National Aluminium Products Company SAOG (NAPI) Earnings Call Transcript & Summary

[Foreign Language] My dear friends, welcome to National Aluminium Products Company discussion session. First of all, I would like to wish you a happy Ramadan and I wish you that all of your prayers will be met. My name is Hamed Al Rashdi. I am the Deputy CEO in the company. And I have with me Mr. Ali Rashid Al Shamsi, who is the CEO of the company; and I have Mr. Raees Ahmed, who is the CFO of the company. So if you allow me, we'll start our discussion session. I'm just having a little technical problem with the connection. Raees can you hear me?

Yes, Hamed I can hear you.

I'm not -- I have my Zoom frozen, I cannot switch the pages. Okay. So the agenda for today, I will do an introduction of the company, then we'll do a company brief, then we have the financial results of the last year 2022. We'll have the present look and the future look then we will conclude this meeting with questions and answers. As you are aware, your company, NAPCO, was established in 1984, and it is the only extrusion company listed in the stock market. All the other extrusion companies in the region, the GCC, they are privately owned and they are not listed. NAPCO also shoulder the Omanization. We are having some -- around more than 135 Omani people working with us. The good thing about NAPCO is that 70% of our products get to be exported outside, which bring hard currency for the country. The company has been there for more than 3 decades. So some landmarks have already used the company products. We are spread all over the continents, reaching to the United States and to India, then into U.K., Europe and even Africa to South Africa. So our prices and our product has been well known and well recognized around the world. There's a little bit of misconception of what is extrusion and what is smelters and what is casting. So just for the high level information, we are an extruder. We are not a smelter. We are not like Sohar Aluminium. Sohar Aluminium is a smelter, and we are not a cast houses. So the basic of extrusion is that we have billets or logs we call them. These are imported from outside Oman. There's nobody in Oman making those billets. So we have to bring them either from the GCC countries or from any other part of the world. Then those billets, they get to be heated to a certain degree, around 500 degree then they got to be cut to a short length according to the customer requirement. And then they go to the press machine in which they will be extruded. For this, now we have not done anything. It's only the log. We have only reformat, we have reshaped it. So we call it a Mill Finish. And it can be either soft without aging or it can be aged and it would be hard. After that, there's a process that is called surface treatment. So this Mill Finish, if it is required to be treated then we can do anodizing, which is a chemical way of painting the profile or we can do powder coating. Powder coating is a paint that is sprayed by cans usually. Then we have what is called also fabrication. Currently, NAPCO having four presses and capacity of 36,000 metric ton production. Before 2014, NAPCO has only 2 presses, 2 8-inch presses. Then in 2014, decision was taken to double the capacity, from 18,000 to 36,000. We added 2 more presses, Spanish, all the presses are European make, and we added a paint line, which is a vertical paint line. So currently, we are having 4 presses. We have 2 paint line, 1 vertical, 1 horizontal and we have what is called natural finish. What makes NAPCO different than the others is our natural finish is powder on powder. We don't do filming and our product is much more durable and it is much more similar to the wood finish. So this is a picture of the horizontal powder coating. In the surface treatment, we can produce around 27,000 metric tons, as I said, our capacity around 36,000 metric tons. Now for this kind of process of surface statement, we have all the requirement and the certification that is required. And we give the guarantee based on the powder manufacture. Why NAPCO and what is make NAPCO more different than the others? First of all, NAPCO has been in existence for quite a long time now. So the name is well known worldwide. And NAPCO product is sought for because of the quality. We don't use any other than the premium billets, in our process we use only premium pellets. We don't use anything from the scrap mix. So we have what is called a premium billets that we're using. We have been here, we have been knowing the customers, so we have the business to go and move. We have been moving things in a very different way. you will see that some of the projects that we have been through or we have participated in is some of the landmark. We as NAPCO are very proud to be -- having creative solutions. We do what others cannot do. Actually, our name is usually synonym with the quality of the product that we're doing. So our creativity, and that's also our logo, makes us one of a kind in the region. We are in presence of almost all the continents in Asia, Europe, of course, in the GCC, Middle East and U.S., U.K., Africa and Australia also there. We have an advantage of using the free trade agreement with the United States, and we started utilizing that now. There are still some issues of logistics to the United States, but we are overcoming that. The company is supplemented by an ERP system that is complementing our production and process of dispatch. In the aluminum business, there are what is called systems. So every company has its own systems or there are system houses that are there available. NAPCO also has some systems in which we have the cold system. Thermal system is the thermal break system. So we have 2 pieces of aluminum and in the middle, there's an insulation. This is usually used in Europe for the cold weather and in the Middle East for the hot weather. Then we have the other system, minimal systems. So our systems are there available. Now NAPCO is a certified ISO 9001:2015, and we are also certified for environmental product declaration, which is 14025. We have all the certification for the powder application from Qualicoat, Qualanod and the certification from the powder suppliers. These are some of the projects we have done in the regions. Some of them are in Oman and some of them are in the GCC. We are very proud to be partnered with these projects. We are still supplying some of our material to some of the prestigious project that's going on. I can very comfortably say that most of the towers coming in UAE are either fully supplied by NAPCO or partially supplied by NAPCO. We have been to so many countries, and I am only going through these projects so that you can recognize some of them when you see them as a NAPCO project. This is an overall nutshell and introduction of the company. I will hand over now the mic to Mr. Raees Ahmed to go over the present financial statement. Mr. Raees, please go ahead.

Thank you, Hamed, for the brief participation and let everybody knows about the NAPCO and you rightly said the strength of the NAPCO itself and the trademark, the brand, and NAPCO exists for a period of more than 3 decades achieved. So let's start with the presentation, the Present slide. Just move to the first slide, Hamed.

I'm still having connection problems so please bear with me. It's not my fault. I'm trying to move the slides. Otherwise, I will get out, and I will ask you to share.

Hamed is still the screen not moving?

Not moving. I will try to just end it. I think better to go ahead and share Raees from your side, if you have it.

So give me a minute, let me just open the presentation.

I do apologize for this connection problems. [ Ra's ad ] area is not that good in the connection, but we're trying to make the best out of it.

So my screen is visible to everyone?

I still cannot see it. Are you seeing Mr. Raees' screen?

Not yet, no.

Yes, now it is visible. Please go ahead.

Okay. Let's start with the presentation before having the financials, I will just highlight some of the important items that need to be to understand so that we can easily understand the financials of NAPCO itself. The main component that is being used in the industry is basically inventory, selling price margins and how it's basically relates. So inventory is the key component. Normally in the extrusion industry, the quantity that is kept almost 15 days to a month as a quantity so that there is no fault in the production of the quantity. Basically, extrusion is a job order -- this industry in which we receive the order, then we produce. It's not something that we are producing and not to sell. It's basically order-based production. That normally goes. So that's why we have a requirement to keep the inventory also. Price, normally what happens, the selling price, it's basically linked with the LME. LME stands for London Metal Exchange, basically, it's exchange where the commodity prices of the extrusion are decided. So the selling price has 3 modes. It's basically decided on LME 3m-1 and LME M-1 or LME0. 3m-1 is basically indicative price that is mentioned on every month, the last month average price, basically these are the basis to quote to the customer, along with the conversion itself. So this is basically the second important component of the extrusion industry then certainly having the margins. So over the past 4 to 5 years, due to the stiff competition, extra capacity in the GCC countries, there's a very reduction in the margin itself. I would say that very tough competition in the margin itself. Basically, the industry is a price taker, not a price maker. So in fact, in the extrusion industry, we have to compete, and we have to get the price which is available in the market. And accordingly, we had to have a target cost to meet the requirement accordingly. In 2023 as compared to 2024, the LME fluctuation was very much high. Overall, although there was an impact of 9% increase but in the first quarter, there was an abnormal increase that happened and that has, I would say, that given a very bad impact and impacted a lot to the NAPCO itself. The -- if you could see the screen, we have just based it on a graph itself, it's available on the Internet itself in which it's showing the trend of the LME, which is basically the main price of the market. So in the month of March, the LME, which was trading somewhere around $2,200 in December reached to a level of $3,542. That was a point where the extrusion industries were unable to get the stock properly on time. And due to the constraint which is there in the GCC country and NAPCO is not exception to it, due to the high leverage company, NAPCO faced and suffered a lot because of this particular component of increase in the price, which reduced the buying power of NAPCO and resulted in the negative results at the end of the year itself. Along with this, not only what happened that the LME got up, there was a reduction by 1 bank of around OMR 3 million in the facility itself. For the last 2 to 3 years, NAPCO is continuously reporting the losses because of certain aspects or certain reasons, especially after the Corona, the situations are not the same as it used to be. We did 28,000 production and dispatch in the year of 2022 and there was Corona. But after that, the things were not normalized, and the impact of Corona is still going on from where we are just trying ourselves to get it recovered. There are certain big companies which got defaulted and due to which the whole chain -- supply chain, the whole change of cash flow affected, such as you might have the name of Arabtec, [indiscernible] and so many other companies. We were not -- the companies who are directly supplier for those companies. Rather, we were the company who supplied to their companies which were indirectly involved into those projects, but that is hardly affected, and it got affected our receivables also. So the combination of stuck up receivables, along with the reduction in the facility and reduced reduction in the buying powers, all these 3 main components is affected the company's performance and it has produced the negative results. Moving towards the same thing, which I will say, the major events during the year that happens, the LME increase. Obviously, the 9% is the overall impact. But the first 6 months, specially, the first quarter gave a big impact that has reflected in second and third quarters and we were unable to produce a positive result in that period. Further reduction in Bank Facility, reduction of buying power, as I mentioned, and further provisioning of OMR 957,000 in as the IFRS, all those combination has caused our loss to report, which is very high. So this is the financial results that we have reported a revenue of OMR 24.447 million as a group, which was OMR 28.536 last year. In the parent it is OMR 24.349 million in December. Last year, it was OMR 28.536 million. We reported a cost of sale as OMR 25.382 million. It was OMR 28 million last year. With the parent, it was OMR 25.368 million, and last year, OMR 28.014 million. We reported a gross loss OMR 934,000 as compared to the gross profit of OMR 521,000 last year. And similarly, with the parent, it's OMR 1 million and for the group itself it's OMR 521,000. I just would like to mention that the reduction in the capacity. Basically, the extrusion industry is capital intensive and capacity intensive. If you don't utilize the capacity and you don't have the proper capital, the losses normally are reported because there's huge fixed cost involved in the extrusion processing. That has reflected in the results. In 2021, we utilized the production capacity up to 50%. And in 2023, the production capacity, which is utilized was 37%. So the less utilization of capacity has caused huge impact to the company itself. General administrative expenses were OMR 1,093,000 which was OMR 1,076,000. There is a small increase, mainly we have done some of the cases to the customer that has caused a little bit increase in the general administrative expenses. For parent OMR 1,077,000 and December last year, it was OMR 1,058,000. Selling and distribution is a drop. In fact, it has not dropped. It has a component of transportation cost as there is a less dispatch happens to transportation costs reduce. So that is showing as a reduced OMR 811,000 is reported this year. It was OMR 1 million last year. In parent is OMR 728,000 and OMR 999,000 last year. Allowance for credit losses, OMR 957,000, as I mentioned, as per IFRS. There were certain expectations last year, we [ thought ] that we'll be recovering some sort of amount of money from the customer. Unfortunately, there was no more -- much of the success that we have done. We had done success in few cases, small cases but not in the major cases. So we were forced to get further provisioning of OMR 957,000 and our total provision has reached OMR 2.2 million. It was OMR 406,000 last year in the parent -- in the group itself. Net financing cost is OMR 1.4 million. It's basically -- OMR 1.476 million was last year. In the parent, it's OMR 1.3 million, and it was OMR 1.476 million last year. There is a minor deduction. In fact, it's not a deduction itself because of the less purchases of material, the -- but not that much, although it's -- with the percentage it's there. Income tax, OMR 628,500 basically is sort of the -- basically the tax that is documented on the loss, which can be carried over forward over the period of next 5 years. It was OMR 163,000 last year. So total reported loss for the group itself is OMR 4.3 million, which was OMR 2.9 million last year. And parent has OMR 4.276 million and last year it was OMR 2.88 million. So the basic earning per share is OMR 0.128. It was OMR 0.8 negative -- OMR 0.087 last year. And parent had OMR 0.086 for the last year. Then we can move to the balance sheet. Okay. The balance sheet, the total assets that we had was OMR 13 million last year, now it's OMR 20 million -- OMR 12 million. The reduction is basically mainly due to the depreciation factor, although we have a further 353,000 purchases. But overall, the depreciation factor, it induces the fixed asset. The current asset is basically -- it was OMR 16 million. It has reduced to OMR 10 million in the group itself, mainly reduction in the receivables. And as there is no much sale and further into it, the company has followed the strict policy of collection itself, and that has basically paid the company a lot. So that's why the reduction is there in the receivable itself. The inventory was OMR 3.2 million, and it reduced to OMR 2.4 million. Again, the same raw material less purchases. The equity got reduced from OMR 5.26 million to OMR 967,000 mainly because of the loss of OMR 4.3 million. Total noncurrent liability about OMR 1.337 million to OMR 1.367 million. It's basically, again, the lease liability as per the standard of IFRS 16. Current liability is basically reduced -- increased, in fact, from OMR 3 million to OMR 5 million. Why it is increased? Because we were able to secure a credit contract from our major raw material supplier in the last quarter. So that has caused the increase in the accounts payable or accounts and other payable side. So this main component is basically is the payable to our billet supplier from where we have secured our credit terms. The bank borrowing is OMR 19 million reduced to OMR 15 million. As we said, a OMR 3 million reduction is there in the bank facility from the bank, major bank that has caused the decrease in the, I would say, the facility not only, rather, it has contributed to suffering the losses to the company itself. In the parent, it was OMR 21,026,000 and OMR 22,964,000 in the last year. So the net asset per share is OMR 0.029. It was OMR 0.157 last year, OMR 0.030 in the parent and OMR 0.157 last year in the parent basically. So this is what the financials that we have. So I will just hand over this slide and the presentation to Mr. Ali for the future outlook to discuss on that. And then we'll be having a further question-and-answer session and where we can address the relevant questions.

Thank you, Raees. [Foreign Language] I'll take you through the following 3 slides, just future outlook for NAPCO. So if we move to the next slide, Raees, please.

Yes, sure.

Over here, actually, it shows that plan, the recovery plan, which NAPCO has come up with, this plan has been presented to the bank, is a 10 years plan of recovery. The bank have requested to have a validation from 1 of the big 4 companies, which actually did the task and it validate the plan. In the plan, you can notice that actually, there will be a certain amount of our borrowing converted to long-term borrowing and others actually will be this for other working capital. The plan, as you will notice, it shows actually a breakeven point by this year, 2023 but going forward, [Foreign Language] that we'll make the profits. What as well was included in this plan as Raees had indicated about having a source of billet in credit. This is just one source currently, and we're still exploring having actually more opportunities with more than one source of -- for the credit -- sourcing the billet in credit. If we move to the next slide, over here it shows as well the -- if you look at the cash flow, it showed the retained earnings starting in 2023 is negative. But if you look at 10 years plan, actually it will be converted to positive. So this is the plan which we are really having in place to -- as a recovery plan for NAPCO. And if you look at the challenges -- next slide Raees please, if you look at the pacing or going ahead as we mentioned that actually the GCC region is having an intense competition when it comes to the billets, to the price. And actually in reality, it has actually an over supply. And the fact as well NAPCO, majority of our market is in the GCC region. So that's actually putting a lot of pressure in the price. At the same time, we know as well, there is other challenges like the energy price, unseen corporate tax, tariff and the high financing rates, putting a lot of pressure in our markets. All of this, along with the uncontrollable LME fluctuation, has actually represent a big challenge for NAPCO. To overcome all of this, actually, the company exercising all the available options by effectively utilizing the operational resources during the improvement in efficiencies and as well the company has extended, if you noticed the last year, to the overseas, especially we started to sell in the U.S. All of this actually would contribute to enhance our financial positions and as well our margin. NAPCO will remain keen to meet all the challenges ahead, to enhance the company image and financial strength to generate returns in the stakeholder funds. By this I conclude the presentation. Hamed?

Yes. Thank you, Raees, and thank you, Mr. Ali. We open the floor for the questions but it is worth mentioning that when we started 2022, we were very optimistic that things will get better. But then the international events that happened that is well known to everybody has really hit hard in the LME prices and the aluminum. 2023, we are very optimistic. We have started January, February and March production without any bank facilities. We are self-dependent on our receivable, on what we collect from our customers. We see that this year can sustain a better environment for NAPCO and we hope that the business of NAPCO will survive and will flourish in the near future. Please go ahead and ask you questions.

Hello.

Yes, please go ahead, Mr. Bishen.

Thank you for the presentation and gentlemen. This is Bishen Bhalla from [ Vision ] Capital. Could you please refer to the projections that you just displayed? The P&L? If you can just start with that?

Raees?

Yes. You can see the screen?

I can't see your screen. One second. Yes, I can see it now. Okay. I just wanted to -- just have a look over there, okay? Pleased to know that you mentioned that 2023 has started on a good note and the first quarter looked decent and that's without banking facilities. So glad to like to hear that. I'm just trying have a look at these numbers. I can absorb them before, I just start with the questions, the EBITDA, finance charges. Now, finance charges, if we just compare it with what you paid last year, it goes down from OMR 1.4 million to OMR 1.1 million due to the withdrawal of the OMR 3 million banking facility. Is that correct?

That's correct. Not only that there were certain penalties was also there in the 2023 because of the noncovenant compliance.

Okay. And there was also -- this includes the shifting from Oman to UAE as well. Is that being considered as well?

No, Bishen. This plan is basically not considering that part of it. This is what we had initially discussed. As we said with respect to the plan itself, there was 2 incidents -- the [ studies ] was conducted. And accordingly, the disclosure was made at 2 studies were evaluated was -- first was the technical study. And after that, there was a financial feasibility that has conducted, and it was presented to the Board. Board has approved that study. And the important part of that study was that there will be a requirement of refunding, [ the fund ], an investment requirement. So due to the COVID 2022, after 2022, the market dynamics got changed. So NAPCO has tried -- NAPCO has presented this investor -- but the things were not materialized. Things were not materialized. So the plan is not considered in this basically projection itself, which we are submitted to [indiscernible].

Understood. That's fine. Gross profit, I mean, from a sort of loss at a gross profit level of OMR 900,000 last year, you're projecting a profit of OMR 5 million this year, right? And that's looking...

Yes. Just to correct one thing that it does not include the depreciation. So if you are saying OMR 900,000, basically, if you add back the depreciation, there will be a positive gross profit.

I understand. I understand. I'm right now talking of sort of a reported number, not a cash -- and I appreciate that. We can look at the cash number as well.

Second, Bishen, I'll just give you a brief on that. See, the capacity utilization, that is done, as I mentioned in my presentation also, in 2021, we did 50%. In 2022, we did only 37%. So important aspect that we mentioned that this industry is basically the -- capacity intensive and capital intensive. In 2023, we are projecting to produce 25,201 quantity and dispatch to networks. So 13,000 dispatched to 25,000, you will certainly see the numbers in the turnover. You will certainly see the number at the gross profit level.

Understood. So you're projecting a capacity utilization of almost 70%.

Yes, almost, yes.

Okay, that's encouraging to note. Okay. That's fine. All right. One second. Let me just get that right. Okay. And sorry, you said that the predominant driver for your business is the LME prices, right? And that's sort of what went against you, where you could not purchase because the prices were so high the purchasing capacity was impacted and that sort of affected the performance. And then how do you see sizes sort of -- I mean, I understand it's difficult to predict exactly but what -- how are you seeing -- in what direction are you seeing them heading?

I thought [indiscernible] you don't ask normally, this question comes from the every financials expert who understand the business itself and understand the figures itself. In the extrusion industry, what happens that you buy the raw materials in advance and you pay -- you sell to the customer on credit business. This is the industry in normal, in general, in all over the world, it happens. It never happens in the extrusion industry, particularly in the GCC were extrusion company secured its raw material on a credit term basis. So [Foreign Language] this NAPCO has initiated a contract initially, this negotiation was started with our main -- one of the supplier in the month of August in which we started with a quantity -- I will not mention the quantity -- almost 33% of the requirement that has supplied to us. And from 2023, we made an agreement for the whole year itself, where he committed to supply almost 65% to 70% of our requirement on credit basis. So this is something that got changed. Now the LME certainly will affect, but it won't affect the big it has affected last year. The combination of the 2 things, as I mentioned in my presentation, the drop in the working capital facility by the bank. So it's certainly reduced the buying power Secondly, the LME it went up from $2,000 to $3,500 means abnormally went up, it has reduced the buying power also. But where I have got a secured contract from my supplier if LME goes up or down. I have my contract in my hand, and I have the security that I will be receiving my raw material on time. So this will eliminate the impact that we have faced over a period of the last 3 years, the uncertainty there certainly be -- what eliminate the option of uncertainty -- I mean the LME fluctuation because it will certainly be hitting the price also. The phenomena or I would say that the market pricing is basically it's LME plus conversion that is in extrusion industry. It will certainly impact, but it would not affect the way it has impacted last year. I hope I have answered the question.

Fair enough. I understand that. Your G&A expenses is what is noted as admin expenses, correct? Is that the right...

The admin and -- G&A admin and selling. Especially...

Selling, I get it. It's OMR 1.27 million because like you mentioned, it was -- it's showed OMR 800,000 because traveling expenses were lower because of a lower capacity utilization of 37% versus 50s. So that number goes up and this goes to -- and your sales goes to OMR 1.2 million which is fine. But if I'm not mistaken, your G&A expense was OMR 2 million last year, and it's what, OMR 1.093 million this year?

No. Last year, it was not OMR 2 million. It was in the same. If I can take you back to the presentation itself, you could see that. So it's was...

So it was...

So it's the same.

Okay. Okay. Sorry, sorry. Your allowance for credit losses goes down -- that was classified under G&A, at least in the headline. So for OMR 950,000, it comes down to almost OMR 180,000, is that correct?

That is basically an estimate that we have taken at OMR 180,000. As you know that in IFRS 9, if you don't have anything, you need to create the provision also. So it's a requirement that we have taken at OMR 180,000 and we are expecting some of the cases to be settled over a period of time, and we will be not having those [ weighing bags ] basically see it in our receivables further. So we are expecting this to continue as minimum bad-debts provisioning over the period of time.

Okay. Okay. Understood. I understand. Sorry, just to -- just trying to put everything together. So basically, capacity utilization sort of almost doubled. That's one factor. Your purchasing clarity improves because you can buy things on credit and you have certainty that you'll be able to still receive the raw materials. And eventually, it is a margin business. I mean you are sort of a trader who has to sort of rely on margins, so we get that. Next point actually would be regards to your exposure or the sales to the U.S. like you mentioned, if I look at the split of your business, which was predominantly driven by GCC. Over the last couple of years, we've seen the contribution in terms of revenue from other countries going up from 8% in 2019 to 26% in 2022. Where do you see that number or in terms of at least absolute volume target or revenue target that you have for other markets?

As mentioned by our CEO, the NAPCO's policy just to enhance further. You have seen the challenges in the GCC that we have faced and that has led our company to focus more on a sustainable market where the liquidity positions are much in a liquid form I would say. That's why the focuses was much more there towards the European market, U.S. market and Canada, Australia market that we materialized over a period of time. And the company is basically continually struggling to expand it further also. So obviously, there is a target basically, that has set and certainly over a period of time. But as far as the plan is concerned, the plan is based on basically the actual existing -- the portfolio, which is there for the sales-related things. So if the enhancement is there further, it will certainly improve the results, which is reflecting over here.

Okay. Fine. Fine. Noted. All right. And on the interest side, you mentioned that OMR 3 million facility has gone down, so the interest cost has come down. But overall, given where interest rates are currently, what kind of impact is that having on the company, the rise in interest costs?

Yes, exactly the current interest rate is increasing. It's basically reached to a 7% level itself. One more thing, Bishen this is basically our overall chain. This is something if the interest rate has increased. So we are -- ultimately, we have to increase our margin also. We have to pass on this cost to the customer itself. So obviously, an increase of OMR 0.5 in the interest rate is not affecting our plans. You could see the bottom line of OMR 317,000. If you don't -- I mean, OMR 275,000 or something, the additional OMR 25,000 or OMR 30,000 will not influence the bottom line if you don't pass even. But obviously, it certainly, it has to be there, it's not only for NAPCO, it has to be for everyone, for the customer to who we are selling, they will be feeling this pain also. So this has to pass to the customers.

Understood. And one of the questions which we had asked last time, I just want to sort of reiterate that, we do understand that given the margin structure, the higher the value of sale, the more dollar profit you make. So we understand that. But what capacity utilization is optimal for the company to sort of -- so if I see for these numbers, 70%, you would be mostly breakeven. Is that correct? So 80%, 85% is what you need to be actually truly profitable. Is that a correct assumption?

Bishen, basically, the projection that we have given to the bank itself, we remain conservative. We did not utilize the complete facility up to 32%, the utilization is up to 80%, basically, 80% to 82%. So the remaining component utilization will certainly add. So utilization of capacity adds to the margin itself because the fixed cost component will remain constant. This is something that we have kept at our part and as rightly mentioned by our CEO, that we are exploring further with other suppliers also, the major raw metal supplier to get the credit terms. If those things are materialized, there will certainly be a further enhancement, as I mentioned, in the bottom-line rules.

If I may ask, what does the utilization mean from Q1, 70% or northwards of 70%?

The Q1 is basically, yes, it's almost 70% to 75%.

Okay. Bishen thank you...

Yes, sure other questions, I'll...

Mr. Husam, you have a question. Husam Shafmari please go ahead.

Yes, I have questions. [Foreign Language]

Raees, Mr. Husam is asking about the restructuring of the capital -- of the company capital. His question is [Foreign Language]. Can we cover all the losses? Are we able to cover all the losses? Please, if you can brief him on the company capital restructure please?

Yes. In fact, if -- related to the recovering of our losses, so the answer is completely rightly for the time being is no. It's basically reducing the losses almost by OMR 3.5 million, which is OMR 2.5 million but we have requested in the reduction it's from the capital. And if you write off the retained earning, which is currently OMR 5 million. And then further OMR 1.1 million of this legal result to be written off. So the remaining part of OMR 1.4 million that will be there and it has to continue in the restructuring. And you might have seen our -- the extraordinary general meeting disclosure also in which the Board has approved the issuance of a right share of 1.175 million addition in the capital itself. So the equity, which will reduce -- the share capital, which will reduce to 867,000 will again reach to a level of 2 million with the -- having this right issue of 1.175 million. Hope I have explained the question if some further clarity is required just you can ask.

Yes, I understand that the use will be like after reduced share capital and maybe you will also provide extra stock like for the stakeholders like maybe OMR 1.7 million EBITDA losses. Now my question is when will you recover this losses at one point? After this is done from the company, when in the future, this OMR 1.7 million it will be covered? Will it be recovered by this year or by next year? Yes, that's my question.

Yes, okay Husam. I got your question. Apologies that I thought that you will asking only on the restructuring. The recovery of the losses will take place. If you could see the screen itself in which I show on the balance sheet, the first year, we are having a breakeven. So the losses will remain OMR 2 million. It's basically not OMR 1.7 million. It will remain OMR 2 million. So over a period, gradually, it will reduce. So by 2028 we are expecting to have a positive equity. And by the end of year 2032, it will be having a OMR 2,311,000 positive retained earning. So from the start of 2023, with having a OMR 2 million negative, we be ending up with a positive OMR 2.3 million of retained earnings, we just continue with the plan itself, the way we have presented to the bank and if it approved and the way it goes. So [Foreign Language] after -- in 2028, we'll be having a positive. But by end of '32, it will be OMR 2.3 million.

Any other questions from anybody before we conclude this session? Anybody else would like to ask any questions? If there is no questions, I would like to thank you for sharing this discussion session with us. Please, you can contact the company at any time you can contact me. I am the Investor Officer here in the company. My e-mail and telephone number are available in [ CMA ] website. Once again, thank you for coming to this discussion session, and have a nice day. Thank you.