Abu Dhabi National Oil Company for Distribution PJSC (ADNOCDIST) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for your patience, and apologies for the short delay there. Welcome to the ADNOC Distribution Q2 2020 Analyst and Investor Call. My name is Joshua, and I'll be your conference coordinator for today. [Operator Instructions] I would now like to hand over to your host for today, Sashank Lanka from Bank of America. Sashank, you have the line.

Yes. Thanks, Joshua. Good day, everyone. This is Sashank Lanka, and I cover the emerging EMEA petrochemicals and industrial sector at Bank of America based out of Dubai. We are delighted to host ADNOC Distribution's 2Q and 1H '20 earnings call with the company management. We have with us Mr. Ahmed Al Shamsi, the acting Chief Executive Officer; Mr. Mohamed Al Hashemi, the Chief Operating Officer; Mr. Petri Pentti, the Chief Financial Officer; and Mr. Athmane Benzerroug, the Chief Investor Relations Officer. The format of the call today will be a presentation from the company followed by Q&A. With that, I'll pass it over to ADNOC Distribution.

Thank you very much. Hi. This is Athmane Benzerroug. So good afternoon, ladies and gentlemen, and welcome to the ADNOC Distribution conference call for the second quarter and first half of 2020. So I'm pleased to welcome this afternoon, Ahmed Al Shamsi, our acting executive officer -- Chief -- CEO, sorry; Mohamed Al Hashemi, our COO; and Petri Pentti, our Chief Financial Officer.

Hi, everyone.

So the purpose of this call is to take you through the results Q2 and H1. And we'll start with the key highlights including how, as a company, we have responded and adapted our business during COVID-19 developments to emerge more resilient and grow from a position to strength. So we will then discuss in detail our strategy updates and financial performance for the first half of the year and finally move on to the outlook for 2020. We'll then answer any questions you may have at the end of this presentation. Before handing over to Ahmed, please allow me to reiterate our cautionary statement regarding forward-looking statements. So this presentation includes forward-looking statements relating to our business, important factors that could cause actual results to differ materially from our expectations are detailed in the international offering memorandum relating to our IPO and in our other investor communications, all of which are available on our website. So I direct everyone to our website to read the full text of the disclaimer and other important information. I will now hand over to Ahmed, who will start by presenting the key highlights of our first half performance. Over to you, Ahmed.

Thank you, Athmane, and good afternoon, and good morning everyone. Thank you for joining us today. I hope that everyone is staying safe and healthy. Before we take you through our first half results, let me first update you on our response to COVID-19. The rigorous introduction of rigorous health and safety measures, ADD as a company ensure that stations remain open to make services accessible to the healthcare sector and to keep customers moving on essential journeys. Furthermore, we implemented a range of measures to respond to evolving customer needs due to the COVID-19 pandemic, including new services to protect our staff and customers, such as daily deep cleaning of sites and car interior sanitization. Aligned with the UAE's efforts to reopen the economy, we have successfully and safely relaunched services that we have entirely suspended during the peak of COVID-19 pandemic, including car wash, oil change and food bakery offerings in our convenience stores. We responded swiftly to the evolving environment by accelerating e-commerce strategy and launching new services to enhance customer experience. Our digital initiatives include contactless payment solutions, online delivery from our convenience stores and mobile fuel and LPG delivery. Let me now take you through the key highlights of our first half 2020 performance and results. Despite the challenging operating environment, the company remained resilient delivering a 7.6% increase in underlying EBITDA for the first 6 months of 2020 compared to the same period of 2019. We continue to make significant progress in executing smart growth strategy during the first half of 2020 by accelerating delivery of new stations and launching new services and products. The company remains on track to deliver 50 to 60 new stations by full year of 2020, which includes 20 to 25 stations in Dubai. We are constantly looking to enhance customer satisfaction and increase customer loyalty. As a result, we have launched the UAE's first customer loyalty program from a fueling provider, we call this ADNOC Rewards. ADNOC Rewards is a point-based system, allowing customers to earn and they can redeem points upon their purchases at our service stations and convenience stores. The ADNOC Distribution mobile app, which includes the wallet, mobile pay and the ADNOC Rewards program, now has more than 750,000 registered users. The company reinforced its commitment to sustainability and supporting customers adoption for fuel efficient and hybrid vehicles by launching a new range of ADNOC Voyager lubricant for hybrid vehicle engines. The new range of ADNOC Voyager vehicle engine oils is the only first to meet the needs of the latest engine technologies and to be certified by the world-leading industry body, the American Petroleum Institute. In LPG space, more recently, we announced a significant change in LPG pricing, introducing uniform rates for LPG cylinders sold to all our customers, whether retail or commercial across the whole country, in UAE. We expect increase in LPG cylinders pricing have positive impact on our earnings, which Mohamed will share more light on. In nonfuel business area, we remain focused on providing superior shopping experience for our customers through revitalization program. Despite the lockdown restrictions, we were in the first half of 2020, we successfully refurbished ADNOC Oasis convenience stores, including [indiscernible] and Q2 of 2020. In OpEx area, we started to see initial results of our cost optimization efforts. The $7 million reduction in like-for-like OpEx in Q2 2020, which comes after an increase of $4 million in Q1 2020. We remain on track to bring further efficiency in our operations and meet our full year targeted savings. The company maintained a robust balance sheet and remains well positioned to expand both its domestic and international portfolio, in line with our growth strategy. Finally, we are committed to deliver attractive long-term shareholder returns underpinned by our progressive dividend policy that offers high dividend visibility to our shareholders. For 2020, company's dividend policy is set to continue with an expected dividend of $700 million, subject to Board and shareholders' approval. I will now hand over to Mohamed for an update on our strategy. Mohamed, over to you.

Thank you, Ahmed. Everyone, good morning and good afternoon. I'm going to start off by giving you an update on our fuel business, which, of course, includes B2C and B2B segments. So during the first half of 2020, as the CEO has mentioned, fuel volumes have declined by 12% -- 12.2% compared to the first half of 2019. This is, of course, mainly owing to the COVID-19 impact on our retail business. Retail fuel volumes decreased by 17.2% year-on-year in the first half of 2020. Commercial fuel volumes, on the other hand, declined only marginally by 1.3% in the first half of 2020 compared to the same period of last year. And this was mainly due to lower uplift from the strategic aviation customers. Following the ease of lockdown and movement restrictions in the UAE, which started towards the end of May, we've noted a -- and experienced a significant recovery in fuel volumes. In the month of June and July this year, our retail fuel volumes, which account for about [ 65% ] of our total volumes, they recovered almost 90% of volume compared to the same period last year. Speaking to our network expansion. We brought in 25 stations in the UAE during the first half of the year. And 18 out of those 25 were during the second quarter of the year. Now, of course, we remain focused on value exceeded Dubai expansion with the opening of 7 new stations during the first half of 2020. The performance of our Dubai stations remained very strong with double-digit growth in fuel sales during the first half of the year. This was driven by new station opening in an under-penetrated market. Despite COVID-19, our Dubai fuel sales continue to grow in high single digit during the second quarter of 2020. Of course, we expect our Dubai expansion to contribute meaningfully going forward as we open more stations in the second half of 2020 and beyond. Continuing with our delivery momentum, we opened 7 additional stations, including 3 in Dubai in the month of July. To date in 2020, we have opened 32 new stations. This takes the total stations we operate in the UAE to 413. Out of the 413, 16 stations are in Dubai. As part of our strategy, we extensively tackle competition with faster and more efficient deployment of our fuel station,while also optimizing our capital expenditure. We've now opened 21 ADNOC On the go. And these are neighborhood service stations, which we've opened in Abu Dhabi as of July 2020. During the second quarter of 2020, we also added 10 new trucks to our My Station fleet. It is to expand on-demand fuel delivery service for P&C as well as B2B customers. The objective here is to, of course provide our customers with a faster and reliable fueling service. As the CEO referenced before, we've announced a major change in LPG pricing, discovery of the Abu Dhabi in the Northern Emirates, so the price of LPG cylinders has been increased from AED 20 to AED 35 for the 25-pound cylinder. And AED 30 to AED 65 for the 50-pound canister. Now this change brings greater parity to the pricing of LPG cylinders across the UAE. Of course, you'll note that our prices are still below competitors. This, of course, gives us an opportunity to potentially expand our market share in markets where we currently are underpenetrated, such as Dubai and the Northern Emirates. So given the LPG still underprice increase, we're expecting an uplift of approximately USD 20 million to our EBITDA on an annualized basis. So finally, international expansion remains integral to our growth strategy, and we are progressing well on our international expansion strategy in Saudi Arabia, in India as well as other countries. Of course, we will announce further updates on the appropriate time, once we obtain all the approvals. So talking and -- about our nonfuel retail business. Let's move on to the nonfuel retail business. Our convenience stores network have increased to 288 as of the end of June 2020. So we have added 24 new convenience stores in the UAE during the first half of the year. In addition, as you may recall, we've got our convenience store revitalization program to slow down at -- during the [indiscernible] of the COVID-19 crisis. But now it's picked up pace, starting early in Q2, 2020. So during the first half of 2020, we have refurbished 11 of our Oasis convenience stores. That was [indiscernible] during the second quarter of 2020 as the movement restriction started to improve. For the month of July, we've refurbished 10 additional Oasis convenience stores. So we are focused on offering a superior customer experience as well as recovering in the e-commerce side. For online home delivery service has more than 1,700 products from our Oasis convenience stores has been received very well during the pilot phase. So we've now expanded it to more than 100 convenience stores. So this tariff has resulted in an increase in back to life for those stores, which are part of the 100 stores from the program. So the average food basket size has increased by 19.7% during the first half of the year as compared to the first half of 2019, and this was driven by changes in the consumer shopping pattern during COVID-2019. The customers were visiting our stores last week on 8th, but they were buying more on the site. And this increase in basket size was also supported by various customer-centric initiatives. This included improved category management, introduction of fresh food and the premium coffee offering. In addition to the growth potential of the Oasis and C-store business, relative to growing their other non [indiscernible], we launched our first vehicle inspection center during the second quarter, and we're expecting to open more vehicle inspection centers over the coming year along with the expansion of our other nonfuel services, such as car washes and lube change. Finally, I'd like to give you a brief update on our cost positions [indiscernible], it is and always remains the key pillar of our strategic platform competition. The benefits of the cost reduction initiatives taken before the COVID-19 [indiscernible], it's now starting to show up now in our financials as seen by slight reduction in operating expenditures of $7 million during the second quarter of the year. Now this was after an increase of $4 million in the first quarter of 2020. So the $7 million reduction is mainly a result of optimization in op cost as well as the decrease in general and management expenses. We've also implemented a more efficient operating model as our [indiscernible] My Station and other convenience stores. And we plan on maintaining this leaner staffing model moving forward. So we're well on track to give [indiscernible] and need for operation, much more efficient. The relation to realizing for the benefits of capitalization, we also expect the results of additional initiatives implemented during the first half of this year, you have positive impact on our OpEx resumption, both in the second half of the year and beyond. As we have given guidance in the past, we reiterate our target of like-for-like operational expenditure savings of approximately USD 25 million in 2020, are in line with our guidance in line to continue with our expansion strategy. In short, higher capital expenditure of USD 105 million during the first half of 2020. Compared to the first half of last year, the CapEx was about USD 38 million. Our 2020 CapEx, capital expenditures, we expect to accelerate compared to 2019 as significantly higher number of units, stations are expected to be on live delivery this year. This, of course, reiterates our strong commitment to secure future growth and deliver [indiscernible] fuel and retail operating for our customers to [indiscernible]. So we have also continued to improve our capital expenditure efficiency. We're going to focus on rolling out invested capital and [indiscernible] of My Station. So at this point, I will hand over to Petri to present the highlights of our financial performance. Over to you, Petri.

Many thanks to Mohamed, and good afternoon, good morning also from my side. So what we have already demonstrated as Mohamed [indiscernible] financial performance for the first half, despite the challenging and operating environment. First half of 2020 revenue decreased by 22.6% compared to last year, and this was driven by lower fuel volumes and nonfuel revenues as due to the lower oil prices compared to last year. During the first half of 2020, gross profit reached USD 666 million, representing a decrease of 1.3% compared to last year. And this was driven by lower fuel volumes, lower retail nonfuel and commercial profitability as well as the fact that last year, we had inventory gains of USD 33 million. And overall, this was mostly offset by higher retail fuel margins in the second quarter of 2020 as the retail fuel pump prices in the U.S. -- UAE did not fall in line with the future play cost [indiscernible] for crude oil and product prices. And as Mohamed mentioned, our cost of realization initiatives are underway to bring further efficiencies in number of [indiscernible]. And having said that, total operating expenses have increased during the first half by 11.8% year-on-year. And this is mainly due to the one-off expenses related to the additional pension costs. And so as, of course, we've had COVID-19, while growth of OpEx associated with our network expansion and cost of [indiscernible] effective early November last year, also contributed materially to the increase in OpEx. The first half EBITDA was $342 million, this is a decrease of 15.4% compared to the first half of last year. Reported EBITDA, however, was negatively impacted by total one-offs of USD 46 million due to the onetime expenses and additional prudent provisioning on [indiscernible] cost as well as right of capital working progress. Whereas last year, first half benefited from one-off recoveries and reversals and inventory gains of total overall of USD 44 million. Importantly, underlying EBITDA, which is excluding inventory gains and losses as well as the one-offs, has remained resilient with growth of 7.6% compared to last year to the entire oil/fuel retail margin. The first half net profit is reported at USD 248 million, decline by 22.4% compared to last year, mainly due to the one-off expenses and due to provisioning My Station as well as due to the presence of one-off gains, once again, I've mentioned last year. However, we have just for inventory gains and these one-offs, the company's reported earnings would have been higher by 6.9%, despite the business impact of COVID-19, specifically during Q2. Now let me briefly walk you through the key operational highlights in the first [indiscernible] the first half our total fuel volumes in [indiscernible] '19. As a result, fuel volumes sold decreased by [indiscernible] in the second 2020 [indiscernible] in the first quarter of 2020. And as you can see in this slide, retail fuel volumes were impacted more than commercial business [indiscernible] [ 32.6% ] year-on-year in Q2 after a marginal decline of only 1.9% year-on-year and during the first quarter. Our commercial fuel volume were supported by a part from industrial customers, leading to an increase in corporate volumes by 4.1% year-on-year in Q2. And this was partially offset by a decrease of 33.9% in aviation volumes. So our strategic customer in Q2 of 2020. In our nonfuel business, nonfuel transactions have decreased by 33.5% during the first half compared to last year, almost again, of course, may be due to the [indiscernible] from COVID-19, which was led due to in customer visits as well as due to the absence of the vouchers after we implemented [indiscernible]. Average cost basket, however, has increased by 19.7% year-on-year due to the first half, and this was driven by our customer-centric initiatives, like improvement in category management, online delivery and also as a result of COVID-19 impact with customers visiting just frequently are spending more during this. So let me now turn on the gross profit by segment. During the first half 2020, retail segment overall, gross profit increased by 7.7% last year. So that made fuel retail business. Fuel retail posted strong operating performance in gross profit growth of 14.8% year-on-year. On the back of higher retail fuel margins mainly in Q2 and regards to new fuel costs following also the renegotiations of our fuel supply contract in last November, partially offset by the clear increase [indiscernible]. Nonfuel cost profit decreased by 29% in the first half in the lower transactions as a result of COVID-19 lockdown restrictions as well as contribute the actions to larger prevention after implementing, and as I mentioned, the free assisted fueling. And in the commercial business, the performance was negatively impacted by lower margins and aviation volumes as well as the line of items of $6 million. Whereas last year, during the first half, it included a one-off recovery USD [indiscernible]. Moving on to EBITDA by segment. First half retail EBITDA B2C was stable overall given the higher retail margins [indiscernible], but offset by lower fuel volumes prior inventory gains as well as the decline in nonfuel gross profit as explained. And finally the increases in OpEx. First half, commercial EBITDA B2B declined due to the lower margins, lower aviation volumes as well as prudent debt provisions in the commercial business. And then finally, a few words about cash flow, cash generation, it was impacted and declined primarily due to the negative working capital movement as well as the dividend payment in the second quarter, partially offset by [indiscernible] from underlying operations. Specifically, the negative working capital movement was mainly as a result of a significant decrease in our payables from a supplier outlook, which is driven by lower purchases, together with the lower oil prices. We have continued to pay for our fuel supply in line with a 30-day payable period. While receivables have not decreased the receivable base in current environment, therefore, leading to an increased working capital during the quarter. And with that, let me hand it back over to Ahmed for the closing remarks.

Thank you, Mohamed and Petri. As mentioned during today's presentation, we have delivered resilient underlying revenues in the first half of 2020. Allow me to update you on outlook and strategic priorities for 2020. So we start with our fuel business, lockdown [indiscernible], the spread of COVID-19 in the UAE started to ease from end of May with the further reopening of the economy income. In line with the economy reopening, our fuel volumes has started to recover. The further ease in movement restrictions between various emirates in UAE, gradual resumption of life and blessing of international travel restrictions and the expected to be opening of schools, and our volumes took rather pace. We also expect our retail fuel margins to remain relatively high in Q3 2020 as some prices for July and August remained stable since April 2020. We remain committed to pursue our expansion plans and [indiscernible] manner and to deliver an enhanced customer experience, both of which are expected to deliver additional earnings growth. We expect delivery momentum to sustain in the second half of 2020 in light of the full year. We expect to open 30 to 60 more stations in the UAE. Our focus is to ensure CapEx is allocated more effectively towards our growth and value-effective Dubai expansion. Therefore, we are targeting to open a total of 20 to 25 new stations in Dubai in 2020. The majority of which will be traditional stations. In our nonfuel business, we reiterate our target to refurbish 40 to 50 C-stores by the end of 2020. Customer-centric initiatives are under way, like improvement and profitability management and reduction of fresh food and premium coffee products across our network. We see great opportunities in our recently launched online foods and grocery delivery service from our ADNOC Oasis convenience stores. We expect to further expand our average in Dubai and expand in Northern Emirates, supporting our ambition of sustaining strongs of in our nonfuel offerings. In terms of CapEx, we expect CapEx of up to $300 million in 2020 versus our previous guidance of $300 million to $400 million, mainly due to COVID-19 impact on contractor's mobilization and supply chain mechanics. We continue to explore new growth opportunities presented by the current environment. We continue to assess potential opportunities to achieve [indiscernible] growth and operational success in international markets. We are targeting the highest [indiscernible] on industry. We are now accelerating the deliveries of cost optimization and margin improvement initiatives across all our corporations and business lines. New operating model, along with financial initiatives are expected to result in material benefits beyond 2020. We remain confident that we will responsively manage the impact of coronavirus on our long-term strategic commitments and same dividend payments backed by a strong balance sheet and confidence in our cash flow of generating pay model. We are gaining sufficient cash to support growth. This concludes today's presentation, and we are happy to receive your questions.

[Operator Instructions]

Thanks, Joshua. As we wait for the questions, this is Sashank here again from Bank of America. Maybe I can start off with the first question. Obviously, as you mentioned, I think your fuel retail margins were extremely good in the second quarter. I think it was around AED 0.85 per liter. Your average over the last few quarters has been around the AED 0.45, AED 0.46 per liter given oil prices have increased so far in Q3. And as you mentioned, your retail pump prices are more or less steady. How should we be looking at fuel retail margins in the coming quarters on a gross level?

So let me address this first of all [indiscernible] then [indiscernible] if he wants to add in, if he wants to. So there are similar trend in other countries, right? Like the U.S. and the provision market for the retail operators this is ourselves and entering from higher margins given the prices did not reflect the oil price movement also being declined. The UAE government has not reduced the retail on pricing significantly. Our view was to have a decision to keep the prices at the pump stable. It's driven by, and I underline, exceptional circumstances in times of significant volatility and the prices -- and the oil prices extra fee counted that. For [indiscernible], we may have taken the decision. They've made and made those calls in short-pricing [indiscernible] retail level, but also ensuring that we are able to to ensure uninterrupted access to our services used by healthcare sector as well by our customers with the highest [indiscernible] center. So we don't see that there's a change in pump pricing mechanisms, which is not long term. This is not implied [indiscernible]. However, I think the [indiscernible] investor in the markets can benefit from this. The stability of fuel retail operation in the UAE and our Ministry of Energy Bank to support continued investment in the developing countries, energy and construction. The benefit of our [indiscernible] customers over the long-term.

Thank you, Mohamed. Just one moment Joshua to add this. The retail fuel margins are expected to remain relatively high in Q3 2020. And to your question, as some prices for July and August have remained stable since April of 2020.

Got it. And any range we could provide happening?

Sorry?

Is there any guidance range you can provide to us? Because obviously, it's almost the doubling of margins that we saw in Q2, right? In terms of the fuel retail margins?

We don't provide guidance. What we can tell you is that for the last couple of months, we ave very high margins and we should in this level of launches in July and August. Have been often quite [indiscernible] company. It can easily all stop with what happened in Q2 and of [indiscernible].

[indiscernible] what my colleagues, the COO and the [indiscernible] mentioned here. Yes, maybe one piece of information/conformation might add the [indiscernible], considering the low volumes and Q2 stability and margins in July and August, we are maybe noticing recovery in volumes. Yes, the margins are stable in Q3, but the key difference here, we see a massive recovery in volumes.

Operator, we can take questions from the audience.

The first question on the phone line comes from [indiscernible] from Renaissance Capital.

Good 3 questions to ask, if I may. Just to go back to the retail prices there. I heard so much about markets. It's about trying to [indiscernible] very soon. Would it make sense assume that the current list of products would be a comp like the floor for mutual projects like in the future. Because if that's the case, there are simply around $40 to $45 in a comfort then we except our margins continue in the next like 5 to 6 quarters that's my first question. The second question is similar to the debt buildup that -- and working capital. How do you expect other elements rest of the year? Do you expect any to [indiscernible] movements are in the layout there you expect in part your working capital movements? And my third question is final. We see [indiscernible] international expansion in Saudi are there any updates there? And more specifically, how do you think of employing an automobile or the franchisee versus a [indiscernible] model [indiscernible] to maybe to return with your CapEx rather quickly.

I'll ask Mohamed to answer the question regarding the -- on the margins, even obviously, we don't take any full on what the Ministry of Energy intends to do. What we know so far is that for the 2 months, the [indiscernible]. Mohamed, perhaps if you can shed some light?

Sure, right. I stated, again, the decision was to ensure stability at the retail level. To keep the margin steady. To us, it should not cause higher uncertainty. We should expect this margin to return back to its tank of normal levels as business as usual in the short future. And we do not expect this to be permanent, in any way, shape or form, nor do we expect it to continue over the short to medium term. So we are operating, if it's in margins will return back to the stated EBIT levels in very short amount of time. Of course, the February quarter of the ministry ensures that we continue to provide and round the clock service, continue to invest. We've got extremely challenging balance sheet for instance. So sometimes it's return back to where they should be without the intervention. The effective operations remain safe. Required, as from the first time, we highlighted, volumes prices recovered significantly. We're looking at excess of 90% of 2019 [indiscernible]. So this recovery has been harder than what we anticipated.

Okay. Thank you, Mohamed. The question [indiscernible] Petri, do you want to answer the question now?

Yes. So I'll highlight that definitely, what you have seen during the second quarter is pretty exceptional. We essentially came down in terms of crude oil prices from leverage of about $50 a barrel all the way down to around $20 per barrel of oil. It was happening while also our product volumes came down substantially, of course, a reaction to the drop in demand as a result of COVID. So the compound impact around the nominal amount of payables at the end of June was significant and it despite a partial normalization going forward or because oil prices have not gone up, R&D holdings of $45 a barrel. And cadence we have seen an encouraging recovery in volumes as well. We are looking at a reversal and kind of normalize it by forward.

Do you expect it to be reversed fully or maybe like a couple of hundred million?

I would [indiscernible] as this is not what we have done in public report but directionally has. I would also like to highlight an element that is related to the margins then alternately data, we would expect to better gain from inventory gains as well.

Okay. The last question was on KSA's [indiscernible] you can give highlights from and if I was you [indiscernible] want to add to so.

On KSA, as of today, we have limited presence. We have 2 stations, one in Riyadh, another one in [indiscernible] Northern Eastern Province. However, KSA consider the key market entry for us, some part of our key strategic sellers, considering the current pandemic situation they think our plans however we have accelerated strategy in place. And we will announce good news whenever it comes.

Yes, sure. Could you...

We should not also deny the fact that the margins in KSA market are very attractive. That is one of the main reasons why we are having key intensions that faster market entry and fast market presence in KSA market, in the kingdom.

How do you think of perhaps an -- growing your own model [indiscernible] come and more about also half? I mean they have G&A and coverage problems?

All these options are on the table. We have an appetite to experience all of them. As I mentioned, the attractive margins in Saudi Arabia, especially after moving from 9 [indiscernible] to 15 [indiscernible], give us really increased the interest to go for even inorganic expansion plans as well.

Mohamed, do you want to add something [indiscernible]?

Sure. I mean, I think that sometimes it's nice to complement this point further. How do you know company operated, company-owned dealer operated and dealer on dealer-operated. We're open to any of these models. Similarly, we're opening the first continue we're pursuing both organic and inorganic growth. So there will be sites that we will build [indiscernible], but the environment right now, what's happening in case, say, how the market is developed is set up large players about [indiscernible] to be in a very fragmented market and consolidate heavily for the next coming -- over the next few years. That's what we're going to be focused on. After training [indiscernible] at [indiscernible] development stores. But right now, in fragmented market moving towards consolidated market, via acquisitions and inorganic growth.

The next question we have on the phone line comes from [indiscernible] from Arqaam Capital.

Just one question for me, if I may. So can you please shed some light on how your positive leader return for the retail business in Q2, specifically. And we're seeing higher growth in cost per liter of 61% on Q, and this is compared to only 35% drop in oil. So can you please shed some light on this?

Yes. So oil, price crude oil price specifically may not be the best possible reference in terms of our business, first of all, so formula that even the ministry has tracked and the polymer, we are using a supply contract is related to product prices, specifically international reference crisis for gasoline and diesel. And that's a result of what I would say in underlying demand across the globe, refining margins and product prices came down really drastic. And that's partially net you have operational and then timing sense rotated matters that they also have an impact on cash. Accounting margin per liter and in a business like future, so this is sort of a tactical play, it's me and operational optimization that we end up looking at the never her chance and that has probably contributed to the substance of unit cost decline during Q2.

The next question from the phone line comes from Faisal Azmeh from Goldman Sachs.

Congratulations on your great set of numbers. Just a few questions on my end. Just the first is on corporate, just to understand that corporate Q-on-Q and even year-on-year when excluding aviation, just looking at corporate, it's actually quite meaningfully despite when compared to the first quarter of this year. If you can shed some color on the trends there and the run rate so far in Q3. The second question is just more maybe more concern, we're looking at the previous target EBITDA by 2023, given the COVID impact and the macro impact on the UAE, do you think that $1 billion EBITDA target is still achievable?

Good question and then I will leave the question on commercial to Mohamed Al Hashemi. So look, we like to target as you are the KSA market basis of achieving the $1 billion EBITDA by end of 2023 as well increment. So this is a 33% increase. Let's just say that 2019 and up level. So yes, we to maintain our guidance, and we believe that this a -- we are at [indiscernible] to reach these levels. I guess that there is a couple of -- there are a couple of factors that will help us to get into the south. One is our ability to grow our network, especially in Dubai, in the market share, implemented volumes and EBITDA. And this is, I would say the -- if I made the -- it's a market where we were not, and we are recently searching this market, and we have the -- funding and to grow our EBITDA for [indiscernible]. The second point is, I guess, the hidden value the sentence company comes from the fact that there is a numbers OpEx savings that can be flowed out for the group. As us, for the past few years, we have said already USD 100 million of Opex. On the like-for-like basis. For this year, we had $20 million that we have to and in the next [indiscernible] end of 2023, we will have 100 rooms for every year, $25 million. And these are the maintenance trophies. The [indiscernible] international and obviously, it takes time to go do to make the right decisions. As a management team, always want to make sure that we are using the shoulder on is the right way, i.e., making sure that we make [indiscernible]. And this with Saudi and other markets for the forthcoming years, to believe that this will also contribute to our…

The last one for us Faisal mentioned is on the [indiscernible] business. It's been today just 10% of our gross profit. You know that we have started an ambitious plan in record our stores we're going to publish roughly 40 to 50 for this year. And this would contribute to an increase in the basket size. And this is what we have seen in COVID in some stations where we have changed the [indiscernible] change, bring some [indiscernible] management, new set of offerings, i.e. coffee barista, fresh foods, we have seen an increase in the basket size and footfall in our station. So by next -- end of next year, I'm not guessing in the next 2 years, we will be able to republish all our network, and this will [indiscernible] strengthen our margin and growth in the market business. Perhaps I will leave now the floor to Mohamed on the corporate business.

On the corporate side, the 2 questions, I think we can express how is the corporate volume. We picked up for the retail pivotal defined by at 17% during the first half, commercial is we [indiscernible] [indiscernible] decreased only marginally high. It's a little over 1% on year. This was what we talked about extent that effort from us on the commercial corporate side to come that contemplation icer offerings being more and more sophisticated in capturing that volume and then started to pay off. So those numbers can specifically improved alongside oilfield and [indiscernible] as well as [indiscernible] as well as [indiscernible]. So the very, very intense economy you see on retail versus commercial potation alone the sense of effort except is play displaced potentially since the second half of last year. [ $5 billion ] by 2023 or the custom part a question.

Ladies and gentlemen. We have any further questions at this moment in time. So Sashank, I'll hand over to you for now.

I think I'll pass it on to the ADNOC Distribution management for any concluding comments.

Okay. Thanks very much, everyone. Thanks, everyone, for I think so before in attending this call. And if there are any questions, please feel free to all which the team will be [indiscernible] of the questions. Thank you very much and stay safe.

Thank you and appreciation from my side [indiscernible] the call. Excellent questions and discussion.

Thank you.

Thank you very much, guys. Thank you.

Ladies and gentlemen, this does now conclude today's call. Thank you for joining, and have a wonderful day