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

Okay. Good afternoon, gentlemen. It's exactly 4:00 now, Oman time. And I see that we have a lot of people attending this discussion session. So good afternoon to everyone, and hope I'm audible. If somebody can just raise your hand or say that whether I'm audible. Okay. Fine. So I'm audible. So good afternoon to everyone present in the -- for the discussion session, and welcome to the second discussion session of the year 2026, where we'll be discussing the first half performance of the company for the year 2026. So as you have all -- there will be no presentation as such as usually we discuss the -- during these discussion sessions, where generally, there will be no presentations as such. And having said that, we will -- I will just give a brief about what has been the performance of the first half. For the first half, the revenue has been flat over last year. This is in spite of the -- what we call the challenging environment we had in the -- especially from March onwards in the region. And however, we have delivered a net profit in excess of OMR 650,000 of money. We are at about OMR 666,000 to be precise, which is about representing a growth of about 25% over last year same period. And the highlight of -- one more highlight will be that we have, this OMR 666,000 also represents higher than the entire year profits, which we did in 2025, which means if we are able to sustain this profitability, we will be more than doubling our profits for this year as compared to last year. And coming to the, to the brief, what you call, parameters based on which we were able to deliver this is one is it was aided by the antidumping duty, which was continued in the local market in Oman. So that helped us considerably to consolidate further the market in Oman. And also, the volumes were, to some extent, in fact, impacted in the other export market because of the going on war here. Otherwise, the performance, the bottom line could have been even more better if we had been able to export a few more or even if we had exported the same levels at what we did last year. So that is one impact. And Oman market is doing extremely well. We have grown decently well, whereas the export market, especially the Saudi, the Qatar, Bahrain and Kuwait and all has been impacted. So that is where we stand in terms of the market-wise performance, whereas there has been escalation of our input cost pressures are there, which we are managing by cost optimizations and then process controls and also by seeing whether we can improve on our realization, selling prices, which will be seen in the coming quarters, which we have already implemented the selling price increases, which will be visible in the coming quarters. With this, I'm sure all of you have done your detailed number crunching and analysis of the numbers, which we had already disclosed. So I leave the floor open for any questions, and then we will be able to answer you to the best of our ability and whatever is relevant. The floor is open for any queries now, please. Yes, Mr. Mohammad, [ zali ], I think you have a query. Yes, sure.

Congrats on the H1 results. Three questions from my side. The first question is, as you mentioned, that the H1 net profit increased, but we realized that the operating cash flow declined by around 23% and receivables increased by about 17% from the year-end. So what is driving this deviation between the earnings and cash generation? And should we be concerned about the longer collection periods or customer credit quality going onwards?

Yes. Mohammad, I think you have a very, very pertinent and a very valid question. See, the -- my clarification for that will be, see the increase in the receivables is basically because you are -- what you call, the revenue growth in the first half as compared to the second half of last year has been quite phenomenal. If you see our revenue has grown by almost more than $1.5 million over the last 2 quarters of last year. When the base was lower there, that is why it appears that our receivables is also higher. And whereas our receivables, in fact, the quality of our receivables has improved in the first half as compared to the year-end.

Okay. So clear. Moving to the second question. I'm asking about the -- any updates regarding the stake sale in the Anwar Ceramic. Have there been any discussions with any strategic investors? And how do you see this potential change in the -- one of the largest shareholders affecting the company in a strategic manner?

As of now, I do not have any information to share because I haven't heard anything from the strategic investor as of now regarding any prospective buyer in the pipeline or anything. And those -- that I think that pertinent question can be raised in the discussion session when they come up for -- in the next couple of weeks, they also must be coming up. Al Jazeira Services, who is the holding company of ours as of now, they will also be coming up for their discussion session. And then maybe they will have more information on that subject.

Yes, clear. So my last question is with the improving profitability in H1, how should we think about the dividends going forward? Like, if we assume that the earnings continue to recover in H2, is there any possibility to increase the dividend payout? Or would you prefer, like, to retain more cash?

I mean that actually is the prerogative of the Board, okay? But as we have already declared our dividend policy, if you see, we will be taking a very conscious call depending on whether any requirement of cash is required for any expansion necessities and things like, that. Otherwise, the payout should be in line with what we have done in the past. I think Mr. Ashish Bhatnagar, please you can unmute yourself.

Just wanted to know, have you any plan to open the new showroom in H2, H3? Because I noticed that some showrooms are closed in the previous year, which are not open.

Yes. I mean, see, it's a continuous process. We don't have any showrooms of our own because they are all the showrooms of our dealers. Sometimes they relocate their showrooms. And the opening of showrooms by the dealers is a continuous process. In fact, this year, we must have at least about 7 or 8 new showrooms that has been opened in the various regions of Oman itself. So there is no, what you call, dearth of our showrooms in the country today.

And you told about that advantage of antidumping duty, which is driving the sales. So do you aware of the government policy for the next 1 year or something that how long that will be continue? Anything you can give a light on that?

Yes. See, the antidumping has been what you call renewed this February by the GCC Council for -- and extended for a further period of 5 years, okay? So this is the information which we have now. And then the decree also we have, a copy of which is available even when you Google it and check it out, which means the antidumping should be in place for the next 5 years from this February onwards. So unless the government decides to partially withdraw it or withdraw it, which is not going to be very, what you call, easy. And also, the CEPA agreement entered into between India and Oman, government also the stipulates that they are going to, what do you call, the antidumping and any restrictions that is there because of the kind of investigations will stay, and that will not be affected or it will not impact the CEPA agreement, the free trade agreement between the countries. So we reckon or we believe that it should be there for at least the next 4, 4.5 years, assuming that they have already gone by 6 months now.

And you also spoke about the challenges of the cost during because of the war. So do you anticipating that, that will affect the second quarter and the third quarter also or it is now over? What is the current situation now?

No. As I said, there are challenges in terms of the input cost escalation. But that we are now countering by ensuring that we are taking the appropriate price increases to ensure that we cover up on the escalation of the cost, so which already we have effected. And then it shouldn't affect the bottom line if we are able to sustain our volumes and the top line.

You must be continuous touch with the exports. So how you see that the H2 and H3 quarter for the export when you're talking about the Saudi market or the GCC market? Anything you can give some detail.

Okay. Yes, sure. I mean, okay, the export is basically impacted now due to the very high freight cost. See, the freight cost because of the war situation, both the road transport as well as the sea transport, especially sea transport, intra-Gulf is almost nil now because of the situation. We are not able to sell anything. Even by road, which we were able to transport in the -- prior to the war. Now that has gone over the roof in terms of the logistic prices. So once the war comes to an end or at least it stabilizes, the situation stabilizes and then we are able to go back to normal situation, then I'm sure that we will be able to go back to those markets and then see how we can regain those markets. Yes, Manna.

When I look at the margins, it has been improving in the first quarter as well as in the second quarter also it has been improving. I just want to understand like, is this sustainable? Can I -- can we expect this to continue in the second half as well?

Exactly. That is what I was just detailing a little time earlier also. If we are able to sustain the volumes and the top line, the margins are clearly we will be able to sustain it. because as I already explained that we have already trying to improve our realizations to cover up our escalation in our input costs.

Okay. And what is the current utilization rate?

Currently, we are in the range of 70% to 75%, depending on what product and what we are doing. Yes. Kushal.

Hi, Mr. Suresh. Can you provide any -- I mean, the situation of KSA market? I mean what are the demand dynamics and how is the ground reality?

Yes. The KSA market is actually, what do you call -- it's quite stagnant, I would say. I mean we don't see that there is any growth in the market. At the same time, there is no degrowth as such. But whereas as we have already been -- we have also said in our Chairman's report, the increase in capacities there is also flooding the market. So at the current freight levels, we are not able to compete there and the viability of our products entering those markets with such a high transport cost is becoming very difficult at this point of time. Once it stabilizes, probably we can go back there because the volumes which we were looking there as compared to the overall market is very minuscule. It's very, very low. So to that extent, once it stabilizes, we will be able to get back to that market at least to whatever levels we were doing earlier without any problems. Yes, Sandesh.

Yes. I just wanted to understand your mix, your revenue mix in terms of your domestic and your export market, like, how much percentage is from domestic and how much is from export? And even in export, like, in GCC, like if you could give some idea on how much is from KSA or any other countries?

Yes. See, I would say now in the current scenario and especially for this first half, in the -- historically, it has been always about 50% to 55% was local and then 45% to 50% was exports. Whereas this first half, because of the challenges, which I explained earlier, the local market, we have been -- has contributed almost 65% to 70% of the volumes and the balance 30%, 35% is in the export market.

Okay. And my last question...

Predominantly, it is the GCC. The major contributor is in the GCC apart from a few other markets like, Yemen and Jordan and other things, yes.

Also, post the antidumping, how has been -- how was the pricing dynamics in terms of your domestic market? Like how the prices have been -- like how did it started fluctuating since May 29, 2025? How did you see the prices going forward till today?

No, prices have been very stable. Our first goal was to increase our volumes and see how we can increase our capacity utilization than looking at the pricing because when we increase our capacities, there is an advantage for us to amortize our fixed costs over a larger volumes. That was our basic intention in the -- once the antidumping was there. Now we have -- though we are not still able -- I mean we are not in a position to, what you call, ramp up our capacity utilization further higher because of the war situation, we are looking at an increase to offset the increase in our costs. Yes, Joice.

Sir, just wanted to take a stock of the current inventory situation in the domestic market. How do you see the inventory situation, especially when we are talking about lower imports and there are only 2 players, major players producing the tiles. So what's the current inventory situation? And also on the demand situation, how do you see the demand? What -- if you can quantify it, it will be much appreciated.

Okay. See, quantifying in terms of absolute numbers may be difficult. But as a percentage, I can tell you that there has been a substantial reduction in the inventory of the imported materials, which used to be there in the last few years because new imports have not been able to come in because of very, very high freight costs. And also, there has been a substantial increase in the gas cost and what you call, on the input costs, even in the manufacturing areas in India, which was one of the major country which was exporting into Oman. So to that extent, the inventory has substantially come down. That is very visible because we have -- our local demand has considerably increased. And in fact, we are looking at further growth in the Oman market because of very low inventories of outside materials. But on the quantification side, it may be difficult for me to quantify as to what percent. I mean, I would say that maybe what is available in the market now may be less than 10% to 15% of what it used to be earlier.

10% to 15% lower...

It is almost, I would say, 80% lower.

Okay. And how do you see the demand? When you're saying that the pressure from imports are reducing. But at the same time, you were pushing only very small marginal improvement in terms of sales. Is it a function of overall demand coming down? Or is it something else?

No, the overall demand is not coming down. All this time, probably what happened was they were all liquidating whatever inventories they had. So we will have to wait and see. The next 2 quarters will be very crucial for us to understand the spike in the demand because of a lower inventory. Because up to almost the May or June, almost up to April or May, the inventory was being -- the old inventory was being diluted in the market, okay? They also kept certain inventory because they thought probably they will also be able to obtain a higher price and things like that. So now that it's all coming to an end, now we have to see whether it will -- there will be a spike. And as I also said earlier, even our local volumes have gone up pretty substantially higher.