A'Saffa Foods SAOG (SPFI) Earnings Call Transcript & Summary

[Foreign Language] First of all, we welcome everybody in the [Technical Difficulty] so as you know, all the time we present data for A'Saffa. Our operation [Technical Difficulty] this year, we will finish 20 years of operation. A'Saffa [Technical Difficulty] only the and biggest integrated company [Technical Difficulty] catching to the final project. Our vision, as all of you know, one of the most successful project diversified food company in the Middle East. And A'Saffa exceed to [Technical Difficulty] 10,000 tons in 2004 up to [ 42,000 ] metric tons in [ 2022 ]. And last year, we run the last expansion, which is 100% success [Technical Difficulty] very efficient production for the whole year. I will allow my colleague, Mr. Yasir Salmani, the Deputy CFO, to present the finance.

Good morning [Technical Difficulty] year-end 2023 and the group results [Technical Difficulty]. So I assume that everybody [Technical Difficulty] financials that the company revenue was almost similar to the [Technical Difficulty]. However, if we go to the gross profit, we can see a significant increase from 20% last year, and this is mainly due to the [Technical Difficulty] in the sales realization. If we -- the expenses side, you can see that more or less there is a cost control happening in the expense side, which resulted to an improvement in operating profit and profit before associate loss and tax. So if we go to the profit before associate loss and tax, you can see there is a significant increase from last year for about 116% from OMR 1.7 million to OMR 3.75 million. And we have one of the associates. There is an improvement in the loss from the associates investments. So you can see that the share of loss reduced significantly also from OMR 800 million to OMR 1,428 million, which gives us a profit for income tax to OMR 3.321 million as compared to OMR 912,000 only in the year [ 2022. ] We have recorded deferred tax. This is due to the merger between A'Saffa Logistics and the parent company. So we had to record the deferred tax, which gave us a reduction in the net profit. We recorded a net profit of OMR 2.6 million as compared to OMR 700,000 in the last year, which is equivalent to 70% increase from the last year. If we go to the next slide to show a snapshot and a brief of the balance sheet. And the significant movement in the balance sheet happened in the current assets only, if you can compare it with the last year and the group results. That is mainly due to the movement in the inventory. There is an inventory increase, finished goods increase carried forward in the year 2023, which was liquidated successfully in the Q1 this year. And also, we have a small increase in the term deposit from OMR 2 million to OMR 1.3 million. This is the brief results of the group performance. If you have any questions, we are pleased to answer.

Thank you, Yasir. Any questions from your side, you are welcome to ask and we will be ready to answer.

This is Abbas Muslemi from Vision Capital. Congratulations on a fantastic 2023 and the first quarter '24. If you just help me understand the industry dynamics a little better in terms of how big is the Oman market? How much is it growing at? What sort of imports are coming in? If you could just help us understand the market a little better, I would appreciate it.

I will give a brief. I think, A'Saffa, you already -- you are aware about A'Saffa, is an integrated poultry producer. And it is the largest producer in Oman, producing 40,000 metric tons per year. And if you go to the total imports -- I appreciate if you make your...

Can you keep the mic off, if you...

Mr. Nikhil, if you can mute yourself. Okay. So if we go to the total imports, we -- the estimates of the total imports in Oman is around 200,000 metric tons. And the production in Oman, we are estimating it -- I mean, we don't have an official records, but it is just an estimate. We have -- we know our production is 40,000 metric tons. We are adding the other producers. It will add up to organized, unorganized sector, it will add up to around 100,000 or a little bit less. So the rest will be imported. The main import product is coming from -- currently coming from Brazil. That is the import is happening from there. We have seen -- we saw -- I mean, the prices we have discussed in the previous sessions that the imported prices were coming, I mean, significantly aggressive in the previous years, but we are seeing now there is a slow correction on the prices where they are less aggressive in their promotions and -- I mean, marketing campaigns. So this is our brief.

And has there been any changes in terms of putting some sort of an import quota on these -- for example, when I speak to other industries, they're talking about some quality checks, some sort of quotas, which will ensure that the products are meeting specification in Oman. So I'm just -- is there any talk in the industry where imports that are coming into Oman have to sort of meet certain quality criteria? So is there any talk of that or that market continues?

The country has -- there is a food safety center in -- which is part of the ministry. And they -- part of their job is to check the quality. And -- I mean, either from the safety point of view and documentation also point of view, the ministry is checking. This is what we are, I mean, officially are aware.

Yes. Just to confirm what Mr. Yasir said that, now the focus from the company to secure the safety food coming to the customer. So they increased their demand of quality control, their food safety requirement. And this has happened now for the last 2 years. And they are doing a great job. That's minimize all this product, which is not meeting the international standard.

This makes a lot of sense. Yes. And it's something that obviously, Oman, we need this. So just a follow-up on that question. A'Saffa is working close to 100% capacity utilization. I think when it comes to prices, export markets are not controlled, but in the markets in Oman, there's a price control with PACP, right? And you've not seen a price increase over the last how many years? And the follow-up question is, when do you expect the next price increase to come in, if at all? Or you're very comfortable with your current pricing?

Just to clarify that the export market also, all GCC almost has price control. So this is not only in Oman. With regard to -- yes, go ahead.

I just want to add that the price -- because to answer your question, I think for the last more than 15 years, A'Saffa has not increased the price. I mean, A'Saffa is following the country regulation. And to answer your question that we have a plan. [Foreign Language] Our results are good. Our performance -- we are more focusing on our performance efficiency, not on the price. So that is where our focus is that we will achieve the best efficiency and to control the cost. So we are not eager for the price increase.

That's very helpful, Mr. Rafique and Mr. Yasir. So then it makes me look at your first quarter numbers in an exceptional light, right? Suddenly, your sales went up from 15 million, 16 million in the fourth quarter to 22 million, profitability jumped as well. Now Mr. Yasir mentioned in the brief explanation that there was an inventory buildup that was sold in the first quarter. Is there -- was this anything related to the first 10 days of Ramadan coming in and maybe there was some sort of a buildup anticipation of Ramadan? Or are there other factors? Basically, I'm trying to understand how sustainable are your first quarter numbers based on your current capacity and the cost of raw material.

Yes. Let me put one information. The last year, we -- in the operations side, we start to deal with the new breed which is Ross, A'Saffa was dealing with the different breed in the previous year. And this breed is showing us a very efficient production in the level of agility and growth rate and the low mortality also. And due to the high biosecurity procedure we are following, it increased our efficiency. That add for us a lot of almost more than 1.5 million extra chicks in the year of 2023, which is adding. Over that, the market also was a little bit slow in 2023, which is built for us inventory, which we use it efficiently this quarter and is adding this wonderful results. Yasir, do you want to add something here? Rafique?

Yes. I just want to add that to -- in fact, you have answered yourself, Mr. Abbas about the Ramadan also. Yes, there is -- we always plan something because the Ramadan demand is always very, very high. So just to keep that -- because our objective is the food security of the country also. So that is where some stock was consciously also -- I mean, carried forward from the last year. And even honestly, when we ended the first quarter, now we don't have -- we were having only for a few days stock. So that was the carryforward stock with some strategic decisions also. But at the same time, because our production is now 150,000, 160,000. So sometimes 6, 7 days, 8 days extra production -- normally 1 month stock, we are -- that is the standard for us. But sometimes 8, 10 days extra stock that add up, which can go easily in the following month. But in this quarter, the -- that wonderful sale, it is mainly because of the carried forward stock.

Okay. And then there should be some normalization going forward from quarter 2, quarter 3. Will that be more in line with quarter 4? Or have they been -- will it be more in line of quarter 4? Or you are seeing better yields and better margins even on an ongoing basis. Forget the inventory buildup that you spoke about. But on an ongoing basis, has the situation changed compared to last year?

It will be more in line with the quarter 4, but there is some more improvement we are expecting.

Right. Okay. And -- yes, please tell me.

No, because one thing you asked that are you -- I remember you asked that are you operating at the 100% capacity. We are operating at the 100% capacity for the '23, '22 also. And that is the reason, unfortunately, until unless we are not increasing our capacity, we cannot -- I mean, increase the production, but we are trying our best to increase the -- some capacity also.

And how much is that in terms of percentage of your current -- like you're saying you have current capacity of 40,000. What sort of expansion you're expecting to come in this year? Is that [indiscernible] at 15%?

Yes, 15% for the full year.

And when should that come in, in the second quarter, third quarter or perhaps later on in the year?

From the second quarter -- from the Q3.

Excellent. And I have a bunch of questions, but obviously, there are other people who want to speak to you. So I just have one more question, and I'll go back in queue. From the debt point of view, I was noticing that your interest cost in the fourth quarter, if I just divide your net finance costs by your loan outstanding as of the third quarter, it's around 8%. And there has not been any debt amortization in the sense that any repayment over the last year that I saw. What sort of repayments are you expecting for debt going forward of this OMR 35-odd million that you have? And is 8% finance cost, isn't it a bit high for you guys? Or am I missing something? Is there a onetime fee that I'm missing out?

There is not 8% finance cost. So I think that the -- there might be some calculation, I think, need to be checked because the cost is not 8%. And the other thing is we have substantially reduced the working capital finance during the quarter 1, okay? The term loan, if we look at the term loan, the term loan repayment, we are paying -- I mean, on the regular basis, but the more -- I mean, the bigger amount will be starting from the next year. Yasir, you want to say something?

Yes. I just want to add that maybe you are looking at the -- you should have looked at total borrowing, because there is a movement from the long term to the current portion of long-term loan. That also, as Mr. Rafique said in the -- especially in the Q1, but we are discussing the 2023. But in the Q1, there is a OMR 2 million movement from the long term to the current, which is due in the next 12 months. However, if you look into the short term...

Maybe, I think, Abbas will be calculating on the quarter 1, I mean, the ending balance, which has been reduced, but the cost will become for the -- Okay, go ahead, please.

Yes. So if you compare then the year-end 2023 with the first quarter, there is a significant repayment happened around OMR 4.6 million.

Excellent. Okay. Because I don't have access to them. I think, the first quarter numbers have not been published yet. You still have 6 days to publish it. So maybe that's why I don't have the latest numbers. I was reflecting on the previous one. But I take yours and Mr. Rafique's comment that the cost of borrowing is lower than 8%, and there is an amortization schedule that you're going to start paying debt from the term loan side from next year. I'll go back in queue. Thank you very much for your answers. I'm sure people have many other questions to ask, and then I'll come back in case there's some time. Thank you very much for your time.

Any more questions? Again, any more questions?

This is Bishen Bhalla from Vision Capital. I had a few queries. The first one, you mentioned that Q1 '24 performance was a function of inventory buildup. You expect the performance to improve. You expect a 15% capacity expansion to come through in the third quarter onwards. You also mentioned that the government prudently is making some quality checks to ensure that there's the right amount of -- the correct amount of sort of imports coming to Oman. Beyond that, fundamentally, have you seen any sort of restriction on imports, not to do with the quality, but the overall volume in order to promote the local players? You have seen of the recent sort of situation with regards to a preference to local products and sort of some boycotting of imported goods. If you could just give us some market landscape shift, if at all, that you've noticed?

Your question is -- just let me brief your question. You are asking is there any kind of action taken by the government to improve the lives -- the poultry sector by restriction the imports or -- this is the question?

Yes, correct. One is on the quality, which I understand. But beyond that, even on the quantity, has there been sort of any step from the government to sort of, let's say, restrict the imports from players in Oman to give some sort of parity or some sort of preference to local players? Because overall, it's still a deficit market, right?

Just to make -- Yes, Rafique, just -- according to our communication with the ministry, the main decision from the ministry is to secure the food safety and quality to restriction. So those all product, which is not meeting the standard, which the government bring that will not be allowed to import to Oman. This is the main decision taken from the government, which is make a difference really, because there was a lot of product, which is very cheap product, low quality coming to the country, and they sell it in very low price, which impact the local production. So government and ministry focusing in this part mainly, which is making a huge difference in the term of volume. Rafique, do you want to add something here?

Same thing, no different.

All right. So now if I put whatever you said together in context, the market size is 200,000 metric tons. A'Saffa stands at 42,000 or 40,000 metric tons, which is just 20% of the market. You've been operating at 100% utilization through 2022 and '23. So you're already hitting those production numbers. It's a price control market where you do not get any benefit of price increase. You've been discussing with the government, but there's been no sort of traction on that. So effectively, where does the -- just to understand, where does the upside come from? You have an incremental organic capacity expansion of 15%. But beyond that, barring some sort of relief on the input side, which we've witnessed now on corn and soybean. Am I getting something wrong? Or effectively, it's a pretty much straight up model where these are the driving factors. You already are servicing the market. The price is controlled. So where does the upside come from, if I may just understand? Or do you think this is effectively what the new norm is in terms of margins of 10% to 12% on the bottom line?

The basic, what we are getting, what we are benefiting, that is -- if you look at, the foremost thing is the economy of scale that A'Saffa is enjoying. So that is the top most because we are enjoying the economy of scale. We are benefiting from the operating efficiencies, which is one of the best, not in the region, but in the world. So that is the other thing and the control. And yes, the -- some, despite, -- I mean, the price because -- which went very high in 2021 and '22. So some correction in those prices, that is also helping.

With regards to subsidy, Mr. Rafique, we understand the company has qualified for subsidy previously. What is the current status with regards to the input prices for corn and soybean? Because they have drastically dropped. In fact, they are probably -- if not mistaken, at probably a multiyear low. So if you could just give us some inputs with regards to subsidy on the input feeds?

So even when the prices went -- I mean, corn went 100% increase, even then the subsidy was given for 1 year, but that was honestly negligible. That was nothing 100,000 something. We were facing the millions increase in the cost. So subsidy, there was no, honestly, realistically subsidy during all this year. And if you look at the now -- I mean, we didn't get any subsidy. I mean, it was a very, very small amount, which was given. But if you look at now, now, yes, the prices have come down. So because there is no subsidy in Oman, even during the 2011 to 2016, probably the subsidy, that was not -- that was the price -- I mean, the compensation, because if the prices were going high, so the government was going above the threshold, the compensating for that price. So now that threshold is -- the prices have come down to that threshold. So now our side also, we are following of any, I mean, the compensation.

Okay. That's on the compensation side. But overall, as a margin expansion, the drop in prices definitely helped the company?

Yes. Yes, right.

Okay. Understood. Next, sir, could you just give us a brief highlight. I'm sorry if I missed that on Osool Poultry. We've seen the loss. You said it's halved from 800,000 to 427,000, but what's happening there and sort of what's the strategy there? What's the outlook for Osool Poultry?

Loss have reduced? No, Osool Poultry, [Foreign Language] I mean, earning profit now. There is no loss in the Osool Poultry.

2022, your share of profit of associates was a negative number, if I'm not mistaken.

2022?

'23. '22 was 800,000. And 2023? I'm referring to notes.

'23 was the first year, I think, which is with the full production. And still Osool was building its market and its clientele, I mean, building its brand also. So which is [Foreign Language] Osool has successfully, I mean, the build the brand and the market and established the quality also, so which is benefiting. Osool has started benefiting from that also. Suhail, you want to take something?

As Mr. Rafique said that year 2021, year 2022, Osool start operating 100% capacity, and it's normal to face the challenge for the first year. [Foreign Language] they improved their efficiency. Now they become one of the best producer in the region, not in Oman only. And we start enjoying the profits since from the last month of 2023 and carry on.

[Foreign Language] That's great news. That's good to hear. If you could now just give us a brief overview on the export. We've seen the exports build up gradually. Currently stand, I think at 67-33 or 70-30 split of local versus exports. What is the market that you're targeting? And is it because of the price differential? Or is it because the local market was flooded with cheaper goods, that's how you saw diversification. Can you just give us some insights over there?

Yes, go ahead, Rafique.

Okay. So the A'Saffa has -- I mean, we successfully established the export market starting from its operation from the beginning. The brand is very well established in the export market, particularly in all the GCC countries, except the Saudi Arabia. And the -- I mean, honestly speaking, because Oman is our major market, so now if you have seen the brand is already established, and we are having quite the demand from there. But our demand in Oman is increasing. So that is where we cannot, in fact, meet the demand also from the export market because our first preference is the Oman market.

Right. And now if I look at sort of you had experienced on your last call or the last discussion we had that even though there was a slight price increase approval in probably Kuwait, with logistics, it effectively comes to the same net cost that you have in Oman. So effectively, are we going to witness a shift of higher percentage towards local markets, because of higher demand, because of quality and the brand name you have, which would effectively lead to a better margin? Or you think the margin will remain the same and just the product mix or in terms of geographical allocation will tilt more towards Oman?

Oman, we have our own supply chain department. We have our own branches. We have our own team. So we are not sharing any -- I mean, the cost of the distribution with any distributor. So there is always -- Oman, the realization is always better. And again, because the priority for us is the more to -- because the Oman sale is continuously increasing and export will be -- because I remember before the expansion, we were just -- I mean, keeping our minimal presence only in the export market. We were not able to give the -- any bigger quantity to the export market, because of the demand -- increased demand in Oman. So after the expansion, so now the...

I think, Mr. Rafique is disconnected. Just to continue his idea after the expansion, because we have the extra production, we liquidate that or we increase our market in the neighborhood market. But as Rafique said that our main target in the market is the local market, because our realization and our earning in the local market is much higher and better than the export market.

Encouraging to hear, sir. So if I hear you rightly, we are currently going at A'Saffa from 40 million metric ton per annum to 46 million or 48 million metric tons. Is that a correct understanding? Q3 onwards, but is that the number to look at?

A'Saffa currently, as we announced -- yes, Rafique. Just let me clarify here. A'Saffa production capacity is 42,000 metric tons. And due to the -- as we mentioned in the beginning, the efficiency and the better -- the excellent performance, not in Oman, in the Middle East, we try to increase our cycle of production in the coming 6 months. So this will add extra production.

Understood. Okay. Fine. That makes sense. So sorry, just to summarize, effectively, where if I view A'Saffa, we would probably envisage a shift towards more local supply than export, because that's where the margins are. You build the brand, you have the name, you have sort of the best technology probably in the world -- among the world players, if not just regional. Interest costs sooner or later should start declining towards the year-end. And that's sort of your two main growth areas for the company. Does that make sense?

Yes, right. That's right. Yes.

Okay. And sir, just a last comment from my side before I go back in queue. If I look at 2015, '16, the margins the company was doing, fundamentally and realistically, how achievable do you think those numbers are? Or you think the market itself has changed that those margins are not achievable? If you can just give us your sort of guideline on that?

Which margin you are talking?

At a net level, sir. If I'm looking at sort of your historic margins of almost 15%, 16%, 18%, 20% and currently, probably 8%, 10% or 12%, just to understand.

If you're looking at the -- because there was, because that time -- if you look at the -- our efficiency and other, we are achieving now the similar margin. We started achieving the similar margin. But still some difference might be there because we were getting at that time, the -- some -- which we -- I mean, normally, it is called subsidy, which is the price compensation. That was the added -- I mean, the margin -- added into the margin at that time, which might the difference remain. Otherwise, we are achieving the similar performance now.

I'm sorry for breaking it down into numbers because that's my job as an analyst. But if I look at -- yes, sir.

One more thing. One more thing, because that time, the finance cost was zero, we were not having any finance cost. So that finance cost is also because we have increased the capacity without taking any, I mean, funds from the shareholder from -- so we have -- the expansion, we have increased the capacity to double by taking the bank finance. So that is also one of the factors. So that difference will remain.

Understood. I understand and appreciate that. In terms of -- given what we understand of the market and your brand name and brand presence, is there any plan of further capacity expansion, purely because it's a deficit market. If the demand is 200,000, all local players added are 100,000. And we witnessed in the past also sort of times where food securities come to the forefront. So if there's -- if there's a sort of bird flu outbreak or there's some quality concerns on the importers, that's when sort of there's a shortfall in the market. So what are your thoughts on that in terms of expanding your own capacity to meet the growing demand for Oman?

I will just give a brief answer, then I will ask the CEO. But I will just tell that A'Saffa I mean, started its operation from 2005. And from 2007, A'Saffa is going into the continuously increasing the capacity, putting the new projects, subsidiaries, investing in the associate companies. So A'Saffa has the similar ambitions always. But as far as to specific to your question that we have any -- the already approved plan. So that is not there. Suhail, you will add something?

Yes. Yes. Thank you, Rafique. As you said that we started the production since from 2007, A'Saffa is going for -- to increase that capacity in stages and in phases. Up to now, we are just maintaining our production. But for sure, according to the change in the demand, in the global situation, we are looking to improve ourselves all the time. And we will keep looking for the changing the whole circumstances around us. But for sure, the idea is there, and we are just take it as A'Saffa's style faces and very careful not to have any impact and to improve their operation. Any more questions?

Mr. Abbas has raised his hand.

Yes. If you allow me, please? Yes. Just to understand the business a little bit better. Obviously, your end prices are fixed, and I understand price control being there in Oman and the GCC. When it comes to feedstock prices, Mr. Rafique and Mr. Yasir were talking about how the prices went up and now they've come down. Is there any way -- I mean, where you can sort of lock in feedstock prices for a 1 year, 2 years without really taking delivery, because I understand warehousing would be a constraint. So how do you sort of lock in prices, specifically when your end prices are fixed? So how do you lock in a margin or you don't -- that's not a strategy. You're happy to sort of take prices as the market -- as they are prevailing in the global markets. So just on the pricing side on the feedstock.

We look into all the possibilities, all the options and option buying and other things. We always look -- we are always open for [Technical Difficulty] looked into the, but the premium what whenever we have gone into that one, we have noticed that the premium what they are charging for the price locking and other, we didn't find it feasible. Because -- and honestly speaking, nowadays, it is not easy to predict the prices that the prices will go further down from the prices. Because the situation is always changing internationally due to not the calculation of the crop and other. There are other political factors and other factor which is affecting these things. So that is the reason we are working. We are always working on that one. But we always found that the premium that we are asking for that one. So that was always very, very high. It's not -- we didn't find earlier. Maybe in future, we will get some good deal, and we will go into that one. So -- but we are working on. We are looking into all those options.

Understood. And in terms of inventory of feed, typically, what's the inventory schedule? I mean, how many number of days do you keep inventory for your feedstock?

Chicken, they are eating -- I mean, they are eating 20, 25 containers on a daily basis. So we have to be very careful to keep the stock. So our inventory level, we always make sure that there should be 3 months stock with us for the -- particularly for the bulk feed.

Got it. And the engineer -- the CEO, Mr. Shanfari, was mentioning that A'Saffa has always been consistent, prudent when its expansion. And we've seen that strategy even when it comes to dividends, right? The fact that you've sort of expanded and held on to cash and not gone back to shareholders sort of rights issue, much appreciated. So now as you stand, I'm looking at the depreciation outflow -- I mean, depreciation sort of saving -- cash saving of close to OMR 4 million. Can you -- I'm just trying to reflect on what the future dividends could be for a company that's more or less reached some sort of a plateau when it comes to any aggressive expansion in the near term. So do you feel there's a strategy to start returning more money to shareholders? Or would you want to maintain a prudent sort of payment strategy and still hold on to some cash for future needs? I'm just trying to understand how do you view this dividend sort of policy?

Question have to go into the domain of the Board of Directors, but we will just answer, I mean, briefly that the A'Saffa was, regularly paying the dividend until the A'Saffa started its expansion and it was a major expansion. And then the initial challenges for -- after the expansion for 1 year due to the COVID and other factors. But A'Saffa was continuously from, I think, 2011 onwards or '10 onwards, A'Saffa was paying the dividend to the shareholder on a consistent basis. So A'Saffa had the similar desire to be -- I mean, to continue its previous -- I mean, the practice to pay the dividend on a regular basis to the share.

Okay. That's interesting. And we got cut off when we were talking about -- and it's not cut off, but I wanted a little clarity on what is effective cost of borrowing? And what will be your annual repayment of loan going forward? Annually?

Okay. The annual repayment will start increasing from the year 2024. We are -- incremental basis, every year is going to increase. And we are going to publish our -- I mean, after the audit -- I mean, the Board meeting, we will publish the unaudited financials, but it will show there that next 12 months, we will pay around OMR 2 million for the long-term loan, a little bit more than OMR 2 million. But this will be on an incremental basis in the year maybe 2026, up to OMR 8 million will be the peak. With regard to the profit rates, because we are taking from Islamic institutions, so up to -- last year, we are taking the main loan was OMR 5.5 million, but that has increased to OMR 6 million this year.

Okay. Great. And my final question is, [Foreign Language], all you guys are experts in this industry, very long-serving professionals. Where do you see a sustainable healthy net margin for a company like yours? Do you see it's the 5% net margin that you will be happy as professionals, as fiduciaries? Or you feel there's room to sort of grow that to 7% to 8% mark on a net level? And I'm not talking about the next 12 months. I'm talking about -- I'm just relying on your expertise to see that you know the sector better than anyone else in the country. Where do you see a healthy net margin for this business? And that's my last question. I really thank you for all your time.

You're talking about the net margin. Are you talking about the net margin after even the finance cost?

Yes, after everything. After taxes, after finance costs, after everything.

Finance cost, honestly, for this -- for such the leverage also, which we are currently having the 5% is considered the best one. But our target, we are targeting something [Foreign Language] better than that. But if you are asking what should be the comfortable level. So the 5% is normally, if I look at the overall industry level, that is considered the best after the finance cost. But in our case, we are -- we have, I mean, ambition to perform better than that, but you spoke about 7%, 8%.

We'll take one more question. Otherwise, we will end here. So if there is no more question, I will thank all of you -- yes, please.

Since we have some time. One last question, could you just give us some sort of comments in general on the raw material cost. What are the key concerns there or areas of concern for the management when it comes to raw material costs? I think, last time you had mentioned that's a sensitive area for the company, sourcing of raw materials. If you could just give us any sort of key concerns that the management has in general?

So the raw material, I mean, honestly speaking, because the raw material cost, we are -- we, A'Saffa, we are buying directly from the biggest trader, I mean, internationally. So we are -- because the major two material, which is the major 90% that is the soybean meal and the corn. So we are buying also in the bulk. We are not buying small, small quantity. And we are always looking at the market trend, international trend also, pricing also. So I mean, again, if the prices will go high or the prices will go, like I said that in 2022, the prices went, which we have not seen in the history of the A'Saffa, the level of the corn, but we have to still buy. We have to feed the chicken. We have to give the chicken, I mean, around on the daily basis, 300, 400 metric tons, we have to produce the feed on a daily basis. So we look at the market, we look at the trend and we are buying directly through the best -- I mean, the supplier for the raw material. That is the reason always our prices, our feed prices are when we are comparing with the other player, we are finding our deal better than that.

And with regards to sort of the fuel cost, electricity cost, even though it's a low percentage of overall cost, how has that evolved in the industrial sector over the years?

It's affecting -- I mean, if you look at the fuel cost and other, it is affecting our -- like the current -- the problem on the feed, that is affecting our -- I mean, the logistic cost for the -- particularly for importing the material. That is affecting which we have to, but that is affecting everybody. And if you are talking about the local fuel cost and the much local fuel cost. Yes. So that -- Yasir, there is any change in the cost?

No, I think, the gentleman is asking about the impact on the results. There is an impact certainly. If the prices are going up, it will go because we have our own logistics, the fuel consumption will increase. And also, we are consuming fuel also in the facility there. So that certainly the fuel cost will increase.

Moreover, that about the electricity, [Foreign Language] the government still continue the subsidy for the tariff, which is helping us a lot to maintain low fixed cost over all the year. They maintain the subsidy tariff for the agriculture sector.

And I'm sorry, if you could just give us some insights into what the subsidies for the agriculture sector on the fuel cost and how that has evolved in terms of percentage?

If you go -- we'll speak in general. If you go -- the government started to ease the subsidies in the fuel. They removed the subsidies, and it was according to the international prices. Then the decision came a few years back to lock it to a certain number. So if you look -- if you -- I mean, the subsidy is not only to A'Saffa, it's everybody. That is in terms of the fuel. So the fuel which we are using everybody, including us, that is subsidized. So this is what the CEO is meaning. Also, there is a tariff of the electricity, which is -- you all know now, there is the citizen tariff which is subsidized by the government. There is agricultural tariff, which is subsidized by the government. And there is also a tariff applicable for the experts and everybody. That is also announced by the government. So this is what we mean by the subsidy.

I completely understand. I appreciate that part. Now if this tariff were for some reason to be removed, what sort of impact are you expecting, the electricity tariff? What impact would that have on Oman, 1-year basis on the company?

Depends what the price the government will -- I mean, what will be the fuel prices, what will be the diesel prices. So it all depends what will be the -- I mean, electricity per unit cost, it will be there. But just to tell to you all that A'Saffa has taken the proactive action on this side also. And we are already in the process of installing the solar project, which will help us to minimize the impact if the subsidy is removed by the government.

All right. And just one last question. Do we see a scenario where the company completely sells its products locally and eliminates GCC sales? Or is that a strategy you would probably not want to go into? Just to understand if that's a possibility.

Before the expansion, Oman increased, I mean, the Oman demand was so high. If we could not sell even one chicken, it would -- we would have sell all chicken in Oman, but we were consciously I mean, not going out of the export market. So our strategy is to keep the export -- keep our brand there in the export market, okay, with a smaller quantity. At the same time, our preference is always to sell in Oman to meet the Oman demand. But the strategy is to keep our brand in the export market always.

Okay. So you would always want some portion of sales to be towards export market to sort of have some business over there. But just to understand that those sales are at a lower margin given the distribution and logistic costs.

Not, I mean, big difference is there. We are selling almost similar prices, which are not significant.

Okay. So thank you very much all of you. We'd like to thank all of you. And we would like to thank all the government institutions for their support for the last 3 years. And thank you, and we will meet you again next session. [Foreign Language]

Thank you.