Aamal Company Q.P.S.C. (AHCS) Earnings Call Transcript & Summary

Hello, everyone. This is Laura from the Corporate Communications team of Aamal Company. I hope everyone is doing well today. I want to welcome you all to Aamal Company's 2023 Year-End Financial Results Investors Call. On this call, we have Mr. Mohammad Arif, the Accounts Manager; and Mr. Zaid Shelleh, the Investor Relations Manager at Aamal Company. We will conduct this call with first, Mr. Zaid presenting the company's results on behalf of the management followed by a questions-and-answer session answered by Arif. Mr. Zaid, please proceed.

Good afternoon, everyone, and welcome to this presentation of Aamal Company's results for the full year ended 31 December 2023. My name is Zaid Shelleh, Investor Relations Manager at Aamal, and I will be leading today's presentation alongside Mr. Mohammad Arif, Aamal's Accounts Manager. Today's presentation -- after the presentation, we will both be available to answer any questions that you may have. Accompanying in this call is a short presentation available for viewing and download from Aamal website. I will begin by summarizing the highlights of our performance for 2023 as set out in Slide 2 of this presentation. Despite facing various challenges throughout 2023, we have delivered robust overall performance marked by marginal year-on-year increase in revenue and an impressive 4.7% rise in total net profit. Notably, our Trading and Distribution segment and our Property segment, both delivered exceptional performances in driving our success. Despite the challenging environment in the Industrial Manufacturing, our businesses within the segment showcased commendable resilience. They implemented cost optimization initiatives, enhanced production facilities, expanded product portfolio, explored new markets and secured projects with major clients. Similarly, our Managed Services segment exhibited a good resilience, notwithstanding a decline in revenue and net profit as FIFA-related contracts came to an end. Throughout 2023, we pursued strategic initiatives to overcome challenges and ensure sustained long-term goal. We expanded our product portfolios, ventured into new markets in the Middle East region and successfully secured new projects and contracts. For instance, Elsewedy Cables secured 30-month project for Qatar General Electricity & Water Corporation (KAHRAMAA) while Maintenance and Management Solutions won major contract with leading real estate company. Our commitment to ESG remains unwavering. We are dedicated to actively contributing to the realization of the Qatar National Vision 2030, particularly focusing on human developing and community development through coalition with various public institutions. For example, we are very delighted with the success of Aamal Ride organized in cooperation with the Qatar Cycling and Triathlon Federation to encourage community participation in sport activities. As we move forward, we will continue to focus on innovative ways to add value to our communities and integrating sustainable business practices into our operations. Turning to Slide 4 and our 2023 financial highlights. Despite the challenges posed by evolving market dynamics, we are pleased to note that revenue increased by 0.9% with net profit up by solid 4.7%. In response to its challenging market conditions through 2023, we've optimized capital expenditures across all segments. This includes a reduction in CapEx, particularly notable in industrial manufacturing segment. This is due to the fact that major retail works for our vessels will fall in next year 2025. Furthermore, we are pleased to report that significant renovation works in our property segments are now largely complete. These enhancements have not only improved the quality of our properties, but have also positioned us well for future growth opportunities. Our balance sheet remained robust with low gearing at 2.4%, broadly flat year-on-year reflecting prudent financial management and solid financial position. Looking ahead, the Board is currently evaluating exceptionally attractive and significant set of investment opportunities including ventures in new sectors aimed to generating additional revenue streams. Consequently, rather than paying dividends for 2023, the Board of Directors intends to recommend to the General Assembly on 12 March 2024, to retain the profits from 2023. This capital allocation decision is very much in line with the Board's overarching strategy of creating long-term added value for our shareholders through sustainable growth and strategic diversification. Turning now to each of our segments. In our Industrial Manufacturing segment, 2023 presented notable challenges primarily due to slowdown in construction industry and reduction in shipping rates. This resulted in 23.9% decline in revenues and 32.3% decrease in net profit. Nevertheless, we are pleased to highlight the proactive measures taken by all businesses to navigate these challenges and secure projects for 2024. Aamal Readymix implemented cost optimization initiatives and secured contracts for significant projects with key clients. Additionally, plans are underway for it to establish production facility in Saudi Arabia in 2024, aligning with the regions anticipated with major projects. Despite facing market volatility and the increased competition, Aamal Cement Industries strategically expanded its product portfolio, introduced innovative products and enhanced production capabilities. Meanwhile, Advanced Pipes & Cast Company successfully navigated the slowdown by expanding its export business with the company now registered in Bahrain and approval secured in Iraq for the same. In addition, we remain cognizant for the promising outlook for 2024, which is highlighted by a new tenders announced by Ashghal. Aamal Maritime Transportation Service faced challenges due to reduce charter rates for older vessels. Efforts are underway to modernize the vessels lineup and negotiate favorable charter rates for upgraded vessels. In 2023, Doha Cables experienced a significant surge in export sales, up 155% year-on-year. The successful completion of the 1,600-megawatt Al Kharasaa Solar PV project led to the award of 2 new solar projects in Ras Laffan and Mesaieed Industrial Cities, which are expected to conclude in early 2024. To meet rising demand in the transmission and distribution sector and enhance manufacturing capabilities, Doha Cables will introduce new CCV line machinery at the factory in Mesaieed Industrial Cities. Furthermore, in 2023, we were very pleased to establish Aamal Energy, which will focus on potential investment opportunities within the energy sector. Despite the challenges, the outlook for the industrial manufacturing segment is encouraging with optimism for recovery in construction industry in 2024. Turning to Slide 7. The Trading and Distribution delivered impressive results, reporting revenues of about QAR 1.32 billion, a significant 12.5% increase from 2022. This significant growth was primarily driven by the higher sales in Ebn Sina Medical resulting in net profit increase of 17.9% to about QAR 130 million. The positive performance of Ebn Sina Medical stems from increased demand from hospitals and private clinics. Throughout that period, Ebn Sina Medical secured numerous supply and distribution agreements and 34 new drug applications were approved across range of medicine and customer health products. Looking ahead, the company anticipates challenges, but plans to expand through the opening of new private hospital and polyclinics, launching new products and acquiring business in therapeutic areas such as oncology and grave diseases. Aamal trading strategic initiatives include the introduction of 2 new tire brands along with the expansion of the company's tire portfolio. Additionally, significant contracts were signed with fleets and retail chains, particularly for the supply of Bridgestone Tires and fully refurbished their showroom and fully refurbished showroom was opened in Salwa Road to enhance customer experience. During the year, Ebn Sina Pharmacy expanded its footprint by opening 2 new branches in Lusail City and Souk Al Baladi in Lusail, increasing the total number of pharmacies to 6. Lastly, we are very pleased to have launched Aamal Information Technology in 2023 specializing in trading computer network equipment, web development, IT consulting, software trading and programming. We are optimistic about the continued success of this venture through 2024. Moving to Slide 8 and the performance of our Property segment. Aamal Property segment delivered robust results in 2023, reporting revenues of about QAR 318 million, a 5.7% year-on-year increase. Net profit up 14.3% to about QAR 256 million. City Center Doha play a pivotal role in success, experienced substantial revenue growth driven by regular retail uplift and the signing of new leases post renovation. Notably, the mall welcomed 40 new shops contributing to an increase in visitor numbers of over 12% despite the challenges such as oversupply of retail space and dip in population followed the world cup. City Center Doha aims to further expand the appeal -- its appeal in 2024 by attracting new retailers, especially in fashion and electronics, alongside premium brands. Plans also include new metro connection and refurbishing the existing car park to enrich the overall visitor experience. Similarly, Aamal Real Estate made significant contributions to the above-noted performance of the Property segment, driving both revenue and net profit growth. The segment achieved occupancy rates of over 90% across various locations. Major lease contracts were signed for location at Bin Mahmoud, Al Nasr City and Madina Khalifa. Turning to Slide 9 and our final segment, Managed Services. Aamal Managed Services segment saw 11.5% and 28.4% decline in revenue and net profit, respectively, primarily due to the completion of FIFA-related services contracts. However, this was partially mitigated by the positive impact of Maintenance and Management Solutions, a recent addition to the segment. Aamal Services, a key player in the segment, experienced a downturn in the performance despite securing 4 new contract wins and diversified services offering early in the year. Notably, the acquisition of Maintenance and Management Solutions, MMS, in September 2023, plastered Aamal Services' position as a facility management company. MMS secured a significant contract with a leading real estate developer, enabling Aamal services to provide comprehensive facility management services covering accommodations, buildings, compounds, shopping malls and more. This is all under 1 management team. Despite the challenges posed by the new market entrants, Aamal Services remains optimistic with several 3- and 5-year client contracts already secured. Aamal Travel continued to benefit from the post-pandemic recovery in travel and tourism striving to return to pre-COVID performance levels. Lastly, the Family Entertainment Center remains committed to customer satisfaction by introducing new attraction rides and video games, enhancing its financial performance for the year. To summarize, Aamal is pleased to have delivered solid set of results for 2023, exemplifying the group's adeptness in navigating challenges across diverse markets and sectors. Our resilience and strategic agility have positioned us well to seize opportunities in 2024 and beyond. Aligned with our diversified approach, we are actively pursuing opportunities in energy, IT and logistics areas where we foresee immense potential for growth and value creation. At the same time, we remain committed to investing in operational efficiency in our people, the cornerstone of our success. The economic landscape of Qatar pointed to [ role ] for robust growth in coming years in line with the 2030 Qatar National Vision. With optimism for recovery in the construction industry in 2024, we see tremendous opportunities in the horizon. Aamal's robust business model and financial strength put us in strong position to support Qatar's growth agenda, benefiting all our stakeholders and generating enduring value for our shareholders. As we embark on the journey, we remain steadfast in our commitment for excellence and innovation. This concludes our presentation. Mr. Mohammad Arif and I now kindly welcome any questions you may have.

Thank you, Mr. Zaid. Thank you, everyone. [Operator Instructions]

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Thank you Mr. Abdul for your question. Thank you Mr. Zaid. If anyone has any other questions, please let me know. [Operator Instructions] Okay. Mr. Zohaib, please go ahead.

I've got a couple of questions. Firstly, I'll start off with the dividend question. As I understand you mentioned in your presentation, you started off that you had a very resilient performance on the bottom line, profitability, revenues. We can clearly see they were resilient. And your balance sheet is strong, next to a negligible dividend -- sorry, debt. And then you also mentioned that CapEx is going to be limited in this year. So what was the rationale or what was the management's thought process for not declaring any dividend? That's my first question. The second question is on the opportunities you mentioned. There are a number of opportunities you're looking at. Could you give us some idea of what these opportunities are and what kind of CapEx requirements will be -- is required for these kind of new investment opportunities?

Thank you, Zohaib for the questions. First of all, let me say, the dividend, the management and the Board has decided to retain the profits for the year 2023 in view of that there are some, we have new upcoming investment opportunity that they are in review of that. So as you said in the beginning of -- the end of the last year, we acquired MMS. Now going forward, we are having a plan to go into the energy sector also, which is we formed a company with the name of Aamal Energy. Furthermore, we have formed a company with the name of Aamal Information and Technology. We are about to do some trading of the IT equipments plus the development plus software with some services, so this is another one. Furthermore, in addition to this, we are having a plan to -- as we have mentioned that we are going towards some of the good projects in the region, which is like on a very big projects we have a plan to -- for Saudi and [indiscernible] we are still going forward for -- looking forward for a good opportunity even in South Africa for the infrastructure projects. There are many projects that are there, which management has in line. So this is a major reason why the dividend was not -- as far I think that it is not being announced because they have their investments plans out there. Due to that reason and it will be definitely serving the interest of the shareholders. This will be your first question. Then you had a second question. As I mentioned to you regarding the opportunities, these are the opportunities, which I have mentioned that we are looking forward for further more like going to Saudi Arab, going to South Africa as well as -- investment inside the Aamal Energy will be a good investment size. When I say if we move around to Saudi Arab itself, if I say it's 1 plant, 1 plant with the capacity of -- normal capacity, if I say, for like example, 150,000 tonnes, so we are talking about an investment of QAR 100 million. So this -- it is a huge investment. So the strategic decision has been taken by the Board. So due to this reason, there was no dividend was announced.

So I'm sorry, which opportunity are you talking about in Saudi Arabia? Are you opening a cement plant there?

Possibly and we're looking for strategic tie-ups for the cement projects.

For cement projects?

Yes.

But cement segment is not doing well in Saudi Arabia. For the last 2, 3 years, the cement segment is falling, prices are crashing. So why would you go into that segment?

So we have done -- we have -- this is a Readymix project. It's not a cement project, it's a Readymix project. We have [indiscernible] the supply with Readymix over there. So again one minimum big project which is there. So it is due to that for large purpose. And we have done our internal work on this. And we are having some conversations are -- the talks are going on with the local partners over there even. So there is a positive sign there.

Okay. And what kind of -- what would be the investment size you're looking at? Because your balance sheet is...

I said to you, even if we go with the 1 plant, there we have to cater like 150,000 tonnes so that -- if we look forward for 1 plant, if we build so that can suffice -- like 500,000 metric tonnes can be produced from there if the orders are sufficient. So QAR 100 million investment we can talk about.

But I mean, I might be rubbing this on a bit too much, I mean, because the dividend was so strong earlier. The thing is QAR 100 million was nothing for your balance sheet. You were completely delevered. You could have easily leveraged up, in fact, you're probably too much delevered...

No, no. We are not saying -- I just said I gave 1 example. This is 1 investment. But as I'm saying, this is a -- we are looking for an opportunity even inside the energy sector over here, which will require a huge investment for which I don't have full [ parts ] at present here. But it is going to be a huge [ part ] and that is inside the energy sector.

And when can we expect any information on this...

Possibly, you will have it in the first quarter or in maximum by second quarter you will have. We've already formed the company to enable [indiscernible] energy.

And what will be the core job of this energy company? What will it do?

This will provide the services to the energy companies.

To basically, QE, Qatar Energy?

QE. Yes. As well as we are looking forward for like we are even seeing opportunity even in the industry side from there even like which we are for the ship -- as a ship operator marine services. So we are tapping in that market also because [indiscernible] is also increasing stakes in a number of ships. So we are looking forward for that opportunity as well.

Thank you, Mr. Zohaib. Thank you, Arif, for your answer. If there are any further questions, please let me know. All right then, I think there are no further questions. Thank you, everyone, for being here with us today. This concludes today's conference call. You may now disconnect. Thank you.

Thank you, everyone.