Gulf Mushroom Products Co. SAOG ($GMPI)

Good morning, everybody, investors and analysts. My name is Deepak. I'm the CFO for Gulf Mushroom. With me is Mr. Abdullah Nasser Al Hadhrami, the CEO, and we welcome you to this sixth meeting of the shareholders meeting for discussing the audited results for the year 2025. And we have already uploaded these accounts on 11th of February. And I'll just summarize the results in this slide, which you can see on the screen. The sales for this year has been OMR 12 million as against OMR 11.3 million last year, an increase of 6%. GP is 50% as against 49% of last year. Selling and distribution expenses have been OMR 853,000 as against OMR 866,000, small decrease of 2%. Admin expenses has been OMR 1.589 million as against OMR 1.489 million, a nominal increase of 7%. Then there is other income. Our EBITDA is 30% as against 28% last year. Finance costs have slightly decreased, OMR 217,000 as against OMR 253,000 last year. Depreciation is slightly decreased, OMR 626,000 as against 670,000 last year. Profit before tax, OMR 2.754 million as against OMR 2.290 million, an increase of 20%. And profit after tax also increased by 20% from OMR 1.947 million to OMR 2.342 million. So in summary, so our profit per share is 15 baiza as against 43 baiza last year. So we invite any questions from the audience.

Yes, can I ask a question?

Yes. Of course.

What's the reason behind the increase in sales? I mean, are you increasing production or you are increasing the prices?

The production has increased. Actually, the prices has seen nominal increase. But main reason is the increase in production. The sales quantity has increased.

Okay. So you have increased your capacity as well. Is that...

No, the capacity in the year 2025 has been the same as last year. The new rooms that got commissioned in January, that will affect the performance in 2026. But capacity, actually, we're using 100% even last year, but there is sometimes a slight improvement with the efficiency in the yield of mushroom. So that's the reason that the sales quantity can go up, even though the capacity is the same.

Yes, that was my next question. It's that what sort of efficiencies, initiatives that you guys have used to increase the sales, or revenue overall?

Yes. Basically, you see the yield is essential product. So the yield, we always try to improve the yield of mushrooms with better efficiency in growing procedures. Sometimes the quality of materials also affect the yield. So it's something which is dynamic.

Clear. I've got a question on the growth, but I mean, we're still talking about the numbers. So maybe I'll let others talk about numbers as before we go into growth.

Yes, Mr. Shaoor, do you want to ask a question?

Yes, sir. Great set of numbers. I've just started looking at this company, and this looks very attractive to me. There are a couple of things that I wanted to ask. I hope I'm audible?

Yes, yes. Please.

Perfect. Okay. So first and foremost, you mentioned something new that's coming up, which will impact the 2026 numbers. Could you elaborate on that? What is this you think? Is it a capacity addition or something?

Yes, we constructed 6 new growing rooms in the year '25, which got commissioned in January. It was announced last year. So it's a small increase in capacity. 12 rooms. So that will give an increase of about 15% in production.

Okay. Perfect. So 15% in production, and we can expect a similar growth in your top line, right, if this capacity is also 100% utilized?

Yes, yes.

Okay. And going down to the bottom line, due to the operating leverage, I think the impact on the bottom line should be slightly higher than that. I'm talking in book terms.

Yes, yes.

Perfect. Secondly, my question is on your payout policy. So basically, I noticed that you guys distribute close to 50% of your earnings in payouts. And the company is not in a stressed situation as far as the debt is concerned. So your net debt is close to, I believe, OMR 1 million against an EBITDA of OMR 3.6 million. So you guys are very comfortable there. Your payout policy, as I mentioned, is 50%. Should we expect an improvement in that because you guys are cash rich, the expansion is up? Or do you have some other uses for the cash on the balance sheet?

Well, the payout in the last few years has been about 50%, but that's not strictly something that we want to follow. It depends on the requirement for the funds. Suppose you want to go in for expansion, then it may be less. And it can be more if the cash flow is otherwise not required for investment purpose.

All right. And do you have any big expansions planned in this year or the next year?

This year, no, nothing has been discussed or decided yet, but it's always possible. Like we keep on adding some capacity in the growing rooms. We may go for some other capacities also, but nothing has been decided.

Sorry, if I may interrupt. You guys have announced recently a purchase of a plot next to your plant, I guess.

Yes.

Is that not part of your expansion? I mean, what are you going to do with it?

That is actually our area in our farm here in Barka. It's limited length, and we wanted to install a bigger capacity of LPG tank and some other utilities actually. So that area is going to be used only for installation of utilities, because for safety reasons, we need some extra space to install the LPG tank, that makes it about 100,000 liters tank.

So it's not an expansion for your production. It doesn't impact that?

No. No.

Okay. Clear. So the expansion -- I'm sorry, my other colleagues, I mean, I interrupted in the middle. So you're talking about roughly 15% expected growth this year or next year?

Yes, yes. Increasing the capacity, yes.

Perfect. Now my next question is regarding your revenue. So could you please elaborate how much of your sales is locally in Oman? And how much, if any, are you exporting right now?

As our Board of Directors report has mentioned that we are largely export oriented. So about 90% of our production and sales is exports and 10% goes in the local market.

Great. And would those exports be impacted due to the ongoing regional conflict, or you guys are immune from that because of the roads or something?

As of now, we're not affected. But going forward, we don't know. We are as knowledgeable as anybody. But as of now, our operations haven't been affected.

Perfect. So your exports are mostly through sea or by...

By road.

Okay. Perfect. Then it makes sense that you won't primarily be affected. My last question is on the pricing. So I believe that the pricing of your products, I mean, depending on the value addition that you guys do, would be closely related to the prices on the international markets, right? How are those prices going forward? And how much control do you have over your pricing policy? And are there any competitive factors that you guys have to consider?

Yes. Mushroom is a very competitive product here. We have local production in the region as well as we have a lot of imports from Poland and Iran and some other places. So there is competition. So our prices are affected significantly by the market prices -- international prices. So we can't -- I mean, to that extent, it's like we don't have so much of flexibility in increasing the price. We have to see the market price. We have to see the competition.

Okay. Just a follow-up question on that. As you mentioned that the commodity is competitive, but seeing 50% gross margins in a competitive commodity doesn't add up for someone who has been analyzing the commodity business for some time. So would you be able to explain how are you guys able to secure 50% gross margins in this competitive business? Or maybe the value addition that you guys do is huge?

What I meant by competitive is our top line, our selling price. We are selling to different markets. It's not just one market. That's one thing. And the margins that you see there is quite significantly impacted by the economies of scale. So we are able to survive in the competition because of economies of scale and our control on cost of production. So these are the ways we improve the margins. The competitiveness in the price, it doesn't mean that we can't -- it means that we can't just increase, like if there is an increase in cost of raw materials, we just can't go on and increase the selling price. We have to adjust for the increased raw material cost by improving our yield or some other efficiencies in the cost of production.

All right. So we should be expecting -- if the prices in the international markets go down, we can expect pressure on your margins. Is that correct?

Yes. Yes.

Okay. And how have the prices been recently compared to the last 5 or 10 years average?

There has not been much movement in the price.

Okay. Perfect. So it's a stable commodity.

Yes, it's a stable thing. Yes.

Right. Last thing, how much of the value addition is actually there? So I can see that a very small percentage, not huge percentage of your COGS is raw materials, right? So how much value addition do you guys do? How much fuel is required by you guys, as you mentioned, in LPG storing facility? Is it to be used as fuel or something in your process?

No, those are just part of utilities. Yes. If you look at the cost of -- if you look at the financials and the details of the cost of operations, we'll see about 30% to 40% going in for raw materials and packing materials.

Yes. And that's what is surprising to me that as a percentage of your sales, your primary margin must be -- they must be huge, right, because...

Raw materials and the wages. Yes, labor part is also very significant.

Yes. So it's a labor-intensive commodity, right?

Yes, yes, yes.

Okay. And what exactly are your raw materials, if you could tell us that?

It's wheat straw, which is the main. And then we have some other materials.

And they are all imported?

Largely, yes.

I've got one last question on the diversification of your product.

Yes, sir.

Do you have any plans to diversify your product itself? Are you going to -- like dry mushroom, any type of mushrooms, are you going to that direction or any other type?

We are exploring to do that, like drying mushrooms or something. But our always priority and preference is to sell them fresh, because when you want to diversify into dry products, there's a lot of energy required and the margins are very small. So we always try to sell fresh. If we have to sell it at a promotion, we try to sell fresh.

Yes. No, very clear. I wasn't sure why you guys have opted to give 10% bonus shares? Why those 10% was not like added into the '25 cash dividend?

Because we want to keep some amount of profits in hand, so we can use it for our capacity building, for our CapEx requirements. So that's the reason.

Is it used to expand the production, expand the capacity and to see something like 15% to 20% increase into your production and then subsequently your sales for the next year. I guess that's fine.

Hopefully. That's the way. Thank you, everybody. We will now close the session.