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

Good day, and welcome to the ADNOC Distribution Q2 2023 Earnings Call and Webcast. Today's call is being recorded. At this time, I'd like to turn the conference over to Athmane Benzerroug. Please go ahead.

Good afternoon, ladies and gentlemen, and welcome to ADNOC Distribution H1 2023 earnings call. I'm Athmane Benzerroug, Chief Strategy Sustainability and Transformation Officer. Joining me today, Bader Al Lamki, our CEO; and Wayne Beifus, our CFO. In today's call, I will start with the key highlights for the first half and also speak about company's outlook. Our CEO will then discuss in detail delivery of our strategy. And then our CFO will take you through the H1 operating and financial results. After the presentation, we'll return to Q&A. Before we begin, I will quickly reiterate our cautionary statements regarding forward-looking statements. This presentation includes forward-looking statements relating to our business. Such statements involve a number of factors that could cause actual results to differ materially from our expectations. For more information, please refer to the international offering memorandum relating to our IPO and in our other investor communications, all of which are available on our website. I direct everyone to our website to read the full text of the disclaimer and other important information. At the beginning of this call, I would like to highlight ADNOC Distribution's unique value proposition. It is supported by 3 main factors. First of all, our focus on delivering smart growth through allocating capital towards growth in a disciplined manner, future-proofing the business and unlocking additional value from efficiency improvements focused on transforming into a destination of choice for its customers. The company is operating under a robust regulatory framework in the UAE and benefits from predictable industry-leading retail margins with a limited exposure to oil price volatility. This visibility was reinforced at the start of 2023 when we renewed the refined product supply agreement with ADNOC for a new value term. Finally, ADNOC Distribution generates strong free cash flow, supporting the new dividend policy approved by our shareholders in March to pay minimum $700 million for 2023 and minimum of 75% of distributable profit onwards. Since IPO, the company has distributed $3.3 billion in dividends and doubled the shareholder value. Our priority is to create incremental shareholder value supported by tangible steps to future-proof the business and achieve leadership in sustainability. Let me start with the progress made towards our decarbonization agenda announced at the beginning of the year. Our commitment to reduce the carbon intensity of our operations by 25% by 2030 is driven by a set 4 identified initiatives, including energy optimization initiatives at our site, installation of solar panels at our station, use of biofuels to power our fleet of vehicles and vehicle fleet management. ADNOC Distribution has partnered with Emerge, a joint venture between Masdar and EDF to install solar panels across our service station network in Dubai as part of the company's sales approach to UAE wide solar product. ADNOC Distribution continues to explore potential growth opportunities and new revenue streams offers through the energy transition. In the EV charging space, we entered an agreement with TAQA to create a new mobility joint venture E2GO with the intention to provide morbidity and charging solutions to our customers in public and project sites across Abu Dhabi and the wider UAE. We are leveraging on our extensive network to promote EV charging and clean energy CNG to meet evolving customer needs. As a part of this strategy, we have installed around 40 super fast charging points across our network. Moving to H1 key achievements and outlook for the remainder of this year. In H1 2023, we completed the acquisition of 50% equity stake in TotalEnergies Marketing Egypt and fully consolidated it in our financial statements from 1st February. All figures in the presentation includes contribution from this entity unless stated otherwise. Regarding our key achievements, we continue to report solid operating performance and underlying profitability, driven by an 8% growth in our UAE network, a 9% increase in the UAE and KSA fuel volumes and a higher number of non-fuel transactions, which continued to grow at a double-digit rate. We continue our refurbishing program. Over 2020 -- H1 '23, we renovated almost 200 front-end stores. Also, worth highlighting is that we achieved the highest convenience stores conversion rate in the last 3 years of 25% coupled with a larger basket size. This is a result of revitalization of our company stores, digitally enabled customer offering, improved category management with a focus on SMB. Finally, we successfully delivered our efficiency improvement initiatives. In H1 2023, we achieved like-for-like OpEx savings of $15 million, demonstrating progress towards our savings target of $25 million in 2023. Regarding the outcome, we expect growth momentum to sustain for both fuel and nonfuel businesses in 2023 and beyond. After opening 16 new stations in the first half, we are on track to open 25 to 35 new stations across our network region. We expect growth in nonfuel business to continue, driven by initiatives mentioned earlier, supported by promotion campaigns and loyalty program. We will continue to take steps to reinforce nonfuel retail offering to transform ADNOC Distribution stations into a destination of choice for our customers, bringing a modern and engaging retail experience to our customers. We continue to pursue organic and inorganic growth opportunities. In our CapEx plan, we focus on growth, including network expansion and revitalization of current stores, and aim to invest $250 million to $300 million in 2023. Following the acquisition of 50% equity stake in TotalEnergies Egypt, we continue to explore opportunities in high-growth potential markets. Let me now hand over to our CEO, Bader Al Lamki, who will walk you through the delivery of our strategy. Over to you, Bader.

Thank, Athmane, and good afternoon, good morning, everyone. Thank you for joining us on this call. Before I walk you through the progress we have made in H1 towards achieving our strategy, I would like to reiterate our commitment to continuously improve customer experience, operational efficiency and deliver on our transformational initiatives. These initiatives will position our ADNOC Distribution service stations and destination of choice through continuous focus on innovation and upgrading the customer experience, as well as capitalizing on the opportunities offered by the energy transition to future-proof our business. Some of these initiatives include enhancing our customer experience by improving product mix and bringing the Oasis store to the customers as well as enhancing our payment experience. Transforming car wash and lube change into a one-stop-shop for car services. We are deploying composite LPG cylinders to maintain the highest HSE standards while delivering a more convenient product to the customers and introducing LPG vending machines. Further drive efficiency program on maintaining leadership on cost metrics via technology integration and AI, invest in new mobility by advancing the rollout of EV fast charging points across our stations and develop capabilities in alternative fuels such as hydrogen. And last but not least, a range of sustainability initiatives to decarbonize our operations. We are committed to putting our customers at the heart of what we do to redefine the experience at service stations and help accelerate the mobility revolution. In order to cement our position as the destination of choice for customers, we will offer convenience, digital experience, attractive offers and loyalty benefits. Loyalty is at the heart of all that we do. Better customer experience is achieved through a better understanding of what services customers value the most and tailoring offerings to meet their needs. Our loyalty program and ADNOC app are rewarding customers who choose ADNOC Distribution station as their destination of choice. Our ADNOC Reward Loyalty Program has proven its popularity amongst customers. During the first half of this year, the number of enrolled customers to the program continued to increase, taking the total number of members to over 1.7 million. I will now walk you through the progress towards achieving our growth plans. Let me begin with the first key pillar of our growth, the fuel business. We recorded the highest ever half year volume sold in the UAE and KSA. This comes after a 9% year-on-year increase, supported by an 8% growth in retail volume and 13% in commercial volumes. The growth was driven by the expansion in our retail network and ongoing economic growth combined with the securing of new corporate customer contracts. Taking into consideration TotalEnergies Marketing Egypt, our total fuel volumes increased in the first half of this year by 34%. We continued with the expansion of our network during first half of 2023, opening 16 stations across our network. TotalEnergies Marketing Egypt acquisition contributed an additional 241 stations. As a result, ADNOC Distribution network now consists of 816 stations. Second pillar of our growth strategy is the nonfuel retail business, which has consistently demonstrated strong growth momentum and solid promise. This is the result of our consistent focus on delivering modern experience to our customers in convenience stores, lube, carwash and in vehicle inspection centers. In the first half of this year, the number of nonfuel transaction increased by 14% year-on-year after growing at a double-digit rate in 2022. This is a result of our strategy to enhance customer experience and loyalty through innovation, personalized rewarding experience and smart marketing. As part of our effort to offer modern, digitally-enabled customer journey, in-stores experience between 2020 and first half of 2023, we renovated almost 200 stores. As a result of this renovation, our convenience store saw an increase in footfall measure in terms of conversion ratio as well as higher basket size. That translated into a higher profitability of nonfuel retail driven by the C-store business. In H1 of 2023, nonfuel retail gross profit increased by 12% year-on-year, including gross profit of our convenience stores that increased by 14%. I will now hand over to Wayne to present the highlights of our financial performance.

Thanks, Bader. Good morning and good afternoon, everyone. In the first half of this year, ADNOC Distribution demonstrated strong operating performance driven by our network expansion and further underpinned by economic growth in the region. In the fuel business, our retail volumes in the UAE and KSA, which represent nearly 70% of the total fuel volumes, increased by 8% year-on-year. We continued to record strong growth in commercial fuel volumes, which increased in the first half by 10% year-on-year, driven by corporate volumes, which increased by more than 12%. In the nonfuel business, we recorded a solid 14% year-on-year increase in transactions, which materially outpaced the change in fuel transactions, leading to our highest C-store conversion rate. In particular, the convenience store conversion rate increased by almost 400 basis points from 21% in H1 '22 to 25% in H1 '23. Overall, the average basket size in our stores increased by 3% compared to 2022. Now looking at key financial highlights. Supported by the strength of our operations in H1 2023, we continue to demonstrate growth in the underlying profitability. Adjusted for the effect of inventory movements, our underlying EBITDA increased by 9% year-on-year to $427 million, while our net profit, excluding inventory movements, was 2% higher year-on-year at $280 million. It is important to note that in the first half of '22, ADNOC Distribution benefited from material inventory gains of approximately $150 million in the rising oil price environment. In the first half of this year, the net inventory gains were $17 million. And as a result, our reported gross profit, EBITDA and net profit have declined year-on-year. Our free cash flow of $333 million in the first half of the year remains robust, resulting in a net debt-to-EBITDA ratio of 1.13x, which offers room to invest in growth while sustaining our attractive dividend policy. Moving on to gross profit by operating segment. We have already highlighted the impact of significant inventory gains benefited in the first half of 2022 in our fuel business financial metrics. Adjusted for the effect of these inventory movements, our fuel retail gross profit increased by 3% year-on-year. In the first half of 2022, the Retail segment inventory gains were $109 million, while in the first half of this year, those have reduced to $22 million. In our nonfuel business, our retail gross profit has increased by 12% year-on-year, driven by customer-centric initiatives. Specifically, in our convenience store segment, our revenues have increased by 17% year-over-year and our gross profit was 14% higher than last year. As we continue to focus on sales of fresh food and coffee and optimize our product mix, the conversion rate has reached 25% and our average basket size has increased 3% year-on-year. In the Commercial segment, gross profit adjusted for the effect of inventory movements has declined 14% year-on-year. In the prior year, our commercial segment inventory gains was $42 million at the half year, while we had losses in the first half of this year of $6 million. The performance of the Commercial segment was further negatively impacted by the lower volumes in our aviation business and pressure on our commercial margins in the declining oil price environment. I'm now turning to our operating expenses. We remain committed to achieving further operational excellence and expect to realize like-for-like OpEx savings in excess of $25 million this year. We will achieve this through tight controls of our discretionary spend; operational efficiency across all our business units, including optimizing our logistics; renegotiating supply contracts with vendors and centralizing some of our key functions. In the first half of this year, our OpEx, excluding depreciation, fell by more than 9% year-on-year. Despite the increase in our network size in UAE and KSA of approximately 7%, as well as the combination of TotalEnergies into our numbers. In the first half of this year, we have achieved like-for-like OpEx savings of $15 million, and this demonstrates our significant progress towards our OpEx savings targets for 2023. Moving on to EBITDA by segment. Our underlying EBITDA of $427 million has increased by 9% year-on-year, which was mainly a result of the volume growth, the higher nonfuel segment contribution and the efficiency improvements measured that I've highlighted earlier. Our retail EBITDA, excluding inventory movements, has increased by 10% to $291 million. On the same basis, our commercial segment EBITDA was 6% higher year-on-year and has reached $134 million. Finally, coming to our cash generation. In the first half of this year, the company has reported free cash flow of $333 million. This is supported by the positive underlying profitability of our business. In line with plans to continue our expansion strategy, during the period, we have invested $110 million in CapEx. Our financial position has remained strong with a net debt-to-EBITDA ratio of 1.13x compared to 0.78x at the end of 2022. Given that in February, we made a cash payment for a 50% stake in TotalEnergies Marketing Egypt, we believe that this is a robust financial position. Our strong balance sheet and consistent cash generation provide us support to efficient capital allocation towards future growth and shareholder distributions. I will now hand back to Bader for his closing remarks.

Thank you, Wayne. Before opening the floor to Q&A, I would like to reiterate our outlook for the rest of 2023 and highlight the key priorities. ADNOC Distribution demonstrated strong operating and underlying financial performance in the first half of the year and continues to offer a compelling investment story. In H1 2023, we saw growth in both retail and commercial fuel volumes in the UAE and KSA markets to a new half year record and expect this positive trend to sustain during the remainder of 2023. Given that this performance was driven by both fuel and nonfuel businesses, we will continue to focus on the network expansion and delivering a sustained growth in nonfuel region. In the reporting period, we launched 16 new stations across our network and progressed well towards delivery of 25 to 35 stations targeted for 2023. We also further advanced our international expansion by completing the acquisition of a 50% stake in Total Egypt in the first half of this year. We aim to further optimize our operations to become a leading, cost-efficient fuel retailer. Our initiatives have already resulted in a like-for-like OpEx of $15 million, and we are on track to deliver $25 million savings in the full year. We are also placing sustainability at the core of our day-to-day operation, reducing the carbon footprint and future-proofing our business. ADNOC Distribution will continue to prioritize incremental value creation for our shareholders by delivering enhanced customer experience to transform ADNOC Distribution stations into a destination of choice for our customers, pursuing expansion plans and allocating capital towards growth in a disciplined manner, finally exploring growth opportunities and new revenue streams created through energy transition, including EV charging points. This concludes today's presentation, and we are happy to take your questions.

[Operator Instructions] We'll go first to Ricardo Rezende with Morgan Stanley. .

I guess the first one, when you look at the number of stations in Saudi Arabia, we've seen a sequential decline of about 3 stations compared to the first quarter. So if you could comment on what's the competitive landscape on the country that you're seeing? And also, how should we think about station deployment there throughout the year? And then the second question is more on the expense side. You've been doing a great job on the OpEx reduction and your running rate in the first half has actually been higher than what is implied for the full year. So what's the -- should we -- how should we think about that for the full year? Is that to see some upside risk to the $25 million guidance? Or you've been more focused on the low-hanging fruit on the first half, and we should see a deceleration on the saving bet on the second half?

Ricardo, Wayne Beifus, the CFO. Thanks for your question. Let me first deal with Saudi. As you've rightfully pointed out, we have reduced slightly our total network in Saudi. Our focus on the last 12 months has very much been on refreshing and constructing the station network and our portfolio that we had acquired through multiple avenues of acquisition in the country. And as part of that exercise, where we found that station targets were no longer meeting our targets, we've handed those back. And as you pointed out, we have reduced slightly the size of the network. However, the focus that we've had over the last 12 months has significantly increased the quality of the network. And you can see that actually coming through the volumes that we are securing within the country. In terms of your second question, the OpEx, the entire organization is very focused on driving incremental OpEx reductions through our multitude of initiatives. We're confident in the guidance that we've given in terms of the target of $25 million of additional savings this year. And I'll pause there.

We'll take our next question from [indiscernible] with National Securities.

I Have a few. Firstly, on your margins per liter on your retail fuel business. We've seen a sharp decline year-on-year in second quarter. Just wanted to understand if that is because of consolidation of Egypt, which has lower margins? Or is there something else going forward, something else going on? Or -- and how should we be seeing this going forward? Secondly, distribution expenses. We've seen a Q-on-Q jump sizable in terms of percentage of sales as well. Just wanted to understand what is a good benchmark to keep for the rest of the year? And the final question on the taxes and dividends. So for 2024 onwards, we have the UAE corporate tax coming in. Is there a clarity on the applicability on ADNOC Distribution? And if it is applicable, then how do we see dividends panning out in terms of possibly lower year-on-year profits and would that translate into possibly lower year-on-year dividends? Or is the management determined to maintain a floor of 20.5 fils as we've seen in the past few years?

Thank you for the question. In terms of margins per liter, as you rightfully pointed out, for the first time, we've consolidated Total Egypt into these numbers. The margins in Egypt are substantially different to the margins in the UAE. So that has had an impact on consolidation. The other factor, though, to bear in mind is that the inventory gains that were crystallized in the business in the first half of 2022 have not repeated in the first half of this year. Just in terms of your third question, which dealt with the corporate tax that's coming in and the impact from the dividends paid by the company, the corporate tax does impact ADNOC Distribution. The impact will be on the tax year commencing the 1st of January 2024, and the first time that impacts our cash will be in 2025. The company remains committed to our dividend policy that we've communicated. And you'll note that our cash position remains robust and our net debt to EBITDA remains very strong at the end of the half year. Your second question, if you don't mind, if you could repeat that, please?

Sure. Just on your distribution expenses, we saw a Q-on-Q jump in terms of absolute number as well as the percentage of sales. Just wanted to understand what's a good benchmark to keep going forward and where do we see those heading?

Okay. This is Athmane, Chief Strategy. So the way to look at ADNOC Distribution is not on percentage of sales given the revenues don't really matter. The business is mainly for 70% of the profits on the retail business, which is a margin creator. So the way to look at it is our ability to reduce this OpEx on a like-for-like basis, but also on an absolute basis. I guess what is important to look at is the OpEx versus the network growth actually, and the level of OpEx [indiscernible] of the OpEx. And what we have realized as we speak is 20% reduction when our network is growing by more than 7%. So this is the way to look at it.

Understood. And just a small follow-up, just for understanding purposes. I understand the Egyptian market brings volumes and it's a growing business. But if the margins are so low compared to the UAE and probably the Saudi business as well. And then, of course, there's the added risk of currency devaluation, all of that. What is the motivation behind company's focus towards Egypt as you've also mentioned that there will be new pumps opening up and you will be focusing on that area. Just wanted to understand from a strategic perspective.

Thank you. Just for the final question. In terms of the Egypt business, what is critical is that there's a mix of revenue streams within that business. So as you pointed out, network is part of it. But the business also has a very significant lubrications business and a very significant aviation business. The aviation business is largely shielded from devaluation risk, as is the lubes business. And it's important when you look at the acquisition that was made in Egypt to realize that, yes, while the network margins are lower than the UAE, there are very lucrative parts of that business that interested us in making that acquisition.

We'll go next to Faisal Al Azmeh with Goldman Sachs.

This is Walid Jamal from Goldman Sachs, asking a few questions on behalf of Faisal Azmeh. I just have a few questions here. Some of them have already been answered. On Egypt, could you add some color on how the seasonality looks like for the business and what kind of upside you see for the asset post the acquisition? And if you could provide some details around the devaluation impact over the quarter? Also in your presentation, you speak about the company's strategy to transform gas stations into a destination of choice for customers. If you don't mind just adding some details around what that entails and some -- or maybe some key initiatives you could pursue to add more footfall in your stores. And also, you mentioned that the retail margins have been down on a year-on-year basis because of some inventory gains that were present in the last year coupled with lower margins per liter in Egypt post the acquisition. Is that a similar story of why the commercial margins declined on a year-on-year basis as well, if you don't mind?

Thank you, Walid. So just -- can you just repeat the last question on Egypt again?

The last question on margin?

Yes, please.

Yes, sure. So I was just wondering if you could add some color on why commercial margins were down on a year-on-year basis.

Okay. So let me start first with the first question, i.e., on Egypt. The seasonality, the earnings of TotalEnergies Egypt are much higher in the second half of the year versus the first half. The main reason being that the Aviation business is more geared towards the tourism. So this is where the ramp-up in Q3 and Q4 would be better. So this is one. The second question is on the margins in commercial, if I'm not wrong. So Wayne, if you want to take it?

Yes. In terms of the commercial margins, as we've expected in a rising oil market, like we had last year, you expect the commercial margins to be more attractive, as we've seen. This year, as the oil prices were falling, those margins tightened and we've experienced that. Over and above that, the Aviation segment volumes are lower this year than they were in previous years. But overall, the commercial volumes are significantly up over last year. And we're confident that as margins come back, we'll see a return to the previous levels. And final bit to add to that, is like within retail, last year, there were significant inventory gains within the commercial segment that do not repeat this year.

Okay. So your question regarding how are we -- what's our strategy to transform our stations into a destination of choice for our customers, I would perhaps leave the floor to our CEO, Bader Al Lamki.

Sure. Thank you, Athmane, and thank you for the question. The philosophy here is to have our stations as a destination of choice, to maintain the footfall to our stations. And we achieve that by growing and bringing additional NFR into the stations so that there's a convenience. I would say it acts as a one-stop-shop for our customers. They come for fueling. But fueling is not the main attraction or it could be an objective by itself, but there's also other NFR, the carwash, the FMB business, trying to add lube. So basically expanding on the offering at a given site so that we enhance the value proposition to our customers. And that, in turn, would mean an extended long-term loyalty to us over the years, yes. I hope this answers your question.

Yes, it does. And just like one part of my previous question was around devaluation, potential impact in the adjustment business. Could you just maybe add some more detail on that front?

Just building on -- well, building on my earlier comment about Egypt and the differentiation of the profitability, the segments of each of the profit pools that come from Egypt, the one that is exposed to devaluation is essentially the network. What we have also seen, though, recently is an announcement of an increase in margin in Egypt that largely restores the impact of that devaluation. So we, of course, there's an impact of devaluation. But given the natural hedging of many of the segments that we've invested in, together with that restoration of the margin, we see that as minimal.

[Operator Instructions] We'll go next to Ildar Khaziev with HSBC.

This is Ildar Khaziev from HSBC. I have a couple of questions, please. So first on the nonfuel business. I think you mentioned strong performance of the convenience stores, but it looks like the other part of non-fuel business have also performed well. I've just noticed that the number of vehicle inspection is up 40% in the first half. I just wanted maybe to ask if you could comment on what's driving this? And secondly, on Saudi Arabia. I think my question is basically is about whether the high interest costs are affecting your lease costs in the existing contracts in Saudi Arabia at the moment? And is this why the lease payments seem to be high year-on-year?

Okay. So on the question on NFR, so the non-fuel retail business is to build on what our CEO just mentioned earlier. So you have the convenience stores, the carwash, the lube change, property management, which is all the space that we lease to quick service restaurants, for instance, and the vehicle inspection business. So all these businesses actually have performed well in Q2 and overall in the first half. Wayne, do you want to answer the question on Saudi?

Just -- if I understood your question on Saudi, your question was do we see an impact in Saudi as a result of the increased interest rate environment on the leases. My response on that is that the leases are negotiated upfront for a long term in terms of absolute currency. It's not subject to changes in interest rates. So we don't see an impact from that.

At this time, there are no additional questions in queue. I'd like to turn the call back over to our speakers for any additional or closing remarks.

Okay. We have some questions from the website. Just let us have a quick look.

The first question is there is an expectation that the KSA margin will go to [indiscernible]. What is the current timing and expectation for when this is going to happen?

ADP as a fuel retailer in the Kingdom of Saudi Arabia, we have previewed the discussion that is ongoing at the moment. All fuel retailers and the relevant authorities have been discussing this aspect. We understand it is still in play with the relevant approvals. Having said that, we believe that this will be something beneficial for the sector. We cannot speculate on timing, so that decision resides primarily with the authorities in the Kingdom and we'll not speculate on time.

The second question is about the target [indiscernible] station, out of the 25 to 35 new stations to be delivered. What is the split between UAE and Saudi Arabia?

Thanks for that question. We haven't given guidance on a split. That guidance of 25 to 30 covers both. Where it makes sense to invest, where the hurdle rates are achieved, we make those investments. So I can't split that between the 2 countries at this stage.

There is a question about the EBITDA contribution from Egypt.

So in terms of the disclosures that we've made, it's clear that we've -- our share of the 50% in the venture is roughly $2.5 million. We've guided that we expect 6% of our EBITDA to come from the consolidation of the JV in Egypt, and we stand by that.

We have a last question. Can you tell us more about the EV market in the UAE?

Okay. So let me give some thoughts on the EV market in the UAE. So first of all, the number of vehicles is roughly 40,000 electrical vehicles, including -- so EV and hybrid vehicles. This represented last year 10% of the annual sales, and this represents roughly 1% of the total car market in the UAE and the car market is roughly 3.6 million cars. What we have done is, as you know, we announced beginning of the year the JV with TAQA, so if we were to be an infrastructure player in the EV space. And we have so far installed 40 charging points. Our strategy in the EV sector is for the stations to ensure that we have superfast chargers and of course, for convenience and also improving our nonfuel retail offering, especially the coming store to capture the incremental profit that will come from the EV drivers.

Just 1 more question. I understand that the company sells UAE retail consumers at a price based on that benchmark plus regulated margins. Is this regulated margin fixed per vertical? And if oil prices go up, does this regulated margin also go up?

Okay. So let me start, and then will give the floor to Wayne, if you want to add anything. So let me just take a step back. Since August 2015, the UAE fuel retail market is regulated by the Ministry of Energy. So we have also a contract with ADNOC Main and the margins are regulated. If you look at historically, our margins have been between 40 to 50 fils per liter. So the short answer is there is no change in the regulated margins, and we still expect the same level of high margins, and there is no impact of oil prices being up or down in the margins, which makes the strength of this -- of the business model of ADNOC Distribution. The only impact of the oil prices actually are on the palm prices, and the palm prices are also regulated. They are -- they change every month and based on the [indiscernible]. Finally, just worth mentioning that ADNOC Distribution has a backstop guarantee on the margins, which means that in the case of lower oil prices, ADNOC Distribution will not record a margin that is below the regulated margin. And if it's the case, ADNOC will compensate, and it has been the case historically. On the top of that, perhaps what -- Wayne, if you want to add something on the inventory gain perhaps?

I was just going to add that we're in a rising oil market environment where there are inventory gains. Those gains belong to ADNOC Distribution. So we are protected on the downside. We benefit on the upside. And hence, some of the movement that we've seen in this quarter and this half year between -- as a result of inventory gains we've talked about in prior year.

Okay. So if we have no further questions, we'll end the call. Please feel free if you have any questions to reach out the Investor Relations team, and have a nice evening. Thank you very much.

That will conclude today's call. We appreciate your participation.