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

So thank you, gentlemen, joining today's discussion session. It will be mostly lasting for one hour, but we'll try to close as early as possible based on the questions that you people will be generating, we'll be just answering all the questions. This is what we are presenting for the first half 2025 performance. So let's start. The agenda will be of this presentation. Initially, we'll be giving a disclaimer, then introduction, Aluminium Extrusion Market Insight, we will give you financial results of H1 2025 with comparative 2024 and future outlook, conclusion and then in the end, there will be a Q&A. So gentlemen, we are just giving a sort of a disclaimer. This information presented here is provided for information purpose only and subject to change without prior notice. While we strive to ensure the accuracy and reliability of information contained with in this presentation, we make no guarantee or warranties expressed or implied regarding its accuracy, completeness or suitability for any particular purposes. The content of this presentation may not encompass all material information pertaining to the company. We disclaim any responsibility or liability for any error inaccurate or commission that may be present in the information provided herein. Any distribution, reproduction or dissemination of the presentation in whole part or in a part without the explicit and written consent of the management of National Aluminium Products Company, SAOG, it is strictly prohibited. We reserve the right to take any legal action against any unauthorized distribution of use of this presentation. The information and opinion presented in this document do not constitute investment advice, financial recommendation or any kind. Individuals should seek professional advice and conduct their own due diligence before making any decision based on the information contained in this presentation. By accessing any reviewing this presentation, you acknowledge and agree to the terms of this disclaimer. So this is what the disclaimer part is. Let's start with the presentation. So NAPCO, gentlemen, you know the company, established in 1984. And last time, we have just mentioned to you that we have completed 40 years of establishment, very, I would say, that productive and successful period for this company, only aluminium extrusion company, a pride of Oman, National Aluminium Products Company. The company as of now is only extrusion company. Now the second listed company is there in Saudi Arabia, which is Al Taiseer after NAPCO. So in Oman, it is only a listed company yet. We have this, I would say, the prominence in the market itself. We are still having the export of 80%, 20%, we are capturing the demand of a local market itself. The company has done the prestigious projects in the past itself, which we have shown in the earlier presentations also like renowned airports like Dubai Airport, Muscat Airport, all the major airports and besides this major projects in UAE, then in U.K., even the Canada and Americas, certain projects that we have done also. This company have a brand name, and it's basically remain prominent in the market itself. Moving towards the second side, what we offer. We offer basically 5 main products. Our main product, which is mill finish. The second value-added product is a powder coated. Third is anodized and fourth is root finish and thermal brake is basically another value-added product, which is used in various applications. So main is basically mil finish, which constitute the main part, 50% to 60% of the sales that we are doing and remaining 40% to 50% is remaining to the value-added product that we are doing. Aluminium extrusion market insight. Market insight, I'll talk about the fluctuation and volatility in the market regarding the price itself. So I'll show you some sort of snaps regarding the price, how the LME has behaved since January 2024, when it started for OMR 2,200, it moved to a level of OMR 2,500, then it went down in the same period itself. So it just remained maintained in that period of 2024. However, in 2025, we have seen that from the 2024 end quarter, it just started, and it remains there till March itself. In April, it went a little bit down, but again, it started moving up to the OMR 2,500. Now it's in the last 2 months, the LME is being traded at OMR 2,600. Actually, the line that we were looking at 2,600, the increase in the price of aluminum certainly affects our, I would say, that buying capacity because when you have more LME and you are just relying on your current receivables itself, it's just reduced your buying power, but with the help of the stakeholders, including our bank and the shareholders, we have managed to have a different result, which we'll certainly show you in the upcoming slides. The challenge that we have, we were developing U.S. market, but certainly, everybody has seen that there is a tariff that is being imported across the industry, across the countries also by U.S., that is 25%, and we are the part of that effect. But we are not that much of effect because we don't have much of the export to the U.S. So what we have handle that we have switched those percentage to the GCC and other market itself. Secondly, the good part that GCC has imported antidumping duty on China itself, still not that much visible those quantity, which was coming from the China itself, but we are optimistic that once it is completely implemented and fully restricted to the Chinese, certainly, it will enhance the local market or local GCC market and it will increase demand, which is already there in the market itself. So this is what we have the current market update and insight related to the aluminum industry and the LME prices, especially. Now the present. I'll just give you the graphical presentation of our half year results, and then I'll give you the figurative figures also. The first thing, the key challenge I'll present to you that we are still having the negative equity, and you have seen that back-to-back losses for a couple of years, last 4 to 5 years that we are incurring. So that has caused this negative equity, which reached to OMR 4.58 million. High interest rates by the banks, as you know, that negative equity in such a case, the banks increases the rate -- interest rates, so we are suffering with that part also, lack of equity funding. So during that period, we did not have that kind of an equity funding, which we are struggling for. We are quite optimistic that we'll certainly be getting this kind of equity in upcoming years also. Lack of additional funding from the banks, it was there. The sufficient funding which we are looking for, we still didn't get it. But to some extent, we are able to manage to get some sort of a facility of one of the renowned banks from Oman itself, which is helping us, and it's reflected in our results also. The raw material price increase, as I mentioned, that abnormal increase in the price certainly affects the company that is struggling with the current liquidity issues. But we managed this year. I'm just trying to explain, it will be certainly reflected in my next slide. You will see certainly the result and the improvement of the company itself. So coming towards the performance for the 6 months this year as compared to last year, you could see that revenue reached to OMR 12.147 million versus OMR 9.945 million as compared to same period last year. There is a jump of 22%, OMR 2.2 million revenue increase. On the other hand, you could see that the cost of goods sold, OMR 11.276 million as compared to OMR 9.685 million. So there is an increase of OMR 1.59 million, 16%. So you could see the change in the revenue by 22% and the cost is only by 16%. It's not a proportion itself, which has reflected in the bottom line also of the company. The GP was 870 -- now it's OMR 871,000, which was OMR 260,000 in the last year. The other income is OMR 12,108, it was last year. Actually, the result of other income is -- constitute the -- our major, I would say, that product, which is called die, which linked with the project itself, which we are looking to enhance. So we did not have the substantial project in the Q in this particular half year. So that's why we did not have much of the other income in this year is being reflected in the financials. Expenses, OMR 663, OMR 697 was last year. So there is an improvement that we have made cost control. And in the last couple of presentations, we said that we have started in 2023 the lean management aspect, which is the practices continue, the cost efficiency and effectiveness that we are trying to implement in the company itself, and it's giving us results also. So you can see that the EBITDA is now OMR 220 positive, which was OMR 329 last year negative. The finance cost has increased OMR 742 and OMR 683. There is 2 factors involved that we have got the additional funding of -- the facility of OMR 2 million from one of the renowned bank in Oman, out of which we utilized OMR 1.5 million. That is a fact that has come into the finance cost. The other factor is that one of the bank is basically the leading bank is charging us a default interest rate of 12%. That has caused a problem. And we are negotiating with that bank also to restructure the loans itself. So the once it is stabilized. So we'll be having the normal rate of interest instead of having a default rate of interest by one bank, which is being implemented right now. So the losses we reported for 6 months is OMR 522 as compared to last year, it was [indiscernible]. So the main point is which I highlighted over here that EBITDA, you could see the figure of EBITDA, it's reached to OMR 633,000, which was OMR 108,000 in last year. This company has made a significant improvement, which was committed early and you might remember that we have shared the plan the way we were moving, and we had a plan to go for the next 10 years, how will we go and turn around this company to be profitable as this company used to be. So this is what we are on the track itself and we are moving with that. So the next slide, a little bit detail of the figures, which I have already reflected in the graphical. So similarly, you could see that OMR 12.147 million of revenue as compared to OMR 9.94 million, 22%. Cost of sales is basically OMR 11.276 million, OMR 9.685 million, 16%, Similarly, gross profit OMR 870, OMR 259, 35% improvement. Other income, which I told almost OMR 11,000 and as compared to OMR 107, so 89% drop. The general and administrative expenses, OMR 409 versus OMR 413 million, so 1% drop. Similarly, selling and distribution, OMR 253, OMR 283, 11% drop. We have done so much work on the transportation cost this year itself with the renegotiation of the rate with the certain company that has helped us in getting this reduction in the number. And we are trying further to reduce those numbers also. There's only negative part that we have, which I have explained in my previous slide, the net financing cost, which has increased from OMR 683 to OMR 741, which is 58%. So you could see all these figures, which is reflected in the summary form that is coming here. So we have the EBITDA percentage, it was 1.08% last year. Now it is 5.21% this year. So this is a substantial improvement that we have done in this year itself. The next slide is related to the balance sheet. So you could see the first figure is basically related to property, plant and equipment. It's basically down. And mainly the reduction is due to the depreciation, which is OMR 337,000 and there is an addition of OMR 88,000 of fixed assets, which mainly dies. Then intangible assets amortization, the impact is for the amortization. Right of use is itself is basically IFRS 16 calculation. So the reduction is based on the calculation itself. Down towards the inventory, if you could see there's a little bit enhancement in the inventory and accounts receivable. That basically has happened because of the factors that we have increased our production from last year to this year itself, not only the production, the dispatches, which has reflected in the revenue itself, which I've shown in the previous slide that our revenues increased by 22%. So it's just started in the first quarter. We were having the capacity utilization of almost 32%, 33%. But by the end of June, we reached the capacity utilization of our plant by 40%. In the second quarter, we produced more, we dispatched more. So that has basically incorporated into the inventory itself and similarly to the receivable part itself. Bank balances is reduced by OMR 61,000, again, the utilization of those resources paying to the main suppliers that we have done. So revaluation in retained earning is basically the reflection of our total loss that we have incurred over a period of time, OMR 521,000. You could see there is a shareholder loan. Actually, at the start of the year, the shareholder has committed that they will be injecting OMR 800,000. So till June, they have almost injected OMR 200,000 out of a total commitment of OMR 800,000. So 25% injection is there. So you could see there's OMR 200,000 addition of the shareholder loan they have injected. So this has helped us to improve the production and ultimately, the revenue also of the company. Shareholder loan, basically, in term loan, there is a reduction of OMR 147,000. There are 2 big small payments were there that we have done. So it has reduced to that level. Down, if you'll come to the accounts and other payment, it has increased by OMR 842,000. Certainly, if you are producing more, you will be having much of the supplies also buying from the suppliers. So that has counted so it has increased to that level also. And you'll see down, bank borrowing has increased by OMR 1.33 million. This is what I told you at the start with the help of one of the prominent bank in Oman, we got the facility. So this facility along with the help of shareholder injection of loan itself has helped us to improve our capacity utilization from 32% to 40% and increase in revenue by 22% over the period of time. So this is what we have. So our total asset has basically increased from OMR 19 million to OMR 21 million, which I have just explained you the component that we have. Moving towards the next slide is basically related to future outlook that we have explained earlier also in the previous discussion session, especially, which happened in the March or somewhere in April, that we had a plan, 10 years plan that constitutes mainly or broadly. I would say that OMR 800 equity injection of a minimum. And in addition to OMR 2 million funding by the banks and OMR 5 million additional funding 2026 onwards. So this is what the plan, and we are on the plan right now, as I told that OMR 200, we got it from the shareholder as of June. And out of this OMR 2 million, OMR 1.3 million, we got it from one of the bank. So these 2 figures has helped us. And we'll be projecting in the next half year, there will be a different results, which will be certainly coming with the balance amount that we are expecting the shareholders to inject around OMR 600 and remaining OMR 600 of utilization or OMR 700 utilization of development bank -- sorry, the Oman Bank. So it will be another OMR 1.2 million that we'll be getting it as a funding, and it will certainly enhance our further capacity. The target of utilization of our capacity is up to 50%. This will certainly impact in our bottom line. Okay. The next slide is related to the major highlights of the 10 years plan that was the last time also we presented that current year capacity utilization target is 50%. And from 2026 onwards, it will be 82%. Similarly, the inflation rate, we have taken 1.5%. Interest rate, we have kept at 5%. Billet purchase, we'll be doing in cash. This is an industry practice. Previously, there was a credit supply sort of a thing we don't have. So we did not constitute this kind of a concept in the long-term planning itself. So it will be a normal industry practice that we're buying the metal in cash. Additional working capital, as we said, at OMR 5 million, which we have asked our banks, and we are sorting the help of the investors also, and we are looking that either this OMR 5 million has to come from the investor -- new investors or the bank will certainly support us in 2026 to get this plan continuous for moving forward to achieve the recovery of our company itself. Old bank term loans will be settled within 10 years starting from 2027. So we'll be getting in these 2 years in 2026 and 2027, we'll not be paying any sort of interest. So this will be an additional cash saving, which will certainly enhance and help us to improve our capacity utilization. So the results, I'll be again showing you. This will be the result that OMR 1.4 million we have incurred a loss last year. This year, we projected to have OMR 1.1 million. So OMR 521 we have incurred, and we are pretty sure the figure of OMR 1.1 million is basically a conservative figure. We'll be achieving much better figures that we have just reflected over here. And after that, once we'll be utilizing the capacity, 80% onward. So this is the total plan that we have. This company will be having the profitability and recovery will be the passage of time itself. So this is what we have projected the profitability, and that's last time we have reflected, and this is only the graphical presentation I just put it over here. So in the last, the conclusion for this company, working capital funding, equity injection, raw material prices, interest. So these are the total challenge that we have, out of which we have almost covered for this 2025, the [indiscernible] capital funding, I would say that almost 70% or 60% to 70% we have covered it up. Obviously, it will be converted into equity over a period of time. And raw material price still remain the challenge. If it goes beyond this OMR 2,600 it will be a challenge. It might reduce the buying power over a period of time, but we are sure that what we have projected that it will be around OMR 2,400 crores, but now it's OMR 2,600. So we are just managing this OMR 2,600 with the current utilization of our fully resources in which we are stressing our receivables to be collected on time. Interest rate will remain a challenge. Once the restructuring of -- again, the second restructuring is being done by the banks itself, which we are in negotiating with the bank and they are working on it. So our interest rate will be certainly streamlined. So this is what we have from the discussion session for the half year presentation, and I just presented the total figure that we have. So in the last, I will just welcome and I'll open the session for the question and answer. If anybody would like to ask any certain questions related to the financial or anything, we are just here to answer that.

Raees, I wondered about the loan, you will get it from the bank, OMR 2 million and OMR 5 million, 2026. I understand this one loan, OMR 2 million, you already get OMR 1.3 million. Alright?

Yes. Your are very much right. Very much right. Yes, we got OMR 1.3 million.

And OMR 700, you will get it this year, correct?

Yes, correct. Correct.

Yes. And for the OMR 5 million, it is sure you will get it or still in negotiation?

We have presented a plan, the way we have shown you the plan. Similarly, the plan we have presented with the banks also. So the commitments that we are getting from the bank itself that if you prove yourself in 2025, we will certainly support you in 2026. However, you have to look for the new investment itself. So we are quite optimistic with the bank itself, the way the bank has supported us. Like OMR 2 million, we got it and we are performing. And you have seen the results OMR 521 is the figure and it's 48% drop of as compared to the last year. So we are on the track itself. Once we will be closing this year, we are quite optimistic that by the end of this year, before December, we'll be getting the confirmation from the banks to get this OMR 5 million because otherwise, it will be difficult to achieve that task of 82%, and bank knows also. Bank knows that if we don't reach to that level of capacity utilization, we cannot have that kind of a recovery.

Yes, your plan, it will be successful. Yes. For the capacity, if you receive the other OMR 700 from this to OMR 2 million loans. How much the capacity to be increased?

Currently, as of June, we have utilized the capacity of 40%. We'll reach to 50%. This is what the target is in the next year.

50%?

Yes.

Okay. Okay. Can you tell me Raees. I really and I hope all plan to be successful and all your target and goals to achieve this year. And hopefully, hopefully, I see the result by end of this year that NAPCO is on positive value, not negative.

With the help of all the stakeholders, banks, including yourself as a shareholder or the analyst or whatever the people who are supporting us to recover this plan, we certainly achieve. We will certainly achieve what we have targeted for. Anybody else would like to put any sort of a question?

[Interpreted] Just to translate to you. The gentleman over there said, first of all, accumulated losses, of course, we know the accumulated losses, how you're going to recover the accumulated losses. How are you going to address them? And also as far as marketing is concerned, he is wondering what marketing are you doing because he is commenting that we don't have a marketing exposure in the country. If you want to talk about that, please?

So, I'll be speaking in English, can you translate into Arabic to this gentlemen.

Okay.

So I was just saying that within this 4 to 5 years as per our plan, we'll be recovering this equity. And by within 10 years, it will be a positive equity. It will reach to OMR 8 million. So that's the plan that we have. We have just make it accordingly. And as we started recovering and we are reflecting those results in this particular year itself, certainly, you'll see next year how the equity is being improved over a period of time. Secondly, as far as the market is concerned, the market, this NAPCO does not need, I would say, any sort of a branding. NAPCO is brand itself. As we said that we are doing almost 80% exports. So 80% exports in the GCCs and all over the world, we have already market available. And as you see that the 2023, we increased the quantity from 12,000 to 15,000. We increased by 3,000. We got that market. So the customers are known to us. We are known to the customer. It's just a matter to make them available that, okay, we are available with our full capacity now because we did not have the funding at that time. We are getting the funding. Once the funding is available, once we are present into the market, we'll get back those customers again. Just remember that this company has done 3,000 per month, almost 33,000 per year in 2019 then '18 and 2020, almost 28,000. So this company has the capacity to do, and this company has capacity to capture those market again also. So it's just a matter of time, you'll certainly see that we have done it in this 6 months itself. Next 6 months, you will see the result, we will be capturing. We have a complete plan for that also.

Anybody has any questions, please? No, it looks like no.

So I think thank you for all for attending this presentation. We thank you all. So it's just time to close the meeting itself. Thank you very much. Thank you for your... [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]