9.9% 10.4%
1.1%
2011 2012 2013 2014 2015 2016
ROE
4.4% 4.0%
7.6% 8.0%7.3%
2.4%
2011 2012 2013 2014 2015 2016
ROIC
18
EBITDA and Net Margins
714.8
476.4
567.4584.4 594.2
485.8
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
0
100
200
300
400
500
600
700
800
2011 2012 2013 2014 2015 2016
AED
MIL
LIO
NS
EBITDA and EBITDA Margin
EBITDA EBITDA margin
222.4 224.0
272.3281.7
310.4
30.8
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
0
50
100
150
200
250
300
350
2011 2012 2013 2014 2015 2016
AED
MIL
LIO
NS
Net Income and Net Margin
Net Income Net Margin
19
Gearing and Working Capital
118
108
93
104107
110
60 59 6065
74
9293
69 68
49
70 69
0
20
40
60
80
100
120
140
2011 2012 2013 2014 2015 2016
Days O
uts
tandin
g
Working Capital Days
Trade Receivables Days Finished Goods Days
Trade Payables Days
1,827
1,474
1,325
1,411
1,6101,660
0.0x
0.5x
1.0x
1.5x
2.0x
2.5x
3.0x
3.5x
4.0x
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2011 2012 2013 2014 2015 2016
MU
LTIP
LE
AED
MIL
LIO
NS
Gearing
Net Debt (LHS) Net Debt to EBITDA (RHS)
20