Al Maha Ceramics SAOG (AMCI) Earnings Call Transcript & Summary

Good evening, everyone. This is Nagu Prasad from Al Maha Ceramics. We welcome you to [ MSX ] discussion. I mean our new CEO, Mr. Rajeev Singh will take the lead in there. Yes, sir, please.

Yes. Good evening, everybody who so are able to join, and I welcome all of you. And on behalf of Al Maha, I would like to just showcase you how the progress has been and how we have been progressing in the present situation. And meanwhile, after the small -- show you a small presentation. And once that is over, I will, in fact, invite all of you or maybe whoever wish to ask any question or anything related to us, I will be happy to answer that. So Nagu, can you just put the presentation online?

One minute, sir. Yes.

I'm sorry for a small glitch what is there. And I think it will be soon starting the presentation. Yes, take it on a presentation mode, Nagu. Go ahead. So gentlemen, I think we know how the business had been and the situation of the ceramic industry per se had been very challenging over the years. And last year versus this year, the situation remains same with a lot of challenges in hand. And in fact, the results are visible in front of you, wherein if we see the country-wise sale and how it has been performing. And as compared to 2024 to '25, there has been slight increase in terms of the volume, but since the prices have gone down considerably because of heavy influx of cheap imports coming from India, most importantly and where they have the market share of more than 70% in this market, that has really driven down the prices and which has impacted heavily in terms of the results. So go to the next slide. I would like to tell you how the situation had been month-over-month. So we have tried to create a chart wherein the key parameter depicting the snapshot month-over-month starting from January '24 until February. And remarkable here is that I joined in the beginning of November '24. And I joined on 6th of November, and I'm here since last more than 4 months. So the capacity utilization, which was 44% and eventually after June with the purpose, it went up where the stock accumulation also happened. And then you can -- Nagu, can you mute yourself?

Yes, sir.

So you can see how the trend had been in terms of the production vis-a-vis sales. And as you can see, there is an improvement of sales starting the month of November. And whereas if you can see till October averaging out to around [ 250,000 ] for the of the year. After October, the trend had been encouraging, and it is like [ 300,000 ] plus to [ 350,000, 400,000, 403,000 ]. So -- in fact, we have achieved the record number of -- record figure for the last 2 years in last 2 months. And emphasis is also to reduce the stock, which has accumulated and gone up. So if you can see the inventory value in October, it was [ OMR 1.3 million, ] which has been brought down at [ OMR 1.1 million ] and not really affecting the -- Nagu, bring to that mode.

One moment, sir. One moment, sir.

I'm sorry for disruption. So I was saying that if you see the capacity utilization, it has gone up as compared to the month and it has not -- it has -- we've also gone for a reduction of inventory. So it clearly indicates with the improvement of the sales that there is no inventory accumulation. And whatever we produced, we sold, more than that we sold. So that's the reason how the inventory went down. Now receivables, which went up to DOS 211 days in terms of number of days in September has come down to 167, primarily also because of the volume of sales, which is happening, plus also a lot of monitoring in terms of collections and receivables. Next. Now if you see key indicators, I will take you to a 5-year journey and with the best part -- in fact, a lot of you might be knowing that I was heading Al Maha as a CEO from the period 2017 to 2022 early. And during my leadership, you can see we had the best of the result at one point of time. Then I left, and I rejoined after 3 years. So I'm showing you from '21 to '25 how the journey had been, how the capacity utilization and how the prices had been the -- major impact coming from the prices because a OMR 1.735 to OMR 1.76 what we were having at that point and that also premium pricing over the competition. It is affected badly because of heavy competition and the price of Indian products going almost everyday low and presently still -- even if when we are saying that our average price is OMR 1.4, the average products which are available in the market is around OMR 1 to OMR 1.2. So that's the situation. Very remarkable here is that since last 1 year or maybe 7, 8 months, Al Hael was standstill. And my first focus was that I joined in November. And in this January, we restarted the production, and you can see the sale. Even March, we have run the plant. And with all probabilities, we will start Al Hael operations, and we start with 1 line. And within the next 3 to 4 months, we will have 2 lines production. And the plan is to successfully run the porcelain operation there. Next. So last 4-month figure, only Al Maha as a stand-alone, if you see, we have improved considerably in Sultanate of Oman, which is our domestic market from an average of OMR 128, we have gone up to OMR 204. Yemen has been stable for us, many challenges, but still we are holding our foot there. UAE is an improvement, though the February was a little lower. But overall, if you see, there has been a lot of improvement. Saudi Arabia, we lost a big chunk of market share because of the policies, and every business suffered. In fact, not just the tiles and all the companies, but also other products because of imposition of sales tax there, and lot of hurdles they've created even for the companies which are operating in GCC. And Saudi becomes a market totally nonviable because of heavy input cost there and the landed cost, which is coming to the consumer. But nevertheless, if you can see [ OMR 32,000 ] in February shows our reentry into Saudi with porcelain and also ceramic. And we hope that we will have a good chunk of business coming from there. Remarkably here is that exploring new market, which also the dynamics and the market -- a lot of dynamics, which has happened over the years. And to brief you with the Ukraine war, with the war going on between Israel and Palestine, a lot of dynamics has changed. And Russia, which used to be a major importer from Europe has now become the major importer from India. And same way, if we see a lot of duty impositions coming from U.S. for Indian products. So that's a market which is emerging for us. Similarly, Bahrain, Qatar, they've already imposed antidumping. And most likely, Oman will also go for the antidumping, and that's where we see the green light in the end of the tunnel, which will definitely bring bonanza for the ceramic industry. So our efforts to look for new market is definitely on, which is helping us to remove our dependability from Saudi Arabia and other markets, which are not fetching good margins. And Iraq is one of them. Jordan is another market, Africa. And soon, I think you will see many new markets opened by Al Maha Ceramics. Next. So if you see, it's just an indication wherein I can say that while we were making losses and the last year were loss-making year, even though November -- December month was good, but you can clearly see the company coming up from red to green operationally from December onwards, and that's a sign where I can really see that we will bounce back and it will be again a profitable company this year for sure. And our capacity utilization, which is around 76% as of now, I intend to take it to 100% in the next 3 months to 4 months' time, along with the porcelain support of around OMR 200,000 to OMR 300,000 per month. Apart from that, reducing my inventory, which has gone up to [ OMR 1.3 million, ] we have brought it down to [ OMR 1.1 million ] to at least another OMR 300,000 to OMR 400,000 lower than that. So we will recover our working capital out of there. Prices, definitely when you are reducing inventory or selling old stock, there is pressure on the prices because old products are not sold at the same price what you fetch from the market. And that impact, you can see. But I'm sure with the new product development and also the new line, what we are thinking to launch a new range of products. Idea is that to enhance our reach and go to the customers who are having more of B2C base rather than B2B base and also introduce products which are complementing your production as well as also able to fetch better margins in the market and which are differentiated products in the competition. During my time, when I was here in 2017 to '22, we did launch some very innovative products, which is like antibacterial tile, much before COVID. [ Bharat ], which is a cool tile and also -- this anti-slip tile conforming to international standard of RA11. But somehow, we underplayed these products. And these are some differentiated products, not every company are producing that. So efforts will be to increase the share of these products, which are differentiated, which are very next-generation products, wherein the company image also get boost up with the product category, what we will be showcasing to. So these are the highlights. I think -- and you can see even DOS of the finished goods have come down, receivables have come down. Profit, we are trying to go up. And next slide, I think it's end of the slide. Thank you so much. So I think just a glimpse of what we have been doing for the last 3 to 4 months, and as we also intend to meet all of you every quarter, and I will try to do that. Individually, I've been talking to people whenever and wherever they wanted me to pitch in and give my opinion or viewpoint in terms of how the operation had been. But I think this is a platform where we invite everybody, and we'll keep on doing that. I'll ask anyone whosoever has got any question to just -- you can start, and I'll try to answer that.

Mr. Rajeev, and thank you for the presentation.

Can you speak louder? I'm not able to hear.

Yes. I'm audible now?

Now, better, yes.

Yes. Just a few queries on the externalities. Firstly, how do you see the industry shaping up? There is a lot of oversupply issues. Scenario was much different when you left in '22, and the scenario is quite the other way currently. And this is an industry structural issue. How do you think you can navigate the current scenario?

Deepak, to answer your query, I think the situation has not changed in tile industry for the last 10 to 15 years. The industry had been growing at a decent rate of 8% -- 7% to 8% Y-o-Y, and it is just a matter of fact where the share is moving, whether the share is moving to Italian or Spanish or to India or to China. Initially, when I recall the days, China was the main -- in fact, they were targeting all the price-oriented market, which now has been taken over by India. So industry as such, the usage of the tile is not a problem. There is a market which is growing. Definitely, the shift is there in terms of the lighting of the customers from ceramic to porcelain, porcelain also from lower sizes to the bigger sizes, labs pitching in. But I think for us, sometimes it is also better for you to have a small size in a market, which is having so much of dynamics, I think to protect myself and to come out of my size is so small in such a big market. So I can definitely find my way in terms of survival and also finding right customer to sell my products. So my constraint here is that my one of the plant is red body ceramic tile where the usage of those products are not very prevalent in the market. But at the same time, we have introduced some products which complements our production and which gives an added advantage to the customers. And in fact, from a average of [ OMR 250, ] we have reached [ OMR 400 ] without doing much of the changes. But with the new product what we have in our pipeline, I think reaching back to the 100% capacity utilization is not a big deal. And plus, we also get complemented with Al Hael porcelain tile, which goes to the same buyer in terms of bigger sizes, 61x20, 60x60, 20 mm thick, which is actually trendy products. So that way, it is complementing the sale of Al Maha. So market challenges are there. It depends, challenges were before from China. Now it is from India. But now with the government policies, which are really going to help us. Some of the market already implemented, like Bahrain, Qatar, and U.S. is going to be another market, which will be implementing a lot of hurdles for Chinese and Indian products and also Oman. We are having all probability to have the antidumping to get signed here and that will be a very added advantage in terms of giving boost to the industry.

That's a very interesting perspective. It gives some confidence to the investors. So one follow-up question on that. Al Hael, when do you think you would be able to turn it back to profitability?

Come again, your voice again got very -- I was not able to hear you.

I was just following up on the Al Hael profitability. When do you think you will be able to ramp it up to a breakeven level?

I think if I'm going as per we plan in next 6 months to 7 months' time, I should be able to do that. See, the plant has got a very different issue, which you all must be aware of. If I have to say the operational profit, operational profit will come within the next 6 months' time. But the liabilities, what the plant is carrying in terms of the interest burden, in terms of the payables from the previous era, that is really holding the footwear we are negotiating with the bank in terms of whatever help or relaxation even with the authorities like Madayn and all, how they can support us to. But plant is viable very much in terms of the quality of the production and also the target price what we are trying to take from the market. And we are happy to inform you that while Indian tiles are being sold at OMR 1.6, OMR 1.4, our price in the market for Al Hael is OMR 2.2 and for some of the product going up to even OMR 5. So that's not easy. It's something where we are trying to really harp on Made in Oman quality product, and there are customers who are ready to do that. So we plan that initially for a year, we'll try to run the 2 lines, and then everything goes well. Then third and fourth line, we can also look into. And then I think eventually, over the period of time, past depths and other things will fall in line. So operational profit, I'm sure 6 to 7 should be enough time for us to bounce back.

Okay. The last question is on the profitability of the group. I mean, it is totally dependent on Al Hael currently.

Not really.

Do you see any other impediments that can happen?

Your voice -- Deepak, sometimes your voice is coming very clear and sometimes, I'm not able to hear.

I'll place my question in the chat room, that would be better.

Okay. Meanwhile, if anybody has any question? Okay. So if I see the size of the market vis-a-vis our market share will still have a long way to go, and our market share will not be more than 3% to 5% in Oman. And in fact, if we consider porcelain and all put together, it should be close to around 8% to 10%. And slowly, it is improving, as you can see, as compared to the last year where it was around [ OMR 128,000 ] till September or August. Now we are trying to touch around [ OMR 200,000 ] per month. And during good times, our figures were around [ OMR 225,000 to OMR 240,000 ] per month. So traditionally, also, when we were making good profit, Oman was contributing 40% of the total sales and 60% was coming from the export sales. So Oman definitely is a market which is fetching us a better margin. So we intend to go to the level what we were there. There will be an impact of Indian title for sure even if we are expecting the antidumping because some of the prices are so low that even if you are adding 40% or 42% to duty, they will be able to compete. And -- but I think that's the dynamics of the market and market had been always like that, Iranian product, Chinese product, Indian product. We have to see our path like what type of customers you're targeting. We are not into project segments where the money or the payments are not coming for 6 months or 7 months. The rotation of money is a problem. We don't want to dump material to the dealers wherein they just take the material and don't pay us. So keeping that in mind, we are selecting customers, not like whoever comes, we try to just dump in the material. So keeping that in mind, we will ensure that not only we have a sustainable growth, but also we are able to fetch a better price from the market. So this is what we are planning for the Oman market. Thank you, Deepak. Anyone else, any question? I hope I've been able to really give you a glimpse of what we are doing, what are the challenges, how we are trying to mitigate those challenges. And I'm sure in coming months, we will interact more surely in the next quarter as well because this month is a month where a lot of activity happening, Ramadan, Eid and all. Despite that we are trying to hold our volume, but I'm sure like with the next 2 to 3 months, you will definitely see a good amount of improvement coming into what we have been doing so far. Any questions, gentlemen or lady or otherwise, we'll say goodbye to all of you for joining or otherwise, you can send us mail or can call me if one-to-one you want to discuss if you have any doubt or any clarification you require, I'm always available. Thank you so much, gentlemen. Thank you, ladies and gentlemen. I can see just one lady, Sushma. Thank you so much.