Jamjoom Pharmaceuticals Factory Company (4015) Earnings Call Transcript & Summary

Good afternoon, everyone. Ibrahim Elaiwat here. And on behalf of AlJazira Capital, it is my pleasure to welcome you all today to Jamjoom Pharma's Earnings Call for Q1 2025 Results. With us today, I am pleased to welcome on the panel from Jamjoom Pharma, Chief Executive Officer, Dr. Tarek Hosni; Chief Financial Officer, Mr. Anwer Muhiddein; and Associate Director of Finance and Head of Investor Relations, Mr. Muhammad Bin Khalid. The format of this call will begin with a presentation from management before opening up the floor to participants for a Q&A session. So without further ado, I'm yielding over the floor to the IR Director, Mr. Muhammad Bin Khalid. Mr. Muhammad, the floor is yours.

Thank you, Ibrahim. [Foreign Language] and good afternoon, everyone, and thank you for joining Jamjoom Pharma's Q1 2025 Earnings Call. My name is Muhammad Bin Khalid, and I'm pleased to welcome you all to today's session, which will run for approximately 1 hour, where we begin with a 20-minute presentation, followed by 40 minutes dedicated to your questions. Joining me today are Dr. Tarek Hosni, the CEO; and Mr. Anwer Muhiddein, CFO. Without further delay, I will now hand over to Dr. Tarek Hosni to take us through the slides. Over to you, Dr. Tarek Hosni.

Thank you, Muhammad, and [Foreign Language], good afternoon and morning. And I guess, yes, I forget, afternoon and morning across all markets and continents, our investors and analysts. So I would like to start by really thanking from the bottom of my heart, my 1,600 colleagues or so of Jamjoom Pharma, who serves all our active markets and functions for a job amazingly done in Q1 2025. I say this because as you have witnessed with me, just a couple of months ago, we were reviewing 2024 full results for Jamjoom Pharma. Amazing year for us, one of the best years in Jamjoom Pharma history at all fronts. We ticked all the right boxes. And quite honestly, I thought that after an amazing year like this, we'll have a little bit of a slowdown in the first quarter of 2025, which if occurred, I would have understood it. So I would have been a little bit upset. But to really keep on surprising me as we always do with the excellent in execution and dedication, our colleagues across all our functions and markets have really delivered a superb job, as you would see in Q1 to make it out of all the last 13 quarters since Q1 2022 when Jamjoom Pharma started to embark on an amazing journey for growth to make it the most impressive at all fronts and at all levels in terms of numbers and achievements and everything. So with this, I would like to thank my colleagues and start sharing with you some of these impressive results. So first slide, Muhammad, please. So perhaps some of you have seen this already in our earnings press release, an impressive 19% growth on the top line revenue, reaching SAR 458 million, definitely even outpaced by an even much more impressive net profit of SAR 157 million with 53% growth year-on-year, which I'm really proud of such achievement and EBITDA grew at 26% with a margin of 37.7%, which is amazing, unprecedented for the first time happening for us. From a total number of brand point of view, we stand solid. Last year, when I started in the first quarter, I spoke to you about an almost 134 products with an opportunity to launch 8 products within the course of '24. Today, I present to you 143 total brands, which means that we have launched about 7 last year and 2 products earlier this year in the first quarter. An amazing, again, free cash convert when I was presenting to you an 88% I thought that this was one of a kind. Today, we stand at 94% free cash convert and free cash flow was 157 million absolute number and 36% growth quarter-on-quarter and year-on-year. We managed definitely, which is something as well give me immense pleasure how we are really transforming on the production and on our manufacturing level, whereby we started with a much healthier strategic stock this year that enabled us to really rationalize our efficiency in terms of units produced even further than last quarter -- last year because of the strategic stock that we enjoyed at the beginning of the year. Next slide, please, Muhammad. Yes. Some of the highlights of the first quarter that I'm proud to share with you is -- and we'll go market by market. So in Saudi, the market grew at 13%, Jamjoom grew at impressive 17%. So definitely, luckily for us, the market grew above forecast. We forecasted 8% to 10%. The market continued to surprise us in the retail sector and grew at 13%, and we outpaced such growth at 17%. Definitely, the team continued to excel in execution. We continue to work smarter and harder by focusing on the high value, the high-margin products rather than just driving volume as it used to be. So we are really transforming across our journey of bringing this company into a profitable growth that really will always delight shareholders' value. We continue to really excel in such journey. In our export markets, we delivered a superb 17% growth in Iraq, 16% across the Gulf. In North Africa, we did very well. And in Egypt at a constant currency level, we grew at 11%. I mentioned the smarter than harder work on driving strategic products with high margin as opposed to just established ones with a relatively low margin, investing on really driving cardiometabolic, as I always shared with you, and CNS portfolio even further and bringing new products that enable us to even excel at every single therapy area that we operate within. I spoke to you about the manufacturing. Today, the facility is having a bit of a brief, 89% rather than hand to mouth a year ago, at above 100% at certain times and definitely enabling other facilities to ramp up like the Egyptian facility as well as the new sterile facility. In Egypt, today, we rely almost at 97%, 98%. We rely on the local facility to satisfy all the local market needs, which is a place we wanted to be, and I'm glad to report that we're getting there in a very trusted manner. From a PD perspective, I'm very pleased to share with you. I promised that I will do this -- this time, and I'm delivering on my promise. You will see a list in a couple of slides about certain areas where we are really finalizing deals and getting some products in certain strategic lines that will really complement our inorganic growth going forward and will help us to sustain such strong results and deliverables to our investors and shareholders. Moving forward, basically, as I told you, in the Jeddah facility, we're talking about 33 million unit out of the 41 you produced. We're ramping up in the new sterile, 1.6 million. Having said that, not even 50%, 60% of the products that should be commercialized from this facility is already produced there. So hopefully, in a month or 2, we will get 100% commercialization of all the brands that need to move and then we will see an even better ramp-up for such facility. Egypt, as I told you, 5.5 million in the first couple of months or 3 months, and we expect that this facility will close this year at 35 million production units. And in Algeria, we within the first quarter, we managed to get 3 million units. Moving forward, -- so again, pleased to report as I guess it became a habit whenever I share with you our results post-split into key therapy areas and key geographies that in almost majority or all of our key therapy areas and key geographies, we continue to deliver healthy growth, which is -- I would have been much more concerned if the growth is coming from 1 or 2 therapy area and 1 or 2 key markets. But it's a very healthy growth that shows very good understanding and the execution of the strategy across almost all markets with different pace perhaps and with different levels of maturity. But still, I think everyone is doing its best out of our colleagues to really deliver on commitments. As you can see, from a therapy area perspective, on the left-hand side, ophtha grew impressively at 20%, dermatology 21% and the rest of the portfolio, as you can see, very impressive growth momentum. When it comes to market by market, Saudi Arabia, 24%. I have to report to you as well that out of this 24%, impressive growth on the institutional and tender sector, more than double what we sold last year in the first quarter. And with the same token, we have delivered our most impressive results on the bottom line. So those who are worried or used to be worried and asking me questions about whenever we increase our portion of the institutional tender, we will dilute our earnings. Here is a very good proof of how we really managed to manage our overall P&L in a magnificent way even though when we increase on institutional and tender business. And the increase in institution and tender is on selected products that we know that we are not too much diluting earnings or just pushing volumes as I always promised you. Gulf and Iraq, we mentioned the growth in North Africa, impressive 15%. And even in Egypt, with the devaluation that impacted us this year compared to last year, we are talking about 11% on constant currency growth in such an important strategic market for us. So, 19% across all. And when we translate this into therapy area in the next slide, you will see the migration we're making. Next slide, please, Muhammad. As you can see, compared to 2021, ophthalmology and dermatology, our niche flagship therapy area, still growing massively, but contributes 10% less to our portfolio, because of the outpaced growth that we are delivering in areas like consumer health, where I'm very pleased with what our team on the consumer health side are delivering year-on-year in our key markets, Saudi Arabia, and I look forward to the same contribution when we launch the Consumer Health portfolio this year onward into other key geographies like Gulf, Iraq, Egypt, North Africa and others. As well, we see tremendous growth on the general medicine, on the gastrointestinal and across all our portfolio. Next slide, please, Muhammad. So when we speak about business development, this is a small list to show some of our key initiatives over the last few months that we have already concluded signing in terms of key products in key therapy areas that will complement our portfolio and will aid our inorganic growth as we move on in the latter part of 2026 [Foreign Language]. So we speak about very good strategic deals with reputable, credible partners across Europe, across China, Korea and other places to bring across some of the best-in-class biosimilars or key products on the ophthalmology, on the GI and on the cardiometabolic front to complement our portfolio. Very pleased with what we have done so far, and I would like you to watch the space for even more deals that are going to come in future. In addition, certain CMOs being finalized at the moment to really get into a strong partnership with some of the multinational players to finalize certain partnership that will really complement as well our portfolio and our capacity utilization as we move on. So watch the space for this. From a pipeline point of view, again, pleased to report a total 58 products in our pipeline split almost, as you can see, 60%, 40% between the product that already either ready for submission or already submitted to Saudi FDA for review and the products that are under development. So almost we're talking about 34 products out of the 58 already submitted or about to be submitted and 24 under development. Pleased with this I'm pleased as well with the split across all our key therapy area. So it's not a focus only in one therapy area ignoring the other. Next slide, please, Muhammad. Yes. And this is the icing on the cake really because we don't allow the amazing impressive growth on the business to make us forget an important part of our mission and beauty and pay back to the community, quite honestly, when it comes to our ESG initiatives, which are basically, I can summarize it to you in a few clusters, as you can see or a few areas. Basically, first, improving affordable high-quality access, improving the health and diversity of our workforce, working on efficiency and effectiveness driving of our manufacturing facility while making it as green and as healthy as it should as well as our responsible governance across. And we have a lot of initiatives, as you can see in every one of these areas, which are complementing our ESG strategy that we continue to blend even better, and we continue to finalize so that we continue to contribute and even harder and smarter to the community while improving our facilities and reducing carbon emission across all our 4 facilities. With this, I guess I will hand over to my colleague, Anwer Muhiddein, the CFO of Jamjoom Pharma, to take you through some highlights on the financial front. Anwer, please?

Thank you, Dr. Tarek. Good afternoon, and [Foreign Language], everyone, and thank you for joining us for our quarter 1 earnings call. I'm pleased to report that our strong momentum has carried into the new fiscal year with continued growth across all financial metrics. I'm pleased revenue increased by 19% year-on-year to SAR 458 million, driven by robust volume growth and ongoing product portfolio expansion, particularly in high-demand therapeutic areas such as ophthalmology, dermatology and antidiabetic. Our gross profit saw a growth of 17% year-on-year to SAR 293 million with a slightly lower gross margin of 64% compared to first quarter 2024 due to product and geographic mix as well as the depreciation of our newly capitalized facilities in Jeddah and Egypt. This performance reflects our strategic focus and market responsiveness, our EBITDA grew by 26% year-on-year to SAR 172 million in quarter 1 with EBITDA margin improving by 2.2 percentage points year-on-year to 37.7%. This expansion was supported by improved cost absorptions, economies of scale and operational efficiencies. Net profit surged by 53% year-on-year to SAR 157 million with a net margin increase of 7.6 points demonstrating the strength of our operating model and disciplined financial management. A notable contribution to the margin growth is from a significant reduction in financial cost from quarter 1 2024, where a significant depreciation of EGP in Egypt adversely impacted the net margin. On the next slide, we will look at our production cost and operation efficiencies. Turning to our cost management efforts during the quarter. We continue to effectively navigate cost control and operational agility. Cost of revenue increased by 21% year-on-year, reflecting higher fixed manufacturing costs such as depreciation, employee-related costs and utilities as we ramp up new facilities in Jeddah and Egypt. Direct production costs, including raw material and consumables rose by 22% year-on-year, slightly higher than the sales growth owing to shift in product and geographic mix. Salaries and employee-related costs grew by 29% year-on-year, reflecting a revision in our employee incentive scheme and benefit to support expansion and innovation. Depreciation and amortization expenses increased by 45%, driven by the recent capitalization of our Egypt and facilities in Egypt. Turning into the right side of the slide, our operating expenses grew by 11% year-on-year, reflecting our strong operational discipline and efficiency. R&D expenses increased by 16% year-on-year to SAR 9 million, reflecting our growing investment in new product development, particularly across cardiometabolic and other portfolios. Selling and distribution expenses rose by more than 6% year-on-year to SAR 100 million, in line with our revenue growth as we continue to strengthen our sales force and brand building efforts while maintaining efficient resource allocation. General and administrative expenses grew by only 38% year-on-year to SAR 22 million, primarily due to impact of our employee benefit incentive scheme driven by new executive hires and organizational enhancement in line with our company ambitions to attract and retain the talent. Our direct production cost is slightly higher this quarter at SAR 3.2 per unit sold, sustaining our efficiency level despite macroeconomic pressure and ramp-up of our new facilities. Moving on to the next slide, please. Moving on to our profitability. I'm pleased to report that our EBITDA margin expanded to 37.7% in quarter 1 2025, representing a 2.2% point improvement compared to quarter 1 2024. This increase was driven by a combination of operating leverage, cost discipline and favorable product mix. As shown on the left side of this slide, EBITDA increased by 26% year-on-year, rising from SAR 137 million to SAR 172 million, outpacing revenue and underscoring the strength of our operating model and scalability. On the right-hand side of the slide, you will notice that the trend in GP, EBITDA and net profit margin across the past 5 quarters. Following the dip in quarter 4 2024 due to strategic lower sales, both margins are up sharply in quarter 1 2025 with net profit margin surging to 34.3% and gross profit margin reaching to 64%, the upward trend from 61% to 64% reflects strong quarterly recovery in profitability supported by higher sales volume, improved production efficiencies and product mix optimization. These results reaffirm Jamjoom Pharma position as one of the leading industries in terms of profitability, supported by effective cost management, focused portfolio execution and growing business across the region. We will now move to the cash conversion cycle on the next slide. Lastly, our focus on working capital efficiency remains key to support our growth ambitions. In quarter 1 2025, our cash conversion cycle increased to 29 days, up by 6% year-on-year, reflecting a strategic decision to build inventory and enhance supply readiness as we scale our operations. Working capital reached to SAR 779 million, up to 23% year-on-year higher than the revenue growth, highlighting our ability to support expansion without overextending our operating cycle. There was a slight increase in DSO days versus quarter 1 2024, whereas DPO days declined to 33 days, reaffirming our commitment to timely supply payment and stronger relationship with the vendor. We ended the quarter with cash balance of SAR 137.5 million post dividend distribution in March 2025, reinforcing our strong liquidity and financial discipline. With this, I would like to hand over to Muhammad and Khalid for Q&A session. Muhammad?

Thank you, Mr. Anwer and Dr. Tarek. So we'll now start with the Q&A session. Ibrahim, please moderate.

All right. Thank you, panelists. [Operator Instructions] So without further ado, the Q&A session is now open. And our first question comes from the line [ Michelle ]. I see Michelle dropped out. We'll take the next question from Tarek. Michelle, now that you're back, could you unmute yourself?

This is Michelle [ Tutt ] from SNB Capital. I just have 2 questions from my end. First, given [Foreign Language] the growth figures posted in Q1 sales, do you expect to upgrade your full guidance for the year? And my second question is, can you -- from so far, if you can share your overall outlook on the pharma market growth going forward, 2026 on, I guess?

Yes, sure. Thank you for the questions, Michelle. Yes. First, I mean, I think you guys are getting used to our accountable approach so far. We wait until the second or third. So we would like to see 2 consistent quarters where we are exceeding expectation. And then we'll come in an accountable way on the third quarter and tell you we will upgrade or change our guidance otherwise. But quite honestly, one quarter, things can go north, things can go south. We don't just rely on one quarter. So that's our approach, and we'll continue to do so, and we feel that this is an accountable responsibility that we need to continue to deliver to our investors and analysts. Our -- or my personal outlook to the market. I mean, quite honestly, [Foreign Language], the market continued to surprise us, especially the market in Saudi Arabia. Every year, we say that it will slow in growth before -- because of certain elements and the market continue to outgrow the forecast, not done by us, but done by experts, analysts and statistical companies in the market. So with this, I'm having even more positive outlook for the market. Hopefully, between '26 and beyond. I expect the market in Saudi Arabia and the Gulf to continue to grow at a single to middle digit -- high-digit growth -- so basically, I don't expect anything less than between 8% to 12%, hopefully, for '26 and '27. We don't tend to forecast beyond 1 or 2 years. And that -- this is for Saudi and Gulf. And the reason I'm singling them out is because of the -- these are markets with the highest predictability for us and as well lowest vulnerability to exchange rate changes or other stuff. I believe Iraq will continue to be a key driving market for us. I believe North Africa as well will even contribute further to our business. And as I mentioned always, Egypt and Algeria will continue to be there to boost far medium- to long-term growth potential for Jamjoom Pharma. So this is our outlook. Thank you for the question Michelle.

Our next question will be from the line of Tarek.

Congrats on a solid set of results. So maybe 2 questions from my end. I mean, I'm looking at the solid revenue growth seen across ophtha and derma, which are your leading -- your legacy leading therapeutic areas. And I mean, my question comes here as should we expect those trends to continue, especially that we've seen that already in 2024? And is your guidance of -- I mean, compared to what you delivered already lower in terms of revenue growth. Is it capturing a normalization within those 2 segments, therapeutic areas? So yes, if you can just a bit explain on what's driving this and your forecast? My second question is effectively on Egypt. I'm sorry, [Foreign Language] you said that you grew 11% in Egypt. That's what I heard at least on the call. And we can see that it dropped by 19%. So I'm assuming you grew by volume. So if you can provide an explanation on why it dropped by 19%, especially that EGP was flattish relatively. And I mean, are you -- should we expect more of a balancing or optimization strategy in Egypt given the lower margin? So would you limit to any extent some of the production capacity that you have up until maybe you have better prices, up until you see better kind of margin profile?

Sure, sure. So on the first question, I guess, you meant to ask about our outlook for the full year. Is ophtha and derma going to continue to outperform like this or we expect a little bit of a slowdown that will meet our guidance for such areas. And the answer, as I said, I think earlier, we continue to push at all fronts, Tarek, and the market continue to surpass expectation, but our people as well continue. So it's not like we forecasted, for example, a lower market growth and the market took us by surprise, but we stayed at our growth related to the original market growth forecast. No, the market grew and we outgrew the market. I guess we'll continue to do this and the impressive team that we have today with the excelling in execution, I think we will continue to serve. So I wouldn't be surprised that ophtha and derma will continue to outperform like every other sort of area, quite honestly. But to your point, which is valid, I mean -- we don't divide the year from a shipment perspective equally, as you know. So like, for example, this first quarter normally constitute for us 27% to 28% and the last quarter in the year is almost 20%, 22%. And hence, you might see some balancing out in the full year. But from an in-market perspective, I think ophtha and derma will continue to outperform in the category and will continue to gain share. This is what I can tell you. On Egypt, I'm not sure about the 11% and the 19%. Are you making the balance between 11% and 28% and saying that the decline was 19% because basically, what we are saying, Tarek, in the graph is while Egypt declined 28% when you take into account the devaluation that hit us last year in March, in particular, and they impacted us on a constant currency level and on an in-market sales level, which is on Egyptian pound, we grew at 11%. That's what we're trying to say here. Are we satisfied with our performance in Egypt? Definitely, we are happy with the 11%. We aspire to even do further, and that's the direction to the team, and we are on the contrary to what you are trying to imply, we are pushing that all cylinders that we increase our presence in the market. We gain market share. We find business development opportunities that can even contribute further to our solid presence in Egypt. But at the same time, a request and ask for price increase that will offset the remaining impact of devaluation that was not yet offset even though we managed to get some good price increases on some of our key products year-to-date. So that's basically, in a nutshell, our direction in Egypt, Tarek. So I don't think on the short term, you will see a slowdown or shutting some manufacturing or operations or stuff like this on the country. We are still positive. We are still relying on the market to continue to do well, satisfying the local facility. And as we discussed in previous calls, to help as well to explore opportunities to send goods from Egypt to neighboring markets and markets that makes sense that we send goods to from Egypt. So we still are solid about our outlook for Egypt.

Our next question comes from the line of [ Abdul Rahman Laukika ]. We can't hear you, but you're welcome to try again. We'll be taking the next question from the line of Madhu.

Congratulations management for the strong set of results. Three questions from my side. One on inventory. I wanted to understand the rationale behind liquidating the inventory because even in quarter 4, your inventory declined both sequentially as well as Y-o-Y, given that your production was down 7%, but sales up 19%, implies significant liquidation of inventory. So just wanted to understand, is there any production issues that you're facing? And can we assume sharp increase in production in quarter 2 to beef up your inventory? That is one. And another related to the inventory, although cost of raw materials should not be impacted -- or cost of sales should not be impacted much, assuming raw material prices were stable. Nevertheless, were there any cost savings just because the production was lower in quarter 1? That is question number one.

This is question number one, ma'am.

Yes.

Look forward to question number two. So okay. So let me handle question number one. So basically, thank you for the observation, Madhu. Quite honestly, if you ask me about my inclination and what I will aspire for always here, I would like to see us working smarter and smarter all the way, not pushing volume, but pushing value. And this is a business we should be in, quite honestly. While we are here to ensure that we supply affordable high-quality medications to our patients and customers, we are here as well to entertain shareholders and maximize shareholders' value. And we can bring the link into satisfying both needs by really working smarter. So we are not anymore pushing just volumes. And as I said, and I think I alluded to this during the presentation, Madhu, that we are working smarter and we are pushing more strategic high-margin products. So that's one reason for the 7% observation that you have seen on the volume. Another key contributor is, as I told you, we started the year by a better strategic stock in hand, which helped us to rationalize to a little bit of an extent what you have seen the reduction on volume. And this happened because, as I said, of the relief that we are getting in the Jeddah plant. Jeddah plant at the same time last year or even earlier at the end of '23, beginning of '24, we were working hand to mouth, more than 100% utilization at 3 shifts front. So our ability to start the year in '24 with a strong strategic stock was not as this year where we have really managed to transfer a lot of volume to Egypt, and we started to embark on manufacturing in the new facility as well. So that enabled us to start with a high strategic stock that enabled us to rationalize the production in this first quarter. The second half of your question, do you expect to see a huge ramp in production in the second quarter? Huge, no. You expect to see the healthy ramp in production to meet our sales and to exceed it as we continue to do. And you expect us -- and I expect my team to continue to work smarter and not driving volume but driving value. So that's basically the business we are trying to drive at the moment, Madhu.

Okay. And were there any savings because of lower production of volumes you used your existing inventory. So were there any savings?

Not per se, because don't forget, I mean, I -- it's not a significant decline from where we were before. So there weren't savings per se because of the 7% lower production. But there were savings, as you heard from my CFO at other fronts, us optimizing cost, driving efficiency, driving effectiveness, working on improved COGS to enable us to really compete on a better front in the tender institution that I mentioned to you that we are really driving the business there in a very nice way, and our strategy is getting into action properly. So we are working on other areas of savings, but we are not trying to save by producing less. That's not the intent anyway to do.

Okay. My second question is about gross margins. and mainly in Egypt. So your sales declined in Egypt due to currency. But given that you have a production base in Egypt, the currency devaluation would have helped to lower your cost as well. So if that was the case, then how much benefit did you see coming from Egypt when it comes to cost reduction on a Y-o-Y basis?

So I didn't quite get your second question.

Yes. So for example...

Why would the valuation lower our cost, I don't understand.

Yes. Because if your sales are reducing when you're translating it to reals, even the cost ideally should reduce if you have a cost base in Egypt?

No. But don't forget that we still buy everything that enable us to produce and manufacture. We buy it in hard currency. We don't buy it in local currency. More importantly, we are still abide in the first couple of years, as I shared with all of you before, to use suppliers that we are currently using in Saudi, so that local authorities and regulators guarantee that we are bringing the same quality. So the potential savings that we can deliver there is hardly there. So if you are talking about cost of employees and whatever, so there aren't much more savings in this area that I can quite honestly report to you. But from an operational point of view, we don't really have a lower cost of operation. Anwer, would you like to add to this?

Yes. Actually, as Dr. Tarek said, okay, raw material, we are -- at the moment, we have the same source of supply. So the cost is same in the raw material. However, yes, in the conversion cost, there is a saving as the cost over there are less.

[Operator Instructions] Our next question comes from the line of [ Nayef ].

And thanks for the amazing set of results. I would like to ask Mr. Tarek about the exporting license for the Egyptian facility. When do you expect to have it to start exporting from there? And can you give us an idea about how would the process look like in registration, especially in the neighboring countries, more specifically the French-speaking nations, please? My last question is about the Algerian facility. Does it only serve the Algerian market or does have some exports as well?

Yes. No, thank you for the questions. So basically, Egypt -- so -- we don't end up getting export license per se to your point. But what we end up getting, hopefully, is registration of our Egyptian facility as a main facility to supply certain markets. So as I told you before, we need to have a couple of years under our belt of the -- our Egyptian facility operating in full, which will happen by September, October this year. And then we will start approaching some of these markets where it makes sense for us to send the goods to them from Egypt as opposed to from Jeddah, the likes of Sudan, the likes of Libya, the likes of Ethiopia and other African markets. And then if they are interested, they will come and inspect our facility in Egypt and give us approval that we can register the product to come from Egypt as the first or second option on supply facility. So that's what we aspire to get. So we'll start exploring this by quarter 4 this year. Registration process in these markets will take anything between 12 to 18 months. And after this, we can start sending products to them if they are in agreement and they give us approval, we can send them products from Egypt. So if you do the time up, then you're basically talking about at least a year from fourth quarter 2025. So end of '26, sometime in '27, whereby you can realize some of this export opportunity to some of these markets via Egypt as opposed to via Saudi Arabia. Algeria as a facility at the moment, as I shared with you before, we only have the oral solid dosage form plant that we bought out of Sandoz, Novartis at the moment. And we are in the process of putting together an ophthalmic facility that will come up in the coming hopefully 2 or 2.5 years to become live and to bring some of our high-quality ophthalmology line into the Algerian market. So at the moment, the market -- the plans we bought is mainly satisfying the local market needs. And we expect to explore as well sending products out of Algeria, not before, quite honestly, we have the ophthalmic unit up and running, which will not happen before beginning to mid of 2027 and give it as well a year or 2 after that. So in the coming 2 to 3 years, you wouldn't hear from us that we are using the Algerian facility for any other market, but to satisfy the local market needs.

All right. We'll be taking some questions from the Q&A chat box as we do have some of those piling on. And we have a question from [ Hamza ] regarding the tax -- the tariffs, the tariff developments. And Hamza wants to know if you've been seeing any changes in the prices of APIs as a result of the global supply chain changes. And would you see more room for improvement in margins if the trade war is off?

We certainly aspire to see the improvements in margin as perhaps, Anwer shared with you or you have seen it in the press release about our earnings, we were aspiring for a higher gross margin, and we lost almost 0.7% there for a combination of things. One of them definitely is the cost. So do we see increased cost here and there? Yes, we do in raw materials. Do we offset it as we go on by other cost reduction or getting better prices in other products? Yes, we do, and we have these initiatives ongoing. this trade war and the Red Sea crisis and all this kind of stuff improve, it will not only improve the cost quite honestly, for us, but indirectly as well, it will impact how quick we can get the products into the hands of our patients, which are our biggest and most important aspiration. So some delays that are happening at the moment are resulting into indirect losses that are quite honestly, even more than the direct increase that we witnessed in the raw material. So I'm aspiring even more for this to ease up the trade war, as you call it, or the or the Red Sea crisis or whatever it is so that we can go back and really manage to get materials faster and smoother. However, as I shared with you in previous calls, I believe and I'm proud of the team that we are, relatively speaking, because of our strategy, managing this better than others because we go and buy strategic stocks, which is longer than what we used to purchase in terms of months of coverage from key products across all our lines. So that gives us more cushion to really be able to control our destiny in terms of key products as opposed to if we used to purchase on the same pace and scale that we used to purchase before. So we are as well, I believe, transforming our strategy and our approach as we move forward in order for us to respond to this changing market dynamics in a more positive way and win while others are struggling.

Very clear. Thank you, Dr. Tarek. We have another question from the Q&A chat box from [ Ajith ] Ajith greets you all, and congratulate you on the results. And then he asks, why have the company -- why does the company only have 50% to 60% dividend payout despite not having any major CapEx or debt? And then he asks what the plan is for the retained cash.

What the plan is for?

The retained cash.

Okay. Yes. So I will leave the return cash for my CFO, Anwer to handle. The first part is basically, yes, I mean, we keep on asking ourselves about the SAR 50 million to SAR 60 million, is it enough? And quite honestly, yes, I mean, given our working capital and the growth in sales and everything else that we do, we believe this is fair and just at the moment to enable us to fund our ongoing operations and our increased cost because quite honestly, as I always share with you guys in full transparency, we are a rich company on paper throughout the year. We are a real-rich company. If you come and visit us, from a cash availability if you come and visit us in November, December, end of the year. But yes, we don't get our pay regularly and frequently as we would like to be because of the nature of the past and the dynamics of the market we operate within, because you go and ask the distributor, they tell you the market is late in paying to us and by default, we are late a little bit in paying to you and whatever. So to manage our working capital as we move on, we really aspire for a higher cushion than we will normally do because of knowing these dynamics. But in full transparency, we keep on reviewing every time whether we should pay more than 50%, 60% or not. And what will give me, in particular, and my CFO as well, a better confidence to move into this direction is if our working capital is improving or as well, we don't have a lot of investment opportunities that we embark on. And we have both at the moment in full transparency. And I only declared and revealed whatever I can share. But we have other areas where we are looking at as well that will make us consume some of our cash. Anwer, would you like to take the other part of the question?

Let me add also that, okay, this -- even in CapEx, also you see that, okay, at the moment, the spending is not that much. But going forward, we know that some of the orders has already been placed for the upgradation of the facility, some addition in the machines. So as we said, it will be 5% to 6%. So we have to spend on the CapEx, plus some business development activities, which Dr. Tarek explained in his slide that okay, there are some discussion with the parties for the licensing fees, all these things. So we are going to again spend on this. And again, to support our working capital also. So this cash will be hopefully utilized in a proper efficient manner.

So the other portion of the question, Anwer, was about -- I think was it about return the earnings or something? I forgot.

Yes, it was about the retained cash.

Retained cash.

This is what I -- I explained is.

Okay. Okay. Thank you, Anwer. Don't forget, I would like to refresh the memory of everyone. We moved guys from plant facility just over a year ago to 4 up and running facilities at the moment. And that requires as well a lot of maintenance and CapEx. And I mean -- and we are managing within all this. So I think as well in full transparency, you can have the element of the fear of the unknown as well, whereby we know that any force majeure, we don't want it to stop us from continuing to operate and continuing with this impressive growth so that we don't lose momentum. So all this combined, I think, contribute to -- but we keep on reviewing every time. We are not taking it as like it has to stay there. We keep on reviewing whether it should be 50- 60, it should increase, it should not. And we'll keep on managing it on an accountable way as you expect us to do.

We have a question from the line of [ Osman ].

I just have a follow-up question on the Egyptian operations. Like you mentioned that it will take at least 2 years from now for you to export from Egyptian facility. Just wanted to understand the capacity right now is around SAR 50 million. You produced around SAR 25 million last year in terms of volume. And if you expect to -- the capacity to increase, where will the additional volumes go? Because right now, you said like 97% of the Egyptian market is localized. So the additional volume, do you see there is a space in Egypt where you will be able to offtake the volumes in Egypt only, the additional volumes?

So I'm not sure what additional volume you are referring or alluding to Osman because, yes, let me give you some numbers so that you can rework your math. Basically, this year, we expect to produce SAR 35 million units in Egypt to satisfy in full the requirements of the local markets plus ending up with the right level of strategic stock to start '26. So out of the theoretical capacity that you alluded to and you are familiar with in our Egyptian facility, which is the SAR 50 million or SAR 52 million, we are only left with SAR 16 million. If you embark on supplying to 2 or 3 markets in a year or 2, this will eat up a big part of this already. So quite honestly, we don't have -- as we stand, we don't have a luxury of saying we have a lot of capacity utilization to be able to fill. But on the contrary, how we are going to respond to increasing demand and request on our products in Egypt and how can we start really even bumping up our existing capacity or finding other creative ways so that we can meet the future growth. So this is our case today.

All right. So until you get the export approvals and all SAR 35 million is the sustainable level...

Don't forget this next year, you will grow. So next year, you can expect as well like if past was any predictor of the future, Osman, we closed the last year, give or take SAR 27 million, SAR 28 million not even that SAR 23 million, 24 million. This year, we would like 35 million. Next year, you never know. Maybe you need to end up closing with SAR 40 million plus. So we'll come very close by the end of '26 into our capacity utilization. And then we need to find other creative ways to bump up the capacity.

Our next question comes from the line of [ Yasir ].

First, I would like to thank company to give me an opportunity to ask a couple of questions. My first question is regarding -- so how sustainable is 18% growth in revenue given the slowdown in production volume? This is my first question. My second question, to what extent did pricing versus volume contribute to growth in each therapeutic area? My third question is about -- are you expecting new norm of profitability in the next quarter? And my last question regarding to Egypt facility. Does the company obtain the Title deed for the facility?

So okay, I'll try because you asked it almost 4 or 5 questions while you told me. Okay. So we'll go one by one, and you have to remind me of the second one. So your first question was about how sustainable is the 18%, which is 19% actually, not 18%, 19% growth without producing more volume. And we never implied that we are never going to have whatever volume is required to drive our growth. But as I mentioned earlier, I wouldn't be that if I finish this year with a growth of equivalent to 18% or 19% or 16% or 17%, and we didn't produce the same volume last year, but we produced 10% or 15%. That doesn't really bother me as long as we are working smarter and we are driving higher strategic products and higher value products and better margin. So it doesn't really bother us. So we don't make this link and it doesn't worry us as we move forward. All we do is we try to work smarter and we drive higher value than volume in every day of our business contact. I guess your second question was about expecting to see a new norm in -- from next quarter in terms of the growth. Was that...

In terms of stability.

In terms of what do you mean, Yasir, by a new normal? Because today yes, go ahead.

So actually, all the profit margin of the company are increasing in Q1 comparing to Q4 or Q1 last year. So are you expecting the new norm to complete until the end of the year?

So listen, I mean, I'll give you the secret. If you look at 2024 and you take it the fourth quarter earnings, you will see a similar trend, although every year, we increase the percentage and the more positive leverage on the bottom line. But you will see a similar trend, whereby our first quarter normally is one of our best, if not the deepest quarter in terms of results. Second and third quarter is very solid. Fourth quarter is less and more dilutive compared to the original 3 quarters. Do I expect to see a similar trend this year? The answer is yes, with variation a little bit, but the answer is yes. And we do it by strategy and by design rather than by default. So we'll continue to drive in this direction. What's your third question, sorry, Yasir?

It's regarding the Egypt facility. Does the company obtain the title deed for the Egypt facility?

Title Deed mean, are we fully licensed to operate in Egypt, if that's your question. The answer is yes. Did we get all the approvals to operate there from an authority point of view, regulatory point of view, everything? Yes, the answer is 100% yes. That happened since September 2023, not just yesterday.

No. Actually, I mentioned it because it was in risk and the prospects.

Yes, Yasir, we sorted it immediately after the IPO. So we do have the title deed.

You're referring to the IPO of 2022?

Yes, exactly.

Yes. No, no, no. No, that's why I'm saying, Yasir, we didn't start to report to you guys that we are fully operational in September '23 before getting this. We got everything, and that's why we announced since September 2023 that we became fully licensed and fully operational. What is your last portion of the question?

It's about the pricing versus the volume.

The -- you can almost speculate a relation of 7% to 10% more leverage on the value than the volume, more or less. But quite honestly, as I said as well, as, I think you guys all need to expect that we'll continue unless when we move inorganically. But if we are going to rely and continue to drive our continuous existing therapy area, yes, it shouldn't surprise you that we might sell more and do higher growth on value and higher growth on profitability with less volumes. It shouldn't surprise you. And if it happened, you need to assume that it's happening because we are driving in this direction, as I told you, because we're asking our people to work on a more smarter front rather than just driving volumes. I would love to drive both, and we will continue to be, but we'll definitely for the near to mid future to come, we will definitely drive more value than volume. This you can bet your money on.

Panelists, as we have reached the allotted time for this call, we do have a few bit more questions. So if you don't mind. All right. So great. We'll move over time to take some of those questions. We've got a follow-up from Michelle. So we'll take the next question from [ Asmar ].

I have 2 questions. The first is that is a follow-up on the trade war query. Granted that at the retail level, the prices are regulated, but at the distributor level, where you actually sell, do you see a risk that foreign companies might increase their discounts given to distributors to offload their inventory because of the ongoing trade issues? And what is your normal course of action when discounting from foreign competing products increases at the distributor level? And my second question is related to your selling expenses. So they did not increase this quarter in line with the revenues, and that's been a key factor driving the increase in your EBITDA margins this quarter. So if you can provide some guidance on that for the rest of the year? Was it some kind of a timing difference? Or can we expect them to stay on a similar trajectory for the rest of the year?

What should we expect to stay on a similar trajectory? Sorry, I didn't get.

The selling expenses, the increase in selling expenses was much lower than the increase in revenue on a percentage basis.

Yes, yes. Sure. So the first question -- thank you for those questions, Asmar. The first question, quite honestly, we keep on reminding our troops and teams that we don't ask them for anything unreasonable. We ask them in our best-performing market to get a 6%, 7% market share, which means that there is 93% of the market opportunity outside us. We don't care which competitor will get it. Is it the competitor that is coming and lowering the prices or bringing it to the ground? Or is it a competitor who's doing other things. As long as we get our fair share and we do our business rightly without really paying a lot of attention to this, we are good. So we don't get into a reactive mood just because some of the competition come and lower the price massively and whatever. We find other means and ways to get our fair share of the total market opportunity while not diluting our margins because as I said repeatedly, we are not in the business of driving volume and commoditize our products on the expense of always driving better value creation to our shareholders and customers. So that's the way we try to drive our business, quite honestly. On the second portion of your question, yes, a good observation, Asmar. And primarily, it happened because of many reasons. One of it is, I mean, 1/3 of the quarter, which is the month of March was a relatively slow month in terms of activities and stuff that is happening in the marketplace. The window of time for customers, for example, to conduct a physician meeting or is much more limited in Ramadan time compared to the normal days as well people efficiency and people tendency while fasting to attend this kind of meetings is much lower, relatively speaking, to the normal days. So the month of Ramadan impacted -- you can -- the way you look at it may be positively lowering the growth in this selling cost compared to any other normal months, but we expect it to go back and normalize within our budgeted level. So that was an exception rather than the rule, and we don't expect this trend to continue throughout the year.

Thank you, Panelist. We have a question from the Q&A chat box. And Hamad Adnan asks, how much of the top line growth in Q1 was driven by institutional tenders? And can we expect a similar contribution from tenders for the remainder of the year?

Yes, sure. Yes. Thank you, Adnan, for the question. As I said, Saudi, you do the math, Hamad. Saudi, our tender business contributes something close to 20% of our total Saudi Pharma business. And this particular business in Q1 has grown by almost above 100% in Q1. So doubled compared to Q1 last year. But was that something -- was that a trend that we expect to continue throughout the year? That's why I'm thankful for your question. The answer is no. We'll continue to really deliver very strong results on institution and tender business growth. But Part of this doubling down on the institution and tender sales in Saudi in the first quarter was orders from Q4 last year that we couldn't -- because of supply and manufacturing, we couldn't supply on time last year, and we supplied earlier in this year, in particular in January. So January saw the biggest hike in our institutional tender sales in Saudi because of what I shared with you. So that was a one-off. We'll continue to impress hopefully, knowing what we got as a reward or as award in the new tender. So, we'll continue to grow healthy, but it will not be the 100% or above 100% growth quarter-on-quarter. So that was a one-off in Q1.

So it seems we don't have any more questions. So we'll do a last call for any questions from participants. You may raise your hand or drop. And we did have a follow-up that just dropped out. And so that seemed -- that would have marked our last question for the session. And then on behalf of AlJazira Capital, we'd like to extend our sincere thanks to Jamjoom Pharma's management for their time and the presentation. And thank you to our guests for taking the time to join the call. Mr. Muhammad, the floor is yours for any closing remarks.

Thank you very much, Ibrahim, and thank you, investors and analysts, for your active listening during this call. We'll be pleased to see you again here next quarter in [Foreign Language] with better results as well. And thank you, Dr. Tarek and Mr. Anwer for joining us.

Thank you all. Thank you all. Thank you very much for attending and for being part of this success and god bless and [Foreign Language] we'll see you in the next earnings call in a few months' time. [Foreign Language]

Thank you so much.

Thank you, everyone. The meeting is now over. You may exit chat. Bye-bye.