Al Meera Consumer Goods Company Q.P.S.C. (MERS) Earnings Call Transcript & Summary

Hello, everyone. Thank you for waiting, and welcome to Al Meera Consumer Goods Conference Call. Please note that this call is being recorded. [Operator Instructions] I'd now like to hand you over to our moderator for today, [ Shahan ]. Thank you. You may now start the conference call.

Thank you. Hello, everyone. I want to welcome you to Al Meera's Fourth Quarter 2023 or Fiscal Year 2023 Financial Results Conference Call. So on this call from management, we have Razan Rauff, Finance Director; Indranil Goswami, Organization and Business Development Director; Quennie Trajano, Manager Budgeting and Reporting and IRO; Jaylene Vibar, Finance Manager. So as usual, we will conduct this call with first management reviewing the company's results followed by a Q&A session. I will turn the call over now to Quennie. Please go ahead.

Hello, everyone. Welcome to Al Meera's Conference Call for Fourth Quarter of 2023. We will be starting off with the overview of Al Meera's results for the year ended December 31, 2023, to be followed by updates on Al Meera's projects, then we will proceed to questions-and-answers. The following are the financial highlights of the group results for the year 2023. Al Meera recorded consolidated sales of QAR 2.8 billion for the year 2023, an increase of 0.9% compared to 2022. Gross profit amounted to QAR 548.9 million, same as last year, while the gross profit margin was at 19.4%. Rental grew by QAR 2.6 million compared to QAR 83.1 million in 2022. Other income is at QAR 34.5 million. Operating expenditures increased by 11.8% compared to last year. Overall, Al Meera reported a net profit of QAR 180.1 million and earnings per share is QAR 0.88 for the year ended 31st December 2023. I will now give you an update on the group's operations. Al Meera's retail store expansion plans in Qatar and Oman are progressing as planned and are expected to be operational in 2024. The corporate and e-commerce sales segments are also being expanded based on market demand. I will now open the floor to question-and-answer.

[Operator Instructions] We have our first question from [indiscernible] from [ Archon Capital ].

So we just wanted to ask a couple of questions. One, regarding the like-for-like growth in 2023. And the other question being regarding the store expansion that happened in '23 and if there is a possible guidance for 2024?

Okay. As for the like-for-like growth for this year, we have a slight degrowth for like-for-like because of the competition and markets, yes, that's it. And as for the expansion plan, we are expecting to open one of our main stores in [indiscernible] which is coming maybe on Q2 2024. And there is another project that has been currently ongoing and is expected to be opened by end of 2024 or maybe first quarter of 2025.

So just to clarify, you are saying that it's possibly 1 to 2 stores in 2024. And regarding 2023, how many stores were opened during the year?

In 2023, we opened 4 stores, but they were all -- I mean, there were 2 convenience stores and 2 just pure supermarkets. So relatively the sizes were much smaller. In 2024, we are opening up a very big store, which is in [indiscernible], right, so that we're expecting to be open and up and running in Q2 2024. And we are also in the stage of renovating our Mansoura outlet, which once again, we are looking at Q4 to open it up.

[indiscernible] from [indiscernible] Investments.

This is Shabbir Kagalwala from Al Rayan Investment. I had a couple of questions. You mentioned about renovation. So it's only Mansoura store which you're innovating or you have got a couple of others on renovation? And how much CapEx are we expected to spend on those -- on the renovation as well as the under newbuild stores? That's my first question. The second question is on update on Oman. We have seen that the revenue growth has been very strong in Oman in this year, but the profit has -- there is a widening of the loss. So I would like to know when can we see a breakeven coming in Oman?

Okay. To answer the first question as to the renovations. No, Mansoura was one which was long overdue because the -- I mean, if anybody visited that store would know that, I mean, it's in a very depleted state, like. So that's the priority that we have given because that's one of our high customer traffic locations. We also have identified 5 other stores, which also similarly has a lot of traffic or customer traction, which we are , renovating, which is already in the pipeline, and it's probably -- we might look at starting the renovation somewhere around Q2 and completing within, let's say, 6 to 9 months depending on those different contractors and so on. So the renovation is ongoing phase where -- because most of our stores are in a very depleted condition, and it needs to be renovated for it to sustain for the next 15, 20 years. So these renovation plans are going on. And I think we are looking at least 3 to 4 stores on a yearly basis to be renovated over the next couple of years. Regarding the CapEx, each renovation costs us about, I mean, QAR 15 million to QAR 20 million depending on how bad the condition is. Mansoura is a totally new redevelopment. So it's no longer a renovation. So we are building something adjacent to the current location and once that is completed and we move the supermarket over there, we will demolish the existing structure and convert into carpark. So that's just to ensure that we don't lose out on any sales coming in from Mansoura. The other renovations are -- I mean, not minor, they will have a significant facelift of the Al Meera outlet in line with some of the new outlets that we have renovated. Did I answer all your questions, Shabbir, or is that...

Yes. I think on the Oman side, if you can just comment on the growth in Oman and when can we see a breakeven?

Yes. Oman has, I mean, been a challenge over the past couple of years, but at least we are signed -- we're trying to put the strategy into place in Oman. So the [ Emirates ] Mall was one that got opened up and that has seen a significant increase on the sales side. Unfortunately, it has not converted into a bottom line profitability. But we expect because any store that opens up needs about, I mean, 12 to 18 to 24, depending on the locality for it to breakeven. So we expect Oman to at least show numbers -- better numbers than what it was in 2024 compared to 2023. So this is the reason why you see an increase in sales, but not the bottom line, mainly because the time for the outlets to mature takes a bit more time.

Right. And in Qatar, in terms of the store growth and expansion, you mentioned that there is a lot of competition, particularly from the large model -- mainly for modern trade. But do you think there is a consolidation happening or you are looking at M&As or acquiring smaller chains of stores? Or is that on the cards, so just to improve footprint and just to grow in Qatar inorganically?

It's a difficult market like -- because if you look at the landscape of Qatar, I mean, the barrier to entry is so low that anybody can open up a supermarket, right? So the challenge for Al Meera is, even if I go for any M&As, right, I mean that is not stopping him opening up again, right? Unless I have, what you call, clause in my contract that he cannot be directly involved or whatever. So the problem is the barriers to entries are so low, right, in Qatar that anybody can open a supermarket. Even tomorrow, if I want to open, I can open it, right? The suppliers are willing to supply. I just need the outlet, I just need a shelf space and out of it. And there is also no control on pricing because I can charge a 10% premium on what Al Meera or somebody else is, right? And there's nothing stopping me, right? So we are looking at -- I mean, we have looked at in the past and whenever an opportunity comes in, we will look at any M&As or acquisitions or so on. But I might take one supplier out, but I might bring in another supply in -- another competitor, right? So that's why because the barriers to entries are relatively low -- I mean, if you look at how many baqalas are there. I mean every street corner you got a baqala, right? So it's a very fluid market, and we are looking at from a very corporate perspective to see how we can move forward. And that's one of the reasons our sales have been stagnant compared to '22 and '23. We are trying to grow. And one of the ways to grow is to give customers a different experience than a baqala and that's why we have invested a bit more on the Mansoura and [indiscernible] because these are larger format outlets which can affect a different segment of the customers. I hope I've answered your questions.

Yes, it does. My final question is on the online thing. How much currently are you -- how much of the sales is online? Sales and on the white label products, what's the contribution right now? And how are you doing it? How has the performance been, sorry?

Okay. So let me first talk about the online sales, right? So I mean, compared to last year, we have seen a lot of growth on the online stores, right, but still not to the level of normal industry standards, like we roughly do about 4% to 5% of our sales, maybe not 5%, but around 4-ish as a percentage of the total sales on our online platform. So the industry currently on a western markets are around 15%, like the 10% to 15%. So we have a bit to catch up. We are currently working with all the service providers in Qatar, Talabat, Rafeeq, Deliveroo, InstaShop, all of them. We are also working to revamp our own delivery channel, which is Al Meera website itself. So we expect at least a 20% to 25% year-on-year growth over the next couple of years, so that this becomes -- I mean -- it contributes...

Meaningful businesses....

Yes. Something equivalent to, let's say, a Mansoura or Hyatt Plaza or something like that like from a revenue perspective.

All right. And is there any difference in margins in terms of online and/or offline?

The margins -- I mean, -- we don't do any differential pricing on the online platform. But the thing is that the cost, right, is a different [indiscernible] to brick-and-mortar, right? So there is less CapEx on the online, but there is a lot more operating expenses on the online because there is a lot of fees that need to get paid for the delivery channels.

Now we don't have any hand raised at the moment. I'd now like to hand back over to the management for their final remarks.

Okay. Thank you, everyone, for joining this call. I think we can close off the conference call now if there's no other questions.

Thank you very much. Thank you all for attending today's session. We hope you have a wonderful day. Stay safe.