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

Hello, everyone. This is Laura Aquel of the Corporate Communications team of Aamal Company. I hope everyone is doing well today. I want to welcome you to the investors call of Aamal's first quarter financial results for the year 2024. On this call, we have Mr. Arif, the Accounts Manager; and Mr. Zaid Shelleh, 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 Q&A session answered by Mr. Arif. Mr. Zaid will be presenting the report in Arabic language first, and then the English report will follow.

[Foreign Language] Good afternoon, everyone, and welcome to this presentation of Aamal company results for the first quarter ended 31 March 2024. My name is Zaid Shelleh, Investor Relations Manager at Aamal, and I will be delivering this presentation along with Aamal's account manager, Mr. Mohammad Arif and we will be both be available to answer your questions in a few minutes' time. Accompanying this call is a short presentation, which can be viewed and downloaded from Aamal website. I will begin by summarizing the highlights of this quarter as set out on Slide 2 of this presentation. I am pleased to report that Aamal has had a solid start to the year with strong performance across all our business segments. This has enabled us to report a 6.2% increase in revenue and 8.2% increase in total net profits for the group as a whole. This performance attests to the Aamal successful navigation of dynamic market conditions, attests to the strength of the group diversified and resilient business model and attest to the strategic focus on capitalizing on new opportunities. The quarter saw increased revenues for our trading and distribution and Managed Services segments due in part to the strong contribution of Ebn Sina Medical and maintenance management solutions, respectively. We also saw reporting improved profitability for industrial manufacturing with positive contributions from across the segments, subsidiaries and solid performance across our property segment due to high occupancy rates. We continue to focus on opportunities, both existing and new sectors and on the continued enhancement of our existing operations. With strong forecasted growth for the Qatari non-oil economy and the new growth avenues associated with the upper National Vision, the outlook for Aamal remains positive. The financial results outlined in Slide 4 further demonstrate Aamal's sustained financial strength and positive start to the year with year-on-year growth reported across our key metrics. Group revenue of QAR 543 million was up by 6.2% year-on-year, driven largely by strong sales across managed services and trading and distribution. Meanwhile, attributable net profit of QAR 94 million was 7.5%, up against the first quarter of 2023, all driven in part by the performance of industrial manufacturing. Gearing also remains low at just 1.22% compared to the 2.7% -- 5%, 7% in quarter 1 2023. Turning now to each of our segments, starting at Slide 6. In the Industrial Manufacturing segment, revenues declined 55.7% year-on-year primarily due to the negative impact of Aamal Cables having recently completed a major contract. Total net profit, however, rose 92.3%, thanks to the positive contribution from across the segment's diversified industrial activities. A set cables, QAR 1.2 billion contract with Kahramaa is particularly noteworthy. While optimism around recovery in the construction industry this year means that the outlook for the industrial manufacturing remain encouraging. Turning to Slide 7. In our training and Distribution segments, revenue increased 22% year-on-year to QAR 396 million, while net profit declined by 18.4% to QAR 28 million, with an associated 3.5 percentage points decrease in net profit margin to 7%. This strong revenue growth was largely driven by the performance of Ebn Sina Medical, which saw seasonable increase in revenue following the diversion of supplier direct sales from Hamad Medical Corporation to Ebn Sina Medical. Aamal Trading recorded an increase in net profit following price increase applied to renewed contract and cost optimization, while Aamal Medical reported a drop in net profit due to slowdown in deliveries and delay in signing service contract renewal. It successfully expanded its product portfolio and entered into strategic partnerships with leading health care suppliers, including Glima and ASCO Healthcare. Looking ahead, we expect to see continued positive performance from this segment as we focus on continuing to develop our health care offering to further capitalize on the significant opportunities across the sector. Moving to Slide 8 and the performance of our Property segment. We are pleased to report stable performance for the period with revenue increasing by 1.3% to QAR 76.1 million and a slight reduction in net profit of 2.5%. The performance of City Center Doha was driven by regular rental uplift and the signing of several new leases during the period, while Aamal Real Estate saw stable occupancy levels. As we're moving through 2024, we expect further strong performance in the segment with exciting new initiatives having been undertaken to maintain City Center as a leading market positioning. This includes the inauguration of the Gold Souq and customer experience focused infrastructure enhancements, such as the direct bridge will shortly link the metro station to the Aamal's second floor. Turning to Slide 9 and our fourth segment, Managed Services. This segment delivered a strong revenue performance with revenue up 72.7% year-on-year, while net profit declined marginally by 6.6% against quarter 1 2023. Revenue drivers include the strong contribution of newly acquired maintenance management solutions, MMS, and the successful winning of new contracts at Aamal Services. At Aamal Travel, the removal of post 2022 FIFA World Cup-related demand unsurprisingly saw a relative decline in performance against the first quarter of last year. Moving through 2024, this segment will continue to focus on seizing new opportunities and on optimizing operations, for example, our plan to invest in updated attractions and rights at family entertainment center. Finally, to summarize at Slide 11, Aamal has seen a solid start to the year, driven by good performance across all 4 segments. The diversity of Aamal business model and the group financial strength continue to support growth opportunities for creation of long-term shareholder value. To support this, we plan to continue diversifying by entering new sectors such as IT, energy and logistics. And we continue to improve operations, efficiencies through investment in our people and technologies. The outlook for Aamal for the remainder of 2024 is positive, and we look forward to capitalizing on Qatar's strong growth forecast for 2024 and 2025, and all significant growth opportunities offered to us by the Qatar National Vision 2030. This concludes our presentation, and we now welcome any questions you may have.

Thank you, Mr. Zaid. Thank you, everyone, for listening. [Operator Instructions] Yes, Zohaib, can we please have your questions?

I've got a few questions. Firstly, could you give us more insight into what happened in the industrial segment? I mean, the revenues half was -- you were making a little loss and property seems the contract that just concluded was a loss looking contract. Is my understanding correct? The second question is regarding the same segment. You mentioned that the new contract with by Kahramaa. Has it already started, or by when do you think you will start that? The other question is on trading. Again, it's a reverse of what we saw in the investor and in the profits are up. The revenues are very strongly, but the profits have declined. So why do you think that has been the case here. Those are my 3 questions. So the last question is basically regarding trading and distribution segment. The revenues have again increased very strongly, 22%, while the profits are lower. So could you tell us why that has been the case? Is there a one-off? Or this is like there's -- you've gone into a new business which is lower profitability. Just a fair idea on that.

Okay. Yes. Let me start with your first question which was related with the industrial segment, where you have asked, the revenue drop is there, but we are seeing the positivity. Yes, the revenue, the impact because of one of its contract, which was there for Aamal Cable. Last year, we had 71 million coming from Aamal Cable, and this order has come to an end during the Q3 and 2023. So it was one of the accounting part, which was there. So this order has not been repeated and when it is coming, it is directly coming to Doha Cable, not under the name of Aamal Cable. And regarding the good performance has happened, which is in Aamal Readymix, we have done -- the turnover is just 1.5x what was there the last year. So there's a 50% growth there in the turnover of Aamal Readymix. So we are getting the positive side Aamal Readymix has reported. Similarly in Aamal Cement, also there is a good -- the revenue is more or less same, but it has turned out to be -- the losses which we made was coming to positive side. Moreover, there's a good contribution came from the cable side from the Senyar group. So the profit has gone up by last year, what we made. So there is a growth of 10% in that profit, plus there is a France steel construction, they also reported positively. There's a good growth from there. That's why you see positive numbers coming to the profits in the Industrial segment. Coming to your next question regarding this Kahramaa. Yes, it is a new contract that we have won of QAR 1.2 billion. This is -- the previous in Q4, what we won was related with a high-voltage cable. This is the new order that we have received with the low voltage cable. And now we started delivering also. So there will be a delivery plan. But I cannot tell you that term now that how much is the total spread. But usually, we are getting for the maximum is 2 years to 2 to 3 years. This is the usual stat. So this QAR 1.2 billion is in this nearly around about 90%, I can say related to the low voltage cables. So the supplier will be there. So we will start doing the deliveries from now onwards only. Coming to your third question, which was related with the trading and distribution. While even though in part of the revenue growth, but we are not seeing in the profit. There is a change in strategy of what we are working in the event snare because of the change in business model. Now all the orders, which we see in Ebn Sina with the less margins, but HMC is putting orders through us. So there's a growth in Ebn Sina in the revenue. But there is a decline because of one impact, which is there majorly coming in Aamal Medical because Aamal Medical, they have slow deliveries. Plus, there is a delay in signing the service contract. However, this impact will cover up in the H1 results. So there you won't see anything. You will find it more competitive numbers, which is -- you will not see a big drop or anything like this. This is all.

If I may ask a follow-up question on the industrial segment. You mentioned that this decline in revenue is because of one contract. And this -- who was this contractor? Is this the old Kahramaa…

This was Kahramaa contract, which was worth of QAR 670 million. It was awarded to Aamal cable. I hope you remember we had a conversation on this [indiscernible].

So now, the new contract that you have…

On the new content which we are getting, we are waiting directly in our names instead of Aamal Cable.

So the new contract, is it with Al Saudi instead of Aamal Cable?

With Doha Cable.

Okay. And is that contract going to be accretive? Because it seems like the old one was not really accretive because the profits increased.

No, they get enough -- these contracts as and when it is due, they always get awarded to them.

And for these contracts, how is the pricing and the pricing done? Is it like cost plus pricing? I mean, you decided on…

The good part you have, I can give you more comfort on this. Whatever which we receive from Kahramaa is back-to-back. So our LME price is fixed, so it is back-to-back. So that doesn't impact us. Whatever is the price of the copper, the same price, it's hard to come on. So it's back-to-back.

Because you're seeing the copper prices are going…

Yes, I know the copper price is now -- there's a change of $1,500, yes. Yes, it is -- yes, no, but we are more secure over here.

Also, in the last -- the time when we met, you had mentioned that -- he said he had some good news about contracts in the Energy segment, specifically in the first quarter, but we haven't heard anything.

Yes, we are working on this one. Even with Kahramaa, our cable group, they have already started working like we did on project with Samsung worth of $15 million in 2023. And they are seeing all these opportunities. We are not leaving it behind.

Okay. So, and what about the logistics? Nothing on the logistics, no announcements?

No, we are working. Still we are working. Our CEO is working on the logistic area. So we are looking at our best possibilities in that.

Because I was of the -- as I understood, the dividend was not paid last year because the investment was required for these projects, but we haven't seen anything coming at the moment. It's been 4 months.

Things are not going and progressing as fast as that, the pace that we are hoping for. That's about it. But plans are in the pipeline.

Should we hear something good in the second half at least?

We cannot say, but we know our team is, management team, is aggressively working on this area.

[Operator Instructions] All right. And I think there are no further questions. Thank you, everyone, for joining our call today. This concludes today's conference call. You may now disconnect.