Al Maha Petroleum Products Marketing Company SAOG (MHAS) Earnings Call Transcript & Summary

Hello. Good morning, assalamu alaikum. Okay, we will start our -- what to call, this is a presentation about the results of Al Maha Petroleum Company in 2024, which is already announced in last AGM, held it last Sunday. The company is, what you call -- your company is doing very well this last year, and the results is really promising to be better for the next -- or for 2025. We have a short introductory video. We'll present it now to you about what's happening in 2024 and the activities that conducted. It's not all, of course, it's very short about the main subjects that company introduced ourselves on it. So please, if you can put that video. Of course, with me here the CFO of the company, Mr. Hiriyanna and myself, Hamed Al Maghdri, the CEO. [Presentation]

Okay. This is a short about what's going on in the last year at Al Maha Petroleum company. And now we will shift to the results of our achievements in 2024. Mr. CFO will give you a brief about that.

As we highlighted, we achieved OMR 6 million profit, it's the highest in the industry, and we also shared dividend payment of 85%, share prices stands at [indiscernible] in the industry in December with a capital [indiscernible] and as we mentioned already, we have total network of 2 fueling station which is the largest in the industry. And of course, we are the #1 top industry plant. This is the main features and [indiscernible]. Here, I can just look at the price moment, which is gone down at 6% when you compare it to our average basis. So just 93.3 [indiscernible] 2023 and now at the end of 31st December it increased to 34.7% [indiscernible] movement and [indiscernible] as you know [indiscernible] and then there's movement in that. And now we just have a quick look at the financial highlights. Sales volume has grown by 6% from 2.1 million liters to 2.24 billion liters [indiscernible] 125 million liters of growth, which is around 6%. And sales in real Omani terms has grown by 4% from OMR 493.8 million to OMR 514.4 million. And there's a growth of -- gross profit has grown by 2% despite reduction in the oil prices. And our net profit stands at OMR 6 million compared to OMR 6.3 million. The main reason for the decrease in net profit is the reduction in the oil prices, which affected our aviation margin. So this is in short the brief financial highlights. And if you look at the segment's growth, how we performed. Retail growth, Retail segment grew by 6% in terms of volume. Commercial segment has reached a growth of 10% over last year. And aviation slight growth of 0.4%. And lubricants 7% growth over 2023 and which is a significant increase of 28% over 2023. So this is the brief...

Our -- actually, our main business or our business is growing, the effect of net margin or net profit because of the international price for the oil market during 2024, especially the last quarter, that's what affect us. And we are using international pricing for the aviation sector, which is really the big drop happening that affect our margin. Otherwise, the business is growing as we have a business plan set for and maybe better or so -- or actually, it's better. Our focus, if you notice because our business plan is doing diversifications, key main business going on, and develop it to better stages, opening more outlets everywhere in fueling stations. But if you noticed in the nonfuel business, we are going -- the result is every year it's better than the year previously. And that's as per the plan set for the company.

And as you have seen in video, a lot of initiatives have been taken in 2024, which is going to affect us positively in the years to come. So overall 2024 is a great year for Al Maha. And this year for all of us, we would like you to discuss with us any questions, any issues you want to address, and we are happy to discuss the same.

Congrats on the good numbers. I just have one question on your expansion into Saudi Arabia. I read about 17 stations being planned going forward and 1 station in January that has been already in place. So could you elaborate on your plans outside Oman? And how is the trend locally as well?

Thank you very much. The plan for us actually, it's 2 way. One of them is a franchise with Saudi Arabia, first fuel station was opened in North of Riyadh. Now which is under construction, our logo, our franchisee will be there for 17 station in the Riyadh city also. Our investor there, he is also planning to go to beyond of Riyadh to Medina and Mecca. And maybe we announced soon about the mega stations, which is more 30 dispenser in each road to Mecca from Jeddah. This is one side of franchise. The other side what we are doing in Saudi Arabia is actually lubricant and lubricant through our service center there, which is the brand AMPRO. The new station or the last station opened in the Riyadh equipped with the lubricant brand we have, AMPRO. And this will be also in different locations where we are. Our plan actually to be heavily available to our products there in Saudi cities, especially in the main city. And that's one. The second -- actually what we are doing, second activity, we have also, as I mentioned about the nonfuel business or related to the fuel, which is mainly the lubricants and also what is associated with the lubricants, we are doing some operation in Tanzania in Africa, especially in Zanzibar. Now we have also an agreement to do the same in Iraq and in Egypt along with Saudi Arabia. So this is our plan actually. We are going very calculated steps, we're not just only jump and do the business without studies. That's why we are not that fast and also not very slow. And I hope this year will be more and more activities because we already completed the studies of the market and all the effects, which is -- can be taken care before you enter to any market or already considered. So our operation could be better this year and especially in Africa. That's what we are doing international. From the internal side, we have a business plan. This business plan is focused to diversify. Diversification is not working in, for example, in other sectors, no, in the same and related to the oil sector, which is utilized allocation correctly as much as we can, where we are available. And this is -- we change or we are continuous changing our fuel station from a fuel to a business center, meaning business or service station. And that's included all types of services or required daily, especially the services for the vehicles and also what is related to time consumed when you are available for maintaining your vehicle, wash it or fueling like beverage, groceries and sitting areas. So all this is taking care in the new layout. We are working on it. And it will be this year, especially, there will be about 4 service centers will be opened, 2 of them in Barka and the other 2 will be here in Muscat. And if we get all the permits ready, maybe will start also and [indiscernible] inshallah. And these types of service centers it's equipped with the fuel, it's equipped with the fuel for the fuel station, service center for the vehicles, electric vehicle charging system and also beverage coffees and grocery and other services related to daily consume. That's what we are doing. So you will notice, inshallah, by maybe third quarter of this year, the center or the fuel station we have, it is not the fuel station, which is regular fuel, just fueling and go, no. There is some other likes will be and some other activities, maximizing the allocation where we are, and we'll maximize the benefit from that location. And that's what we mentioned on the diversification. Diversification of going abroad with different approach or franchisee, which is less risk as you all know. And internally now going with the services rather than just on the fuel. I hope I answered your question.

Yes, that clarifies. So these 17 stations will be coming up in 2025 in Saudi Arabia or is it over a period of time?

No, this 17 stations will be in 2025. In fact, it could be any more than that, but what they committed, our partner there to do this in this year, December.

So it's a franchisee, certainly, there will be a revenue-sharing agreement. Could you throw some light on that?

Franchisee is -- yes, it's a sort of revenue sharing, but it is a throughput. Franchise, it's less risk on Al Maha itself. We have participated with the experience of the company we have in operation of the fuel station, operation and other activities in the -- related to the fuel, like the codes and systems and regulation we have, procedure. All this is required in this franchise, and we have to provide the training for the staff there. Our logo should be available strongly there and is there, what you call it, same like what we have it here, meaning we are doing or spending the same know-how to all employees there. And this agreement with this investor, he is committed he cannot go beyond our operation procedure. He have to comply with all our operation procedure. And in the same time also, we have to handle the liability of train all this stuff and all this is, of course, actually additional by the way. On top of that, we have a throughput, which is we agreed on per liter and that's all the fuel station in Saudi Arabia, which is having Al Maha logo will be connected with automation system we have here in center in Oman in our office. This is actually what is the meaning of franchise we are doing there. So the risk is low, but we are enjoying revenue because of our experience.

Just what would be your guidance on the local fuel stations? We have 252 now. So would that be...

You mean from the numbers side?

Yes, 252 currently.

Yes. It's currently 252. We are planning this year to do -- if we finish all because there is really a bit of -- not slow, but a bit of requirement, which shall be satisfied, I mean, for the approvals. And this is and we try our best to go fast than what is going on now, I mean each approvals or a total approval required of time is about 8 -- 6 to 8 months. So we start from last year, to gain all approvals for the centers we are going to build this year. We are really planned to do a minimum of 6, if we success. 3 of them is really big station. It's more than 20,000 square meter each. And this is here in a Muscat. We have 2, each of them about -- one of them is -- totally about 40,000 square meter for both centers. And we have also in [indiscernible] same, 21,000 square meter business center. So -- and also in Salalah. So it is a big station, big activity there, and we are expecting really bigger revenue from it also, inshallah. This is new. I mean by 6 centers new, but we are also not forgetting our old own fuel station, we do something for a revamp or rehabilitation. And that's 8 also, 8 stations will be rehabilitated and renewed to cater or to include the services I mentioned before.

I was just wondering because your competitors are slowing down and you're going faster than them for the last 2 years, at least. And you continue to have a faster rate of adding stations. What gives you the optimism? Is it in terms of volumes? What differentiates Al Maha compared to your competitors? Why are you going in additional tangent is what I would like to understand?

I like this question, by the way. And why you are against us. Yes, this is why because of our business plan, and this is really a success story. What we are doing is not different much from our competitors, but the approach is difference. So what we do, we study the location, carefully. And before we put our foot or feet there, we see what is the required in that area. For example, His Majesty Cities, so [indiscernible] city, we are going to do a center there. But where it is, we have 2 locations, one inside the city and one outside the city. We are going to do the outside, which the demand is high now and we will start soon since the first phase will be ready. Second things, where we are available, we are trying to include services according to the market survey. We do a market survey, requirement and market research. And we feel, yes, these places need to be expanded, need to be developed. So the approach of each company is totally different and it depends how you are looking to the market. Our look into the market is always positive. And really, and even when we went outside, we haven't gone to invest Al Maha shareholder money cost. We've done something called franchise. Franchise, meaning less risk, more experience gaining and also at the same time, financial is also available there, and we gain from it. So our approach is a bit different. We can discuss it, but if you come here, I will explain to you more. Any other questions?

Since there's nobody else. I'll ask you 1 more question. Would acquiring other stations of other companies, would that be an option? Have you been approached for similar requests? Because I can see that some of them are, like I asked you earlier, some of them are slowing down, they might be willing to give up some of their stations. So will that be an option for you?

Everything open. Yes, maybe it's an option if it is viable. If it is an economically or business side is viable for us, yes. I mean we are -- as I mentioned, we are a slow in deciding where we have to hit or where we have to go ahead with because as you know, this is -- I mean we have to be very careful about the shareholders' money also and also the company reputations and how it is expand. But yes, there is, to be honest, a thinking or an idea of expansions could be internally, could be maybe outside also, international. But that depend on the studies, we are doing it from time to time on the market and in global, in total. So it is a Oman or outside. So yes, why not, maybe there will be. Do you have anything to say about where we are and in terms of -- the company is -- if it is just on a general note for the audience, maybe -- we are actually -- in Al Maha focusing in 3 ways of, what you call this, for serving the market. One of them, market tests. We have to see and we have to search and look what is exactly the market need and look from the company. And the second one, to do certification or to do -- I mean, to satisfy the requirement of our customers, we have to make for him easy to approach us. So one of the easy approaching is introduce AI, like Al Maha PLUS, now we are thinking about this Al Maha PLUS to be expanded to other activities in the station there. We are seriously studying to make a station or fuel station to be the hub. To do this, we have to go for the second, what you call it, pillar, which is the plan. Business without plan is a fail always. We have to plan our business on what we want from this business. To complete this, 2 pillar, we have to take care about the human resources we have and who are really implementing and also planning these approaches I mentioned. So without the human resources, strong in understanding the needs of all sides, the customer and the market and the company shareholder. If we don't have human resources equipped with this idea or this thing, I think we cannot go ahead with all our activities. So the third pillar is always come first or it is the base for everything, which is the HR. You have good equipped with all specialties, experiences HR, I think the success will be always there. Without that, it could be there success, but mostly, there will not be more movement ahead or to better stages. So that's what we believe here. Second thing, we believe in something called customer-centric. What is customer-centric? Our whole focus, our whole business actually built on customers, customer requirement, customer desire, desire customers need and this is our vision. If the customer -- and that's what is also approved for the last 3 years when we've done the market survey how the customers satisfy our services, and it is really good progress. How it is happening? Because we have good HR, good employees, that's the most important. But this is just a general message. I hope someone there to give -- to ask questions or interesting in Al Maha activities. Hello?

While somebody wants to ask question I just want to discuss about energy transition.

Yes. That's very important.

Yes. Energy transition is not happening at the speed that one would expect it. So especially on electric vehicles or hydrogen vehicles, so still we believe our oil fuel or fossil fuel holds the key, so how do you say about the condition?

Well, look, this is really very important questions. And also, it is very important to plan accordingly. When you are going -- when you mean internationally, you hear there is a lot of activities and research going on, mainly in the one which has become now a bit old, not there, which is electric vehicles. Electric vehicles is really the one which is before everyone vote that will be the future of the mobilities in international, in the world. And it continue with the same momentum of growth. And then hydrogen came on the other medium for energy, which is really very powerful. Hydrogen is the one which is the medium, which is really or energy which is the cleanest in the atmosphere because it's just only in simple H2O. H2O is hydrogen plus oxygen. And this 2 has never harmed the environment. It is good for the environment. So water split it to 2 chemical compound, which is the oxygen, can be used in a lot of activities in industry, especially in medicals or other industries sectors. And hydrogen, which can be used and one of the most efficient energy available now. The research and when you read about these 2 sources of energy, it is like it is tomorrow will be implemented. But to keep hydrogen safe, to make it better for use, it takes time. Why it take time? Because hydrogen is available long time, especially in the military side. But now to make it more civilian use, it is like a mobile GSM telephone before and like a computer in your hand. So this is what's going on. So the future will be for the hydrogen is better than the other because to produce electricity, to charge the battery, you need to burn other types of energy sources like gas or fossil fuel or a range of diesel in some places. So you are not contribute positively to the environment, you're maybe contribute negative. Yes, it's a lot of -- I mean, saying yes, we'll use solar, but solar is not always [indiscernible] especially in some countries internationally. And at the same time, also it's costly. Solar itself there is a problem for environment, especially the waste material of solar cells. So the hydrogen is the future could be happening very soon according to researches or take maybe maximum to 5 to 10 years. We can see mobilities, there's a usage of hydrogen better than now. Thus, the future will be more -- for us, we have to be thinking seriously about hydrogen technology for the country Oman, actually one of lead country in hydrogen projects. And the government really strongly encouraging to produce hydrogen, there's a lot, we have a lot of agreement going on, signed between the government and Ministry of Energy and Minerals and with international corporate to produce hydrogen here in Oman especially in Dupont. So that's one of the best hydrogen for green hydrogen, which is used in renewable energy to produce this hydrogen. So yes, we have to be also in Al Maha thinking how we already -- inshallah.

And talking about the geopolitical tensions across the region, how do you think Al Maha, as your opinion, how it would affect on our right price, our demand, business in general going forward?

Well, Hiriyanna, this is -- we are in a country which is very safe. Country which is trying to be neutral all the time and that gives us a flavor. Internally, we are not that affect. Yes, this could affect international trade for the oil price and could affect us from the aviation side a bit because we are in that business. But totally, that will not be -- could be better for us because the oil price -- if the oil price becomes higher, it's better for our economy. So internally, since we are a company, exposed much internationally that will not affect us much. But yes, of course, the oil prices also affect very sensitively to any geopolitical issues going on, especially we are in a very strategic internationally, which is GCC and Arabia, 1/3 of the oil production came from these countries. So yes, there will be, in total there is some effect. But for the Al Maha itself from aviation side, could be on the effect. And we are trying to do other activities to cover that effect on that fluctuation.

Anybody else? Actually, we have strong communication itself with our investors community. In fact, [indiscernible] capital representatives from those -- come from those...

So all information available every time, anywhere.

Visits us regularly and the investor community to meet us, to come and meet us and have more information of our business, any point of time you are welcome. And talking about one more thing, about talking about ESG compliances, environment compliances, one of our plans we -- how we can make our stations more greener and...

As you know, Hiriyanna, we produced the first report for ESG entries, I think, he uploaded in our portal. So it is available there, I mean, about our activities and how we are complying and what is our future also plan for be more and more in these sites. Environment and social governance is really one of the important for the company. And we are maybe classified as a company deal with fuel and it could be some harm for the environment. And that's why we are compromising that if there is any happening of farmings by more contribution to the communities. And that contribution is in various ways, one of them could be the increase, the greeneries in our locations and the other location, actually, in fact, like gardens can be used by the public and also try to use the technology to avoid emissions could be happened during the fueling, especially in the big fueling of bunkering or in aviation, and that is always going on. To use technology, avoiding any evaporations of that fuel, which could harm the environment. Our responsibilities for the community is always we are putting size budget that's used for improving the society requirements and communities in the country in different activities which is health or educational or environment, like make more greeneries, make more renewables, especially for some, what you call, this walking distances areas and also educational side. So our activity there is really before ESG is a requirement, we are doing our responsibility and attended each time. Yes. I think this is better to be afternoon, still morning people are -- Ramadan, they are still not charged.

Do we discuss about digitalization, which are the [indiscernible].

Yes. I mean, Al Maha really, since 2021, we started our automation program. This automation is really or fully digitalizing our business operation of -- on the sites where we are available. So what's exactly the automations that now we have in the company, we can control all our fuel stations from the called operations center here in the head office. 252 stations, we can know what's going in each of them exactly on spot, on seconds. This is give us more, what you call this, availabilities or leverage of the no operations in more and better and excellence. So we know leakage, water contamination in the system there, on the tanks, fuel sale, different fuel types sales in each nozzle, not even each dispenser. So we have better control on the fuel which is really -- we can't relate this to ESG because when you control fuel better, leakage and losses of this fuel could not -- could be controlled very fast and control the harm on the environment itself also give us leverage in the operations. Quick to operate, to attend any issues, obstacles could happen in that very fast. Third thing is controlling our system availability. There are things help us even improve the efficiency and the services in the center and give us more, what you call, this is information about the activities of seeing each point of sales or fuel station. So all this is -- and there is a cascade of what you call benefits happening from these automations, give us more to be more digitalizing in customers' interactions especially in our Al Maha PLUS and applications, promotion, we are doing from time to time, easy access for customer to his portal and what is activities, if you like, going on especially for fuel cards or NSS, this has all helped us a lot to improve the operation. And of course, this is also help the company to reduce cost, very important.

Any further developments in AI, artificial intelligence and incorporation of those at artificially AI in processes, probably we should also would help us in...

Yes. Of course, artificial intelligence is one of them. I mean if you are not with you are out of the market because of the -- IT and artificial intelligence is the future language than very soon, and you see some examples in some fuel stations they do robot now for fueling, okay? It could be -- and sometimes in these types of weather is very helpful. Second thing is also this fuel station is a sort of very high in and out, and people visiting fuel stations because they have to fuel their cars, or recharge their electric vehicle. So if it is not equipped with artificial intelligence or future, what you call, this future science and will help because when you are equipped with the future science or artificial intelligence will help to give you better results, better decision because you have -- the information is with you, easy. So this give you better data to help you for future plans. Of course, any fuel stations, any artificial intelligence also, it can be in controls of that activities, operation, it gives you -- and now you enter a fuel station, you can go to other fuel station and welcome back to us, you was visited our fuel stations so and so. This is all cannot be happening without all this improvement in the science, and AI. So we -- if we are not, that means we are out of the business. And this is really what's going on in the world. They said new future business is all we'll be heavily dependent on AI, which is we have, yes. All right. Still 5 minute. Hello? There is 2 way, one is they're interesting in our business or they are not.

Or maybe they are happy.

Or they are -- yes, they are very happy.

Or they're waiting for dividend increment.

Of course, of Ramadan. Especially the last part of Ramadan. The last Sunday. This is very important. Everybody is attending and worship, I think all of you. Preparing for Eid.

I take this opportunity to wish you all a very happy Eid. And if you have a -- we're always open for any questions, so you can always reach us. Or you can visit us, [indiscernible] disclosed on the website [indiscernible] so you are welcome to address any of the queries, if you want any information, we're always there.

Yes. Our offices doors are always open, all our shareholders or also customer. If there is any of types of ideas to improve the business or even complain or whatever, we have a call center, by the way, and you can use it to say exactly what is ideas you have to improve the business or at the same time if there is anything you feel you need to complain or to say your opinion about it, everyone, most welcome. And really, we take it very serious from that side. We are -- each complain or each ideas or suggestions, we study it and we try to implement it in the business because your opinion is always a movement for us.

Well, there are no more questions. Probably, we will clear call.

Right, thank you very much, and I appreciate your attendance and also listening to the CFO and myself. And we'll see you, inshallah for the next quarter. All the best and happy coming Eid [Foreign Language] and plan to [Foreign Language]. Thank you very much.

Thank you.