Al Anwar Ceramic Tiles Company SAOG (AACT) Earnings Call Transcript & Summary

Okay. Good afternoon, gentlemen. Good afternoon to all present. I think it's 3:00 now, 3:00 p.m. And then welcome to the discussion -- MSX discussion session of Al Anwar Ceramic Tiles Company SAOG to discuss the first half of 2025 performance. So as usual, we do not have any presentation, okay, because I'm sure most of you would have done all your number crunching and then the analysis will be ready. So we try to avoid a presentation so that straightaway, we can get into the discussions. Before that, just to give a brief highlight about how the company has fared in the first half of 2025. The sales value has grown by about 7% over last year to OMR 10.3 million as against OMR 9.633 million. But as compared to the second half of last year, the growth has been almost at 20% which was at OMR 8.651 million was the second half revenue of 2024. Against that, we are at about OMR 10.3 million. And operating profit -- coming to the operating profit, we are at about almost OMR 0.5 million this year as against [ OMR 184 million ] of last year, representing a growth of about 144%. Investment income is almost flat at OMR 180,000 against OMR 200,000 plus last year. And pretax profit is almost 60% up over last year from OMR 390,000. So we're at about OMR 623,000. And coming to profit after tax, we are at about OMR 530,000 as against OMR 350,000 of last year, representing about 52% growth. Here, I would like to highlight that the EBITDA is at a decent margin of about 16.5%, which stands at -- which translates to about OMR 1.685 million for the first half. So this is just a brief of our performance for the first half. And then now I leave the floor open to the attendees here. if they have any queries, we can always discuss that and then ensure that they're satisfactorily answered or clarified.

Yes, Anoop.

Just -- is there any seasonality in the 2Q in general? I mean, if you look at the revenue sequentially, it's been quite a big drop. Is it usually a seasonally weak quarter? I think it is Ramadan and all that but the dip...

That's right. If you see year-on-year, always there is a seasonality. The second quarter is seasonal, okay, to the extent. And also having both the Eids, that is the Eid al-Adha and Eid al-Fitr, both coming together in the same quarter also has impacted. And also second quarter is a seasonal thing. If you go back to the last 5, 6 years or 10 years, you will see that it's always marginally lower than or a little lower than the first quarter, yes.

Has there been any improvement in the price -- pricing because of the duty structure and all of that?

Pricing, as of now, there has been no improvement, though the volumes we are reckoning that the volumes is expected to go up, okay? On the pricing front, still we have not been able to push it up as still there is some inventory left in the market of the imports, which has come in at much lower prices. So that has to first be out of the market before we are able to appropriate on the pricing, which we are more interested in increasing our volumes than looking at a pricing increase in the immediate -- as a immediate strategy, yes.

Okay. Just last one. I mean in your previous call, you had mentioned that there were a lot of cost initiatives taken last year and you would see the impact. Did you realize all of that in the first half? Or is there room for more improvement in the subsequent quarters?

Yes. We have substantially recover -- I mean we have been able to achieve whatever we had envisaged earlier. Most of them have been achieved. And then that is a continuous process. Now we are not going to stop at that and then that will go on and then continue and then see what more we can do. The leapfrog achievements have been done. Now maybe 3 spoonfuls will be there to -- as we go ahead.

Could you please outline like what were the sort of -- where did the efficiencies come from? Was it labor? Or was it operational process related or raw material sourcing? If you could give us some color just for us to understand it better.

It is a mix of all. It is not in one area which we have been able to achieve. We have been able to do it across all the heads of expenses, In fact, in labor also, you would have seen in our statements, which we have already disclosed. On the labor front also, we have done something, even on the admin general expenses. I mean, every area we have looked at we have been able to achieve it, predominantly in the -- what do you call -- on the fixed cost, basically, we have done about more than 10%. We have been able to achieve reductions there. And we see that going forward, we will be able to sustain it and improve upon it. And I have a question, I think, from [ Mr. Taha ], asset management, I think. So his question is, what is the current capacity? And what was the utilization for Q2 2025? Does the FTA with India supersede the duties imposed in April? If so, can you shed some more light on the potential impact that we will have on the sales? Okay. There are 2 portions to the question that [ Mr. Taha ] has asked. So the first one is on the current capacity utilization. We are continue to utilize the same capacity utilized in the -- capacity, which we had utilized for last year. We are in the range of about 65% to 70%, which we expect that it will go up as we are able to fully appropriate the benefits of the antidumping, which has been imposed in Oman. That might take a couple of months. As I explained to you earlier, the inventory which was brought in before the kickoff of the antidumping is still in the market. So that has to reduce. After that, we will be able to improve our capacity utilization and we will be reporting that in the coming quarters. And coming to the second part of his question on the FTA with India, whether it's supersedes, as we have already disclosed last week, we have no information from the authorities, from the statutory authorities or the government authorities as to whether they are going to have a change in the policy or anything. If there is a change in the policy, then we will have to see how we need to readjust our strategies. But as of now, we do not have any information whether it is going to supersede or not. Yes. Yes, [ Kushal ]. I think you have a question, please.

I have a couple of questions. First question is, how do you see the market and pricing outlook post the duty event?

Okay. You have -- and any other thing you want to add on or...

I'll add later.

Later. Okay, fine. See, post the duty thing, as I explained to you earlier, we are -- immediately, we are looking at improving our volumes. We need to appropriate the volumes first before we look at the realization because once we have the utilization fully of whatever spare capacity we have now and then we are able to achieve that capacity utilization. The fixed cost gets averaged out over a larger volume and then thereby, it will help us considerably in the bottom line. So that been -- that is going to be our first strategy. And once we achieve capacity, after that, we will see how we need to tweak on the realization and the price.

Another one. So have we received any refund from KSA as of now? If yes, how much received in current year or in last year?

Yes. See, from 2024 onwards, we have been receiving all the refunds. There has been no issues at all there, okay? Up to '23 or beginning of '24 is only we had the problem. After that, we are not even providing for it. So to that extent, the Saudi refunds are in place because we have been able to work out the paper, the documentation that is required by them and then even our dealers are able to understand how to go about it and things like that.

Okay. So a couple of years back, management declared they will add around 7 million SQM capacity in 2 phases. Since the first phase is got added, so are we going to add second phase by seeing the current market? And if yes, so what will be the time line and cost expectations for this?

Okay. Yes. See, as we had announced, yes, for about 7 million square meters and 3.5 million square meters, we have already implemented it. And as of now, as I said, we are still not able to utilize our full capacity even with that. So we will first need to ensure that we are able to -- we are confident of utilizing the full capacity for a sustained period of time before we restart the addition of the next line. So as of now, we have deferred it and then it is still on a deferred mode. So we will wait for some more time after we are able to achieve and we are able to sustain the full capacity utilization.

Okay. The last from my side, if possible, can you give a just a quick idea about the cost outlook or the margin outlook for the future period, medium term?

See, as of now, as I told you, see, you can also extrapolate from my numbers. See, my fixed cost is there to see, okay? So if I'm able to achieve 100% capacity utilization, how my fixed cost is going to get averaged out over the full volumes. So based on that, that will be the incremental bottom line increase, which we can look at. So I don't want to put a number to it or a percentage to it. But then it's -- all the numbers are in the public domain, where you can work it out and then see for yourself how we will be able to fare, assuming that we will be able to maintain the current realizations. Any other questions or any... There is one more question from [ Taha ], whether we can share the current capacity figures. The current capacity, I would say is -- will be anywhere -- our full capacity will be anywhere between 16 million to 18 million square meters for all the lines put together what we have, depending on what product and what sizes we produce. So based on that is what I said about 65% to 70% is our current capacity utilization. Yes, there's one more question from [ Richa Kumari ]. What sort of margin are you expecting for the full year? And any update on the dividend? Okay. So both the questions are difficult to answer at this point of time, okay? So the margins, what we have been doing now, for sure, it should continue, whatever we have reported for first year. First half, if you extrapolate it for the full year and it can be a little better also. That's what I can say at the present moment, considering that the antidumping will continue in the Oman market. And as far as the dividend update is concerned, I would not be able to comment as it's a prerogative of the Board and the AGM to decide on that. So I will leave at it. I think there is -- I think there is a hands up from [ Azul Malad ].

Quick one. One is in terms of the production costs. So do you have -- can you provide us some colors if there's going to be any changes in terms of the production costs, that's one -- in the short to medium term? And second is for your other income, what are these? And then can you also provide some colors on how are we going to -- should we -- how should we look at other income going forward?

Okay. On the cost front, we don't foresee any major changes in the cost front. It should be in the same range as what presently is, okay? If at all, if the position in the -- of the geopolitical situation in the region improves, to some extent it -- the cost can be lower also because the freight costs of the material, which we are bringing in from the European sector might marginally be better so that we will be only having an advantage in terms of the sea freights and other costs. So otherwise, there is no major impact on the cost as of now. That is what we foresee. Okay? And what was your -- second question was on the -- I'm sorry, I missed it.

On the other income.

Other income, sorry, yes. Other income is going to be stable at the same levels. On the current investments, which we are having of about OMR 2 million which is there in the balance sheet, on that, this stable income is what we feel that it's -- it will continue in the range of between OMR 180,000 to OMR 200,000 every year, okay, unless we are able to generate more cash and then have some more investments added to the portfolio. Anoop, I think you have a question.

Yes, Mr. Suresh. Just on the capacity, a clarification, you mentioned 16 million to 18 million square meters but wasn't 16 your capacity before the expansion as well? So have you closed any old capacity?

No, no, no. Now what I mentioned was 16 million to 18 million for the products and the sizes which we are producing now because it's a very dynamic. Capacity is a very dynamic term in our industry because it can even -- if we produce a particular -- all the lines produces one particular product, it can come down to even 12 million to 13 million. Or if we produce one particular product in all the lines, even it can go to 20 million. So that is why I just gave you the range of 16 million to 18 million, depending on what products we are producing presently. There's one more question from [ Taha ]. Was the increase in sales in Q2 mainly driven by sales in Oman or exports? And was the split still close to 50-50? That's a very good question. In fact, just to tell you where we stand on the market, the sales, in fact, overall, Oman sales, in fact, went up marginally as compared to the export sales. So this is -- there was very clearly there has been, what you call, advantage, which has started to figure in, okay, even before the full implementation of the antidumping duty. Yes. Any other queries, questions? Otherwise, you can wait for about 2 minutes and then we can see if we can wind up the discussions. Okay. Okay, gentlemen, I assume that there is no other questions and clarifications. So thank you very much all for attending these discussion sessions and I'm sure you would have been happy with the clarifications that was sought and that has been provided. Thank you once again for attending this meeting. Thank you.