Mezzan Holding Company K.S.C.P. ($MEZZAN)

Good afternoon, ladies and gentlemen. Welcome to Mezzan Holdings Full Year 2025 Earnings Call. Today is Wednesday, March 18, 2026, and we're hosting this call live from Kuwait. A recording will be available on the same link within about 2 hours. My name is Fawaz Sirri. I'll be moderating today's call. And with us are Mr. Amr Farghal, the Group Chief Executive Officer of Mezzan Holding; and also with us is Mr. Omar Samoud, he's the Group Chief Financial Officer for Mezzan Holding. Now before I hand over the mic to the CEO, let me briefly outline the format of today's call. The CEO will begin with prepared remarks, followed by the CFO, who will take you through the financial performance in further detail. After which, we will open the floor for Q&A. [Operator Instructions] Please note that Mezzan Holdings reports its financial results in Kuwaiti dinars and all figures mentioned during this call are stated in Kuwaiti dinars unless otherwise specified. Certain statements made today may be forward-looking and are based on current expectations and assumptions. Actual results may differ materially in the future. With that, Mr. CEO, please start.

Thank you, Fawaz. Good afternoon, ladies and gentlemen, and thank you for joining Mezzan Holdings full year 2025 earnings call. Before we begin and as we approach the end of Ramadan, the holy month, I would like to extend my warmest wishes to everyone on the call. On behalf of all of us at Mezzan Holding, I wish you, your families and bless -- and loved one a blessed Eid in advance. May bring you and your loved ones peace, good health and prosperity. Now let me turn to our performance for the year. I am pleased to report that 2025 was another year of solid progress for Mezzan. The results we are sharing today reflect the strength of our brand portfolio, the resilience of our operating platform and the disciplined execution of our teams across the group. In an operating environment that continues to evolve and require swift adaptability, Mezzan delivered steady growth while improving margins, enhancing profitability and strengthening the quality of earnings across the business. What is particularly encouraging for us is that profitability continues to grow faster than revenue, reflecting the structural improvement we have been implementing across the group. 2025 revenue increased by 3.8% year-on-year to reach KWD 297.1 million, supported by strong volume and an improved portfolio mix. At the same time, our focus on operational discipline and cost management translated into meaningful margin improvement. Gross profit increased by 10% to KWD 75 million, representing 25.2% of total revenue and reflecting the benefits of organic growth alongside continued efficiencies -- efficiency initiatives across our manufacturing and distribution operations. At the bottom line, net profit before tax reached KWD 20.5 million, representing an increase of 25% compared to the previous year. Net profit after tax reached KWD 18.6 million, up 20% year-on-year and representing 6.2% of total net revenue. The results for the year reflect the introduction of the new domestic minimum top-up tax regime, which added approximately KWD 1.1 million in tax expense. This impact was effectively absorbed with the group continuing to deliver strong profit growth through disciplined execution and efficiency improvements. In line with our strong performance, the Board of Directors has recommended a cash dividend of 45 fils per share, representing a payout ratio of approximately 81%. This reflects both the strength of our earnings this year and our continued commitment to delivering consistent and progressive return to our shareholders and is subject obviously to shareholders' approval at the upcoming Annual General Meeting. Alongside improved profitability, we continue to invest in strengthening the long-term foundation of our businesses. During the year, the group deployed approximately KWD 18.6 million in capital expenditure, representing about 6.2% of total net revenue. A significant portion of this investment was directed towards the development of our Al Shifa Pharmaceutical manufacturing facility, which remains a key strategic project for the group. Importantly, we continue to fund these investments while maintaining strong financial discipline with a healthy net debt-to-EBITDA position, which Omar Samoud will walk you through in more detail shortly. From an operational perspective, we also continue to advance a number of initiatives aimed at improving efficiency and strengthening the group's operating model. This included completing the transfer of Mezzan's frozen food activities Sharjah to Kuwait, which is expected to generate annual cost efficiencies going forward. At the same time, our SAP S/4HANA transformation program continues to progress according to plan. The Al Shifa implementation successfully went live in December 2025 and preparations are underway for the broader rollout across our FMCG and nonfood businesses during 2026. Regionally, we are also encouraged by the improving trajectory of our operations in KSA. Performance in the Kingdom has shown noticeable improvement during the year, reflecting the operational steps we have taken to strengthen the business. While there is still work to be done ahead of us, we remain optimistic about the direction of the market and our ability to continue building momentum there. Before I conclude and hand over to Omar Samoud, I would like to take a moment to thank our employees, our colleagues across the group for their dedication and hard work, especially during what continues to be a challenging period for our region. The sectors we operate in are essential to daily life and our teams play an important role in ensuring the continuous supply of food, water and medicine to commodities -- and medicines to communities across Kuwait and the wider region. During times like these, that responsibility becomes even more meaningful, and I'm proud of the professionalism and resilience our people demonstrated every day. Finally, to everyone joining us on the call today, I hope you and your families remain safe and well. Kuwait and the wider GCC have faced challenges before and have always come through them with resilience and determination. I remain confident that our region will once again emerge even stronger. That concludes my remarks, and I'll now hand over the call to our CFO, Omar Samoud, who will walk you through the financial results in more detail. Omar, to you.

Thank you, Amr, and good afternoon, everyone. Let me walk you through Mezzan Holding financial performance for the year ended 31st of December 2025. Starting with revenue by business line. The Food segment continues to represent the backbone of our group portfolio. Food contributed 64.4% of total group revenue, growing 2.2% year-on-year. The nonfood segment accounted for the remaining 35.6% of revenue, growing 7% year-on-year, reflecting continued strength in pharmaceutical, medical services and selected FMCG categories. Overall, the balanced contribution of these 2 segments continues to support the group diversified growth profile. Breaking this down further across division. Food Manufacturing and Distribution grew 4.8%, representing 54.4% of total revenue. Growth was mainly fueled by stronger volumes, enhanced trade execution and portfolio premiumization across our core brands. That's reflecting sustained focus on brand building and strengthening market presence and leadership. For example, our salty snacks range underwent brand restaging, recipe enhancement and portfolio premiumization, enabling incremental growth and fostering our brand equity. Enhanced route to market across geography is also enabling us to increase trade coverage and widening distribution network. Food catering declined 18.5%, contributing 4.6% of group revenue. As mentioned previously, this reflects our deliberate strategy to streamline the catering portfolio and focus on contracts that deliver stronger margins and operational efficiency. Food services declined 1.3%, representing 5.3% of group revenue, reflecting softer demand across certain venture operations in Jordan. On the nonfood side, the FMCG and Healthcare division grew 7.7%, contributing 33.7% of total revenue. Growth was primarily driven by continued strength in pharmaceutical distribution, medical devices products alongside with sustained performance across Home and Personal Care categories. The Industrial division declined 4%, contributing 1.9% of revenue, mainly due to softer demand in oil refinery and plastic-related products during the year. Turning to revenue by geography. Kuwait remains the group's largest market, contributing 73.4% of total revenue, with growth of 4.9% year-on-year. This was primarily driven by solid performance in food manufacturing and distribution, supported by continued growth in health care and FMCG. The United Arab Emirates accounted for 13.4% of revenue, growing 3.9%, supported by strong distribution performance in energy drinks and premium bottled water. During the year, we continued strengthening our route-to-market capabilities and expanding the presence of our own brands within the market. Jordan delivered 5.7% growth, contributing 6.4% of group revenue, supported by expansion in KITCO salty snacks as well as growth in our premium fresh fruit and vegetable offering under [ Al-Wazzan ] brand. The recent launch of [ Al-Wazzan ] dark store is unlocking growth opportunities in the B2C channel and expanding our portfolio offering. It's worth mentioning that Mezzan operations in Jordan has so far been acting as incubator to part of our innovation initiatives. The market also benefited from activity within the foodservice segment through ventures serving UN affiliated organizations. Qatar declined 16.9%, contributing to 4.3% of total revenue, reflecting the ongoing penetration of the catering portfolio with a continued focus on contract quality and profitability. Saudi grew 12.5%, contributing 2.4% of revenue, reflecting the operational restructuring initiatives implemented to strengthen the group platform in the Kingdom. Turning now to profitability. Gross profit increased to KWD 75 million compared to KWD 68.1 million in the previous year. Gross margin improved by 142 basis points to 25.2%, reflecting stronger portfolio mix, operational efficiency, mainly driven by an optimized supply footprint and disciplined cost management across the group. SG&A expenses, including other expenses totaled KWD 48.4 million representing an increase of 6.1% year-on-year, largely reflecting targeted investment in distribution expenses, expansion and brand building activities, combined with additional spend supporting building organizational capabilities and digital transformation, as earlier mentioned by Amr. Net profit before tax reached KWD 20.6 million compared to KWD 16.4 million in the previous year. After accounting for the newly introduced domestic minimum tax, the entity, net profit after tax stood at KWD 18.6 million compared to KWD 15.5 million in 2024. Net profit attributable to shareholders reached KWD 17.3 million, representing a 19% increase year-on-year. Turning now to cash generation. Operating cash flow before working capital changes reached KWD 35.7 million compared with KWD 33.8 million in the previous year. During this period, the group also recorded a KWD 2.3 million reversal of this year, reflecting successful recovery efforts on previously impaired receivable and risk mitigation. Working capital outflow totaled KWD 11.2 million compared with KWD 14.9 million in the prior year, reflecting improved working capital management across inventory and receivables. As a result, net cash flow from operating activity reached KWD 24.4 million compared with KWD 18.9 million in the previous year. Investing activity consumed KWD 18 million compared with KWD 10.7 million a year earlier. This increase was primarily driven by capital expenditures related to the Al Shifa Pharmaceutical manufacturing project, capacity expansion within the food segment and ongoing infrastructure and system investments across the group. Consequently, cash flow before financing activity amounted to KWD 6.5 million compared with KWD 8.2 million in 2024. Turning briefly to the balance sheet. Total assets stood at KWD 312.5 million with total equity reaching KWD 138.4 million. Net debt stood at KWD 74.3 million, representing an increase of KWD 9.1 million year-on-year, primarily reflecting the group continuous investment in strategic growth initiatives. Despite this investment, the group maintained a healthy net debt-to-EBITDA ratio of 2.1x, providing sufficient financial flexibility to support ongoing investment and future growth opportunity. That concludes my review of the financial results. With that, we will now open the floor for the questions. Thank you.

Thank you, gentlemen, for walking us through the highlights of the year. We will now be taking in our audience's questions. Allow us a minute to take a look at what has been submitted so far. As of now, we have received no questions, but we will be waiting online for another minute or so to give everyone a chance to digest the information and ask their question. We're back and we started to receive questions. The first question we have is from [indiscernible] is asking, given the current geopolitical situation and the closure of the Strait of Hormuz, how does this affect Mezzan's operations and what is the expected cost impact from higher freight rates? That question is going to be answered by the CEO.

Well, I'll try to answer it as much as I possibly can, Fawaz. So obviously, there's a lot going on, and there has been a lot going on in the last couple of weeks. As far as we are concerned, obviously, timing played in our favor because, obviously, we were carrying the inventories for Ramadan and Eid and so on and so forth. So we -- so far, we have been able to serve all our markets without feeling any pressure or any need. Having said that, and I think this is the second so far, we've been navigating and we've been navigating quite smoothly, I have to admit. And we have visibility, obviously, on our inventory, taking into account the offtake, which has been fluctuating, and we're in good shape without getting into a lot of details. Having said that, when it comes to the cost, I think this is a question that is on everyone's mind. And I don't think that anybody can quantify the impact yet. But we are -- I can assure you of one thing, we're modeling. We're doing a lot of sensitivity analysis. We're looking at our offtake on a daily basis versus the inventory versus oil prices and everything. And it's not just about the freight. It's the landing port. Is it going to be [indiscernible]? Is it going to be Salalah? Is it going to be Jeddah Islamic? Is it going to be King Abdullah Economical City? Is going to get diverted to Bombay. So there are still a lot of variables that we have to deal with on a daily basis. Is air freight a viable option versus sea freight because the insurance on air freight is still a lot lower. So at this stage, there's a lot. We're dealing with a lot of variables. Our financial algorithms are quite solid, and we are doing a lot of war scenarios. We still remain confident that while serving the community, while acting responsibly and playing the role that everybody is expecting us to play, we are running a business as well. So it's all about finding that sweet spot between making sure that we continue to run a cost-efficient business while zero compromise when it comes to the service levels that we are providing. I know I did not necessarily answer the second part of the question, but I hope I gave you a bit of assurance that this is not a free fall. We are in control and continue to be in control. And hopefully, we'll navigate this. And hopefully, one day sooner than later, that's behind us, and we go back to business as usual.

Thank you. We have no questions coming in. That was the only question that we received, and that question was just answered. We will stay on the line for another minute. And if we receive no questions, we will be concluding today's call. Thank you everyone for holding. We have received no questions. And with that, we will be concluding today's call. We would like to take this moment to wish everyone well and be safe and those who observe we wish them a happy Eid al-Fitr and a long weekend. Thank you for joining us, and we'll see you at the Q1 results.

Thank you.