Aluminium Bahrain B.S.C. (ALBH) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Aluminium Bahrain webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Anoop Fernandes from SICO. Please go ahead.

Good afternoon, everyone. On behalf of SICO, I welcome you all to Aluminium Bahrain's 4Q '23 and FY '23 Conference Call. So we have with us today, as always, Alba's management, Ali Al Baqali, CEO; Ahmed Abdulqader, acting CFO; and Eline Hilal, Director of Investor Relations. So without further ado, let me hand over the call to Eline.

Many thanks Anoop for the nice introduction and also thanks goes to [indiscernible] introduced in the call. And I also -- I want to appreciate everyone in attending today for Alba's webcast. We appreciate the time that you all have taken in advance by being up for the upcoming 1 hour or so as we take you through Alba's financial results for the year ended 2023. And every year quarter, we will start -- we have 5 main sections within the IR presentation. And the first section is about the industry major highlights, and I would like to note that all the highlights that you are seeing in these sections are expanded from CRU Market Intelligence. After that, we're going to get deeper into Alba's activities for the full year of 2023 with a major focus on to the last quarter of 2023. After that, our active CFO will give us some detailed insights on Alba's financial performance for the full year of 2023. Post which our CEO will give us more insights on the industry perspective for the year of 2024 and Alba's priorities for the remainder of the year. And without further ado, can we please move into Slide 5 of the IR presentation? Okay. So in this slide, we're going to explore what has happened for the aluminum consumption worldwide over the course of 2023. So as you will note from the first bullet point, the aluminium consumption saw a very modest growth of 1% year-over-year. This is mainly due to stagnant economies curbed by rising interest rates as we have seen back in 2023 as well as inflation, ongoing supply chain disruptions and weak consumer confidence. From all markets worldwide, we know that the Chinese economies have shown signs of stability, mainly thanks to resilient manufacturing factor and a rebound in the auto and consumer goods spending. And this has led to a 5% increase in the aluminium consumption year-over-year. If we move now to the Kingdom of Saudi Arabia. The Kingdom of Saudi Arabia's consumption has plunged by 6% year-over-year, and that has dragged down the demand in the Middle East by about 7% year-over-year. Moving now to the economy in the United States. We've seen that the economy has been transitioning to a slower pace with labor market easing and consumers facing increased cost pressure due to the higher interest rates. All of that have led to a drop of 6% year-over-year in the aluminium demand. As for Europe, the economy has been sluggish and that was caused by tighter controls on spending, rising prices in particularly high inflation, and the weaker consumer interest have led to a contraction in the aluminium consumption of 8% year-over-year. Moving now to the world market supply. The world market supply has seen a volatile increase of plus 2% year-over-year. If we look first at China, we note that the growth in production has slowed due to winter disruption in the South. So we have seen the production in China up by 3% year-over-year, while the consumption was up by 6% year-over-year as per the previous slide. For North America, the production rose by 3% year-over-year, and this is due to different smelters' restarts. For the Middle East, the production was overall flat, plus 1% year-over-year with gains in Bahrain and the United Arab Emirates plus 1% year-over-year, offset by a decline in KSA minus 6% year-over-year. So as you see, the consumption in Saudi Arabia dropped by 7% year-over-year, while the production in Saudi Arabia also dropped by 6% year-over-year. For Europe the consumption was cut back by 4% year-over-year due to weak manufacturing activity. For Russia, the LME stocks of Russian origin have surged to reach 9% (sic) [ 90% ] of the total LME stocks, while the U.K. has imposed additional sanctions of the Russian metal. With that in line and given that the consumption was up by 1%, with the worldwide supply up plus 2%, the world market without China has posted the first surplus since 2020, plus 51,000 metric tonne and the world market is in deficit with China minus 6,000 metric tonne. Moving further into the LME prices and the premium. So for the LME, the LME cash averaged $2,252 per metric tonne in 2023. That was down by double digit, 17% year-over-year. The LME price has fluctuated in the fourth quarter between a low of $2,083 per tonne on 11 December and a high of $2,336 per tonne on the 29th of December. With regards to the inventories, the LME inventories remained low at about 565,000 (sic) [ 566,000 ] metric tonnes by the year-end 2023, despite a 27% increase year-over-year. And Chinese stocks reached a 6-year low. With regards to the different premiums that we rely on, in particular, Major Japenese Ports, U.S. Midwest, and DDP Rotterdam, as you will note in the bottom chart, we have started seeing -- we've seen the premiums dropping significantly, specifically in the last quarter, owing to weak demand and a bearish market sentiment. And with that, we move to the alumina price on Slide #8. So in the first chart, you will see the LME price trend on a quarterly basis. As stated before, the LME price average was the year-end 2023, [ $2,262, ] while for the first quarter, it was slightly down at its average $2,190 per metric tonne. With regards to the alumina price index trend, it was 16% out of the LME price. And the alumina price for the year of 2023, it was $362 per tonne. That was the alumina price average. And with that, we finished from providing you with some general insight on what has happened in the aluminum industry in terms of supply, production and inventories for the year of 2023. And now we dive deeper into what has happened in Aluminium Bahrain. All the information that you see in this section are based on Alba's official news that have been made public on our website and on the regulator's website. So if we start with our first slide, as always, we always like to start with safety. This is the safety in numbers. We would like to state that on the 31st of December of this year, of the previous year, Alba has achieved [ 12 ] million straight working hours without LTI. Actually, last week, Alba has also achieved 14 million straight working hours without LTI. And as you see, the numbers speak louder than the words, if we take a closer look at the chart, we see that the recordable injury for the year were 9 forecasted '23 versus 9 in the previous year. And in terms of LTI, we had 1 LTI and for total injuries, they were slightly higher from 32 in 2022 to reach 35 for the full year of 2023. Moving closer into what had happened in Alba with respect to our updates on environment, social and governance highlights. We have reached another milestone in the construction of Power Station 5 Block 4, with the arrival of the JAC Gas Turbine on the 16th of October, and we have disclosed that via an official press release. In terms of additional safety milestone Alba for the 7th consecutive summer or years, we have achieved 0 heat-related illnesses and injuries. Alba was the first smelter in the GCC to have attained 4-star audit rating by the British Safety Council, and this has never happened before in the history of all smelters. We have launched in the fourth quarter of last year, a mini-Safety Campaign, it's called Safety is Driven by Each 1 of Us as Alba employees on the 10th of December. This mini-Safety campaign was in addition to the official safety and health campaign, which has occurred in the third quarter of the year. We have also released the sixth edition of our ESG report. It used to be previously called sustainability report. Of course, with quality assurance received from Deloitte & Touche Middle East. And with regards to our SPL Treatment Plant, we have exceeded the target converting -- by converting waste into valuable HiCal, which is the treated product of the SPL, 40,185 metric tonnes of HiCal produced against the nameplate capacity of 30,000 to 35,000 metric tonnes, which is the nameplate capacity of the Spent Pot Lining treatment plant. Slide 11. This is a repackaged slide. So Slide 12, it's a repackaged slide, where we are refreshing you and refreshing also ourselves by the major priorities underscoring our ESG roadmap. And you know, we have 6 major priorities, decarbonization, one; the second priority is Green Energy & Aluminium; the third 1 is Circular Economy & Secondary Aluminium; the fourth 1 is Employee Welfare; the fifth 1 is Collaboration & Partnership; and the last 1 is Transparency, Communication & Due Diligence and this is what we are doing as -- in terms of keeping you posted and updated at Alba. If we take a look at the nice time line in front of fuel, this is -- this time line has been made in line with the government of Bahrain directors on what we should be doing by 2035, and we have listed in the bottom what we would like to achieve and what we are currently doing. So as you see, Alba has previously issued a tender to establish its own solar farm that has the capacity to produce 6.23 megawatts of solar energy, the tender has been awarded, and we will be giving you more updates by the CEO in Alba's priority in the last section within the presentation. In terms of Efficiency Upgrades, I have noted in the previous slide that we have received the gas turbine by Mitsubishi and we are anticipating the commissioning of Power Station 5 Block 4 within the last quarter of this year. Once fully commissioned, that will help us to use our greenhouse gas intensity ratio by 0.5x. Commissioning Line 7 and Retiring Lines 1 to 3, this is going to be based on the completion of the feasibility study within the first quarter and the second quarter of this year. In terms of what we will be doing starting from 2025 to 2027, we're looking at a remelting facility that will help us reach our green aluminium targets. And government collaboration, I would like to highlight that Alba had issued a public tender last year to establish -- to call vendors to establish a solar -- big solar farm, all renewable energy that has the capacity to provide us with at least 500 megawatts and through an offtake -- long-term offtake agreement. More information will be shared in due course with respect to this kind of initiative. Moving further into Slide 13. We have happily achieved and had a all-time production record of more than 1,620,000 metric tonnes, which is a 1.3% increase year-over-year. A disclosure also has been launched in [indiscernible]. Moving further into our operational highlights for the year on Slide 14. So our sales volume has rose to 1,603,000 metric tonnes despite the market challenges that we have seen previously within the industry highlights, and that is corresponding to plus 0.2% year-over-year. We have closed last year with an all-time net finished production of more than 1,620,000 metric tonnes. Our value-added sales averaged 68% of our total shipments versus 66% in the previous year. Our VAP sales volume has exceeded for the first time more than 1,095,000 metric tonnes, which is an increase of 5.1% year-over-year. We have also inked on 23 January 2024, a 10-year gas supply agreement with Bapco Energies with a fixed price structure for the first 5-year period at $4 per MMBTU. Also another exclusive was posted on 23 of January this year. We have been the recipient of 2 major Investor Relations award for 2023 by the Middle East Investor Relations Association, MEIRA. We have also upskilled more than 660 employees through our various programs at Alba, such as Al Jisr, Skill Matrix and comprehensive Training and Development Program which are designed for every single employee in the company. We have also celebrated our female employees on the occasion of Bahraini Women's Day on the 8th of December of last year. And through our consistent efforts, AL HASSALAH Top up, we have maintained our $115.34 million and achieved savings exactly as what we have achieved for the year of 2023. With regards to our sales by geographic footprint, we have maintained our sales in Bahrain. In fact, we have increased our sales contribution to the sales of Bahrain from 25% in 2022 to a 26.2% for the year of 2023. We have -- also have another 24% in the Europe continent followed by the Middle East and North Africa region of 20.6%. Asia, slightly higher than Americas at 14.9%, almost 15%, while American sales is at 14.3%. It's worth to note that as we stated before, the Bahrain with 26.2%, locally in Bahrain and rest 73.8% of our product are exported worldwide. So our different offices was, which is in Zurich, in Atlanta, U.S. as subsidiary all the sales offices as well in Singapore. All these details have been included in our Report of the Board of Directors which is attached to under Financial for the year of 2023. With regards to Alba's breakdown by the product line. So we have seen Billets at 31.9%, almost 32%. We have 5.8%, which is the high-purity metal. This is also considered as the value-added products at 5.8%. We have sold as well a slab, rolling slab, 8.6% of our products were sold in rolling slab. Foundry alloy is at 22%. And the rest is divided between liquid barrel, well that goes directly to Ingot at 18.8% and the remaining 12.9% in terms of standard Ingots. With regards of the financial KPI on Slide #17, this is a very high level, a screenshot on the major financial KPIs. So our EBITDA was impacted by a double-digit drop in the LME price, so it was close to [ 7%. ] And dropped our premium more than 30% for the full year of 2023. That has brought our EBITDA down to $804 million, down by 46% year-over-year. Of course, the same also applies to Q4 because of low LME prices and premium, and you can check that in the last section of the presentation within the appendix. With regards to the net income, it was driven by lower EBITDA levels for the full year, we have $314 million in profit, down by 72% year-over-year. Again, this is always to lower LME prices and premium. Free cash flow, it was impacted by working capital changes. So for the full year, it's about $652 million, down by 47% year-over-year. And for the first quarter, it was $255 million, down by 50% year-over-year. Also on the 14th of February last week, our Board of Directors have recommended a final dividend of $60 million for the year end of the 2023, noting that Alba has processed and paid to its shareholders as an interim dividend for the year of 2023 $60 million that was paid after the 31st of August of 2023. So with that it is supposed to be -- in short, $60 million for the interim dividend which was paid and the $60 million to be paid after the Annual General Meeting on the 7th of March that will have a total dividend of $110 million for the year ended 2023 corresponding to 35% dividend payout ratio. Our share price has increased by 5% year-over-year. So the highest in 2023, it was KWD 1.275. Today, we're not too far from that as of the trading day for today. As we have ended last year at KWD 1.145. In terms of our operational productivity, if we look at the total head count for the year for our full-time employees are at 3,150. So we have increased our full-time employees by 4 employees versus last year. And in terms of our contractors, we have slightly -- the number has slightly went up from 1,025 to 1,113. In terms of value-added sales, as noted before, we have closed 2023 with 68% versus 66% for 2022, and of course, an increase of in terms of absolute numbers, it was more than 1,096,000 metric tonnes versus 1,042,000 metric tonnes for 2022. And accounts receivable days' trend will almost have same -- the same 46 versus 45. As for the inventory days, we have reduced our inventory days by 7 days from 110 in 2022 to 103 for 2023. In terms of our net debt to EBITDA, this is in line with our covenant ratio with lenders. We have ended 2023 with 1.74x, you will see that it is slightly higher than the year-end 2022. This is owing of course, to lower EBITDA, which is driven by lower LME price and lower premiums. And with that, I will end this section, and I will leave the floor to our acting CFO, to take you in detail into Alba's financial performance for the full year of 2023.

Thank you, Eline, and good afternoon to all. I will be taking you through the financial highlights for the year 2023 in comparison to the year 2022. So starting at Page 22, looking at our metal sales' bridge. For the year '23, we have reported total turnover of around $4.085 billion down from last year by around $800 million, and this is mainly contributed because of the drop in the LME prices as well as the index premium prices that was offset against our high sales volume and this contributed positively around $109 million. Moving on, on Page 23. And this is where we look at our sales volume as well as with our premium. When it comes to the sales volume, we have managed to increase our sales volume overall by 35,000 tonnes. This has mainly contributed because of our high value-added sales of 54,000 tonnes and our liquid method as well has increased by 23,000 tonnes. When it comes to the premium, our average premium in the year 2023 recorded at $289 per metric tonne reduced from last year by 35%. Moving on our operating and other costs overall that has been a slight improvement from last year by around $20 million. And this has really contributed positively because of the drop in the raw material prices as well as we have seen the LME prices drop. We have also seen the raw material prices drop after the inflation. And this was offset against the high spending in our construction, mainly because our finished project has been placed from this year comparing to last year. We're also noting that on the energy price in 2023, our gas price we had $4 from January at the end of the year, whereas in 2022, the gas price of $4 started from April onwards. So now looking at the EBITDA position, our EBITDA for the year at $804 million, our EBITDA margin is 20%. As we highlighted in the previous slide, the main reason of the drop is really because of the LME and the premium index prices. But also there has been favorable changes when it comes to the freight charges comparing to the year 2022. On our cash flow approach, we ended the year '23 with our cash position of $159 million. This contributed positively from our operations, mainly from the EBITDA and even the working capital changes that has been starting to improve when comparing to last year. Our spending continues on the maintenance activity of $281 million. Block 4 Project is spending for the year is $115 million and also the dividend for the year '23, we paid a total of $373 million. Now looking at the summary highlights on Page 27. So the key event here, we had LME price drop from last year to this year that by over $400 per metric tonne. Also the premiums indicated by Eline had dropped by [indiscernible] from last year to this year [indiscernible] percentage. So this result with our average of $804 million and our profitability for the year ended at $314 million. This is all from my side on the financial highlights. Now I will hand it over to our Chief Executive Officer to go on with the remaining of the presentation. Thank you.

Thank you, Ahmed. Good afternoon, good morning, everybody. I will go through very fast on the industry perspective. I will give you a summary on what happened in the market. We feel that the market is still within time due to many reasons. One of them, Eline already mentioned at the beginning of the presentation about the high interest rate, disruptions in the supply chain, because of the Red Sea as well as the inflation is still is in the higher side. But Alba remain -- lower demand comes from the construction sector, which is still we are feeling -- putting pressure on the demand. However that's on the Market Intelligent Report and all the conferences we attended and many meetings with the customers, the market will be a little -- will be start picking up from quarter 3 this year, would see the demand as well as the price it will see increase slightly. In terms of the major raw material. For the major raw materials, we have Alumina, is the most important or the bigger cost for us, the price a little bit on the higher side because of Chinese, they are importing some alumina and some on the rest of the world. But in terms of alumina, aluminium fluoride and carbon product like GPC, CPC, I know it's -- there are quite -- almost slightly similar to the quarter 3 and quarter 3 prices. A liquid pitch, we feel that the price is going down little bit, which is a good indication for us. Liquid pitch are normally, it's for the liquid pitch as well as the carbon project, I mean, it's almost -- they are following the oil price. If we move to Alba priorities. In 2024, definitely, our top priority is safety. We completed the 14 million hours without LTI. We can start the year with that good momentum in safety, and we are pushing all the shopper floor people, all the employees, all the contractors to maintain the same motivations to increase our safety, because we believe that if you have a good record in safety, if you are net safer player, definitely, this would reflect directly on your projections, efficiency as well as the profitability. We are already progressing, as Eline mentioned you in the update on our ESG road map to achieve the target of net carbon 0. But for you to understand that our big challenge is to secure the renewable energy, either from the solar farms or from the wind, but this is a big challenge for us. In terms of efficiency, we are doing a lot of things in-house to improve. One of them will ensure the supplying for the Block 4 and the power station and despite itself, it would use almost half tonne of our carbon intensity. We are going to push our productions to achieve at least higher than what we achieved in 2023. This is a challenge for us, but this is really the mandate and objective for all Alba employees and the management to achieve it as well as also we launched a new program e-AL HASSALAH. e-AL HASSALAH is 3 years for the grounds to achieve $150 million. In terms of other certificates like ASI and we are doing and recertified for this one. But we are heading to complete the power station 5, have looked for [Foreign Language] by quarter for this year. This is a good thing to achieve it. And for Line 7, actually, Line 7 we give I mean, a new mandate to act to complete a plus 3 estimate by quarter 2. This should be happened in February this year. But our Board requested more information competitive to provide in order to make a final decision on Line 7 to go ahead of that. By this, also, I would like just to highlight there is some objectives. We have it in my Majlis beginning of this year. These are the 4 main objectives for the company and this objective getting every executive and departments in order to draw their both objectives to achieve this thing. The safety mirror is the top one, which means we want to help all Alba employees to come from their home safe, work at Alba for 8 hours safely and they reach to their houses also. Safety is the objective for us. Then strategy refresh. We are already working with the management and with the Board to refresh our strategy because we have the 5-year strategy, we'd like also to refresh at the 1 which we achieved, we have to, I mean, just focus on it. And the new challenges because of the sea ban and other environmental issue, we have also devoted as a double priority for us in order to achieve it in the coming 3 years. e-AL HASSALAH, as a new program, it is a digitalization one. We are going to introduce the Industrial 4.0 and we have to cope with all these things in the future in order to certify Alba for Industry 4.0. Definitely, our human capital is the most important for us. We are a plan to upskill and reskill all the employees, especially the longest-standing employees. The one who we were not getting the opportunity to continue their studies, we are going to support them with this technical studies in order to increase their scale to cope with the challenges we have in the future. By this, I think we are ending the IR presentation. I will leave the floor for Eline to handle the Q&A session. Thank you.

Melanie?

[Operator Instructions] We will now go to our first question.

Melanie, I cannot see any question in the box.

Yes, our first question comes from the line of Akash Kumar from SICO.

Congratulations on your good results.

Akash, can you -- if you do not mind, can you please increase the tone of your voice because we are [indiscernible].

Yes. Can you hear me now?

Yes.

Yes. I have 2 questions. First 1 is on Block 4. Can you give us some colors on how much efficiency gains you're expecting either in dollar terms or any indication on the efficiency gains from Block 4? And second is on the coke and liquid pitch costs. Are you seeing a declining trend there? So these 2 questions, please.

Yes. For the Power Station at Block 4, the efficiency is increasing our potency overall. We are going to any -- but I think this is not the information you need. We cannot acknowledge any in public. But it's improving the efficiency as well as reducing the consumption of the gas. This is the main thing for you to understand. Once they took for the operation to reduce our consumption in natural gas. In terms of the liquid pitch, yes, the price is declining. And if you compare it to quarter 4 because we secured quarter 1 and the quarter 1 supply because we have a long-term supply agreement, but the price is on a quarterly basis. We see there is a big drop from quarter 4 to quarter 1.

I would like to add to Akash, 1 thing. So the efficiency of Power Station 5 is 54%. And we will start seeing the benefits once Block 4 is fully commissioned. So we would see the benefits by the end of 2025, because it will be commissioned hopefully, within the Q4 of this year. So you will need to wait 1 year to see the full results of the benefits or the efficiency that Alba would experience with the commissioning of the Block 4. And that will also lead to a reduction in our greenhouse gas emission in density ratio by 0.5 tonnes of CO2 per 1 tonne of aluminium product.

There are no further questions from the audio. So, I'll hand back to you for the questions.

Yes. Melanie, I have a couple of questions. First is on the alumina price. Can you please tell us what are you all seeing in the index right now? What is the price right now that you all are seeing in the index? And secondly, just a follow-up to Akash's question. The coke and pitch prices have dropped a lot over the year. I mean, in the 4Q results, was the entire gain realized from the drop? Or do you think there is still some potential for cost to fall in those raw material costs to fall in the first quarter?

For the alumina, the index is right, it is within the range of $350 per metric tonne. Okay? And value I think almost 2 tonnes to produce 1 tonne of aluminum. For the liquid pitch, another major raw material, you will still realize the price, I mean, it will be coming because we are buying the material. The impact will be of 2 months or 3 months like value we will see.

Our cost per tonne there is an improvement, and we do foresee that the price continue to drop, will have even further improvement in our margin.

Okay. Understood. And regarding the 500-megawatt solar park, have you seen any expressions of interest so far? I mean, what is the progress on that? Any time lines you have in mind? Or anything -- any update on that would be very helpful.

We have many letters received from the interested investors but the main challenge for them is to allocate the land because 500 megawatts, you need at least 10 to 13 kilometers to secure that. Bahrain is an island, but not open for any idea to come from these investors. These are to have it Bahrain a smaller skill, not necessarily 500 megawatts, even if we get 200, 300 or whatever we available, we are going to take it from the market.

Do we have any other question, Melanie?

We have 1 more question from the audio. Our next question comes from the line of Nour Eldin Sherif from Arqaam Capital.

A couple of questions for me, if I may, if you can take it one by one. So regarding the expansion of Block 4. Can you just share with us how much does it represent of the current capacities? And you mentioned that it should result in lower consumption of natural gas. Can we get round figure about how much of consumption in terms of percentage is good result?

I can tell you what is the capacity will be generated from a Block 4. Block 4 will equip [ 31 ] additional megawatts, 680 megawatts -- 680 megawatts. And we are roughly using now our consumptions for megawatts is around 2,700 megawatts, which is a big contribution almost in. And we are doing to close and efficient power stations, this will contribute in our efficiency and reduction in the gas consumption.

Yes. Okay. That's clear. And can you give us guidance on the CapEx for 2024?

What?

CapEx.

So CapEx. The total CapEx on a yearly basis, we are around $100 million of the maintenance CapEx.

Yes, that's maintenance. Regarding total, does this include the Block 4, the remaining CapEx?

No. Block 4 is separate CapEx.

So for Block 4, we have almost the majority when it comes to the milestone, I think what is left for last year. So in 2023, we have paid around $100-something million. So in 2024, we expect it to be the large -- a lump some payment. But there will be some retention until the commissioning is upon with respect to all requirements and then that came to us and maybe as a common sort of practice of any major projects.

Yes, clear. And on dividends, I've seen that it came lower for 2023, which makes sense because of lower earnings. But the payout ratio was even lower. So can you give us a reason behind it? Do you see that the balance sheet is already stretched. How would you see the dividend going forward?

So for the dividends, yes, you are right. As the dividend payout ratio, 2023 is lower than 2022. But the reason, the main reason because we are planning to go for expansions, and this is expected by the shareholders, that we have to, I mean, need to be reasonable in paying dividends. And dividend payout ratio of 35% is not a small percentage, which I feel is within industry not high, more than the 35% also.

I'm going to say, just to give you some market intel. Go ahead and proceed with your question.

No, just on the expansion Line 7. So do you think that would be mainly from debt and the free cash flow generation of the firm?

We still not decide, because this is part of the Bechtel's Feasibility study. We are in the process also to assign or to award a bank to see the feasibility of how to finance Line 7, either from, as you said, what will be the contribution for equity side, conventional loan or ECS, that it will be provided at later stage once the Feasibility study is completed, we can share it with the banks and the banks they will give us the proposal.

Yes, clear. I'm just testing if there could be lower payout ratios going forward for dividends?

It depends. I cannot confirm now. It depends on how we are going to finance Line 7.

Okay, clear. My last question on the supply chain. Do you see any disruption from the Red Sea conflict?

From -- for inbound, we don't have any issue because majority of our satellite come from the major raw materials from -- either from Australia or from China or this it's not coming through the Red Sea. But from customer side, while we are shipping to Europe, yes, but we already communicated. But we don't have a problem with disruption, but the problem is increasing our insurance as well as the Fed is increasing a little bit. But we are taking the longer route which is making any a little bit delay to our customers. But this is already communicated with the customers, and they revised their plan and delivery.

And the higher freight cost is on the client?

What did you say?

The freight cost is mainly on the client?

No. The freight cost actually for the short period, it will not be on the client, but if this continues it will be reflected directly in the premium, because the premium will adjust automatically. Because part of the premium is covered the insurance and the freight cost.

There are no further audio questions at this time. So I'll hand the call back to Eline.

Thank you, Melanie. We have received a question on the screen from Bahrain National Holding from Aditya Dugar. So the first question and despite VAP share increasing, why declining LME premiums in the last quarter? So the premium, of course, it will decline if you check [indiscernible] quarter-over-quarter, the LME price has been going down. So this is 1 reason. Another reason is the managed market sentiment. The consumer spending is not as high as before. So people are extremely cautious when spending and that has led to lower consumption quarter-over-quarter, and this is why the premium have 1 done. Why you have spend down year-over-year more than the overall sales decline? The sales in the U.S. are not down year-over-year. I don't know how we got that -- how you got this. In fact, our percentage of the year is down, it was slightly in terms of number because the percentage is higher. The percentage is higher year-over-year. If you see that -- I wouldn't consider this as a fully decline. But let me answer your question this way. First, the overall sales into the local market has increased by 25% -- to slightly above 25%. And if you check, we stated before in the industry highlights, we expect to our -- what's happening in the U.S., we sincerely that the U.S. has been transitioning into a slow -- into a very slow pace in terms of what the consumer are facing in terms of the cost pressure. And that has led to a strong drop in the year-over-year consumption in the United States. So Alba will not be an exception for that. Overall, the consumption fundamentals in the U.S. have slowed down overall in 2023. And if that has slowed down, you will definitely see a move in our sales in the U.S. Having said that, our sales year-over-year has increased year-over-year. And not only that, I mean, whatever was not shown in the U.S. was shown everywhere, I mean, other continent or in other regions. So the overview is within the industry, we didn't do any losses. In terms of the insurance and transportation cost pressure, and that has already been addressed by the CEO in directly, if we're going to see a persistent pressure on the freight or what's happening today in the Red Sea, the premium will be adjusted accordingly. And will the insurance cost be given by Alba on FOB? So that has already been addressed. For the KSA cost update, there's no update as of today. For any further update, you will have to wait until you hear from us officially on any progress with respect to the KSA cost. Any other question, Melanie?

There are no questions from the audio at this time.

Thank you very much. We take the opportunity on behalf of the CEO and acting CFO to thank you for joining us for the last 1 hour over the call. If you have any questions, at least feel free and drop us the questions in [email protected] and we will address them if we have missed addressing any questions you wanted to ask over this call. Thank you very much, and we will connect with you for the first quarter of 2024 webcast.

This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.