National Biscuit Industries Limited SAOG (NBII) Earnings Call Transcript & Summary

Good morning, everyone. Myself, Shweta, Board Secretary of National Biscuits Industries Limited SAOG. I welcome you all to the MSX discussion session for the period ended 31st December 2024. We will have a question-and-answer session at the end of the meeting. In the next slides, I'll be presenting the income statement and balance sheet as of 31st December 2024. [indiscernible] for the income statement for the period ended 31st December 2024 in comparison with the figures as of 31st December 2023. The sales has grown from OMR 12.5 million to OMR 14.8 million resulting in growth of 18%. Cost of sales has grown by 17%, which is in line with the increase in sales. Other income, which includes interest on fixed deposits and scrap sales has grown by 9%. Expenses has increased from OMR 1.47 million to OMR 1.6 million. Profit for the period has increased from OMR 419,000 to OMR 680,000, resulting in growth of 66% Earnings per share has increased from OMR 409 to OMR 680. Next is the balance sheet as on 31st December in comparison with the figures as of 31st December 2023. The property, plant and equipment of the company has decreased by 5%, which is merely due to depreciation. Intangible assets has also decreased by 17% due to depreciation. Write-off use of assets has increased from OMR 250,000 to OMR 622,000 due to change in the lease period, Advance for capital goods has increased from OMR 43,000 to OMR 191,000. Inventories of the company has increased from OMR 2.4 million to OMR 2.9 million. Paid and other receivables has increased from OMR 5.3 million to OMR 5.63 million. The company has put excess funds in the Wakala deposit of OMR 400,000. Bank balance has increased from OMR 217,000 to OMR 708,000. On the liability side, the retail earnings has increased from OMR 6.3 million to OMR 7.1 million. Noncurrent liabilities has increased from OMR 882,000 to OMR 1.36 million. Current liabilities has increased from OMR 6.3 million to OMR 7 million. Moving on, I'll take you through property, plant and equipment as on 31st December 2024. Balance of property, plant and equipment as on 31st December 2024 was OMR 14.8 million. Total additions during the period is OMR 215,000. Transfers during the period is OMR 478, charge for the period is OMR 454,000. Balance as of 31st December 2024 is OMR 6.1 million, resulting in a decline of 5%. Trade and other receivables has increased from OMR 5.3 million to OMR 5.6 million. Trade and other payables has -- trade and other payables has increased from OMR 5.9 million to OMR 6.7 million. That is all from my side, and now we'll open a question-and-answer session, if any.

we will wait for 2 minutes, and then we'll close the meeting.

I just have few questions, if I can continue.

Yes.

Okay. So the company during the first 9 months, it has -- the sales has grown by 18%. We see the gross profit has grown at a high percentage. So I just want to understand what are the key drivers behind this increase? Was it due to the higher volume or price increases? Was there a shift in the product mix?

This is Harkamal, I'm heading the finance of the company. So I'll take on the question. Sales of growth -- company has grown mainly from GCC country, which is core market, which is more profitable. We have not taken any price increase. It's just the change in sales mix, in fact, the country mix, which has enabled us to generate more profits.

Okay. Okay. Also, in the company report, there was a mention that the company is planning to expand as geographical coverage in the premium segment. So which new markets are being targeted for expansion, are you seeing a higher demand in any particular region?

No, as I said, GCC will remain our core market. What we have said that we are getting within GCC into premium segment of biscuits. The company has improved the capabilities in terms of segments of biscuits. So we'll be launching some new biscuits, which will be in the premium segment at higher prices.

Okay. Do you have any targets like we can expect in the short-term -- revenue side?

It won't be a very steep growth, but yes, it will be a consistent growth in line with the CAGR, which is company attaining. It's around 10% to 15% growth we are targeting every year.

Do we have any more questions?

Yes, Joice.

Congrats on the good set of numbers. Just a follow-up on [indiscernible] was asking. You said you're focusing more on GCC, but I don't see your export sales as a percentage of total sales is not growing, it's stagnant at 62% year-on-year. So could you throw some more light on what's your strategy about getting into these new markets, the GCC markets and everything? Because what you have said is you're pushing more products into GCC, but your sales as a percentage of total sales is not growing in GCC markets. So that's the reason why I'm asking this question.

No, no. Maybe looking at the mix perspective, that's how the Oman sales has also grown, 15% in this period of 9 months, and GCC sales has grown by 21% in this period of 9 months. Yes, the rest of the export like MENA and all has declined. Hence, you are able to see that overall exports have not grown, but the profitable markets have grown very well.

So what's your sales mix from -- Oman is 37%. How much of is it coming from GCC?

GCC is again 40% of the shares.

Okay. And the balance 22% is coming from other markets.

MENA and then Levant region, MENA region, some of the sales is coming from Africa and then some of the sales is coming from Asia.

So could you tell us how much was the MENA and the other -- other than GCC, what does the sales percentage in the previous year?

You have to allow me for one minute. So MENA region sales is approximately 10%, Africa is 3%, Levant is 2% and rest of the world is again 2%.

So this is this year, right?

This is the current year, right.

Okay. And what was the sales loss or drop in sales during the year. Can you give me last year's numbers, the corresponding numbers? MENA, Africa, Levant and rest of the region.

GCC and Oman sales remain intact in terms of mix, slightly local sales has reduced in terms of mix, but MENA used to be 14%, which has reduced to 10%, 11%. Africa used to -- Africa used to be same at 3%, is same. Levant from 2% to 2% only. So it's mainly -- decline is from MENA region.

Okay. And what could be the reason for this decline in sales in the MENA region?

So last year, we launched a few products in MENA region, which we have run wonderfully well in the first year of launch. We believe the second year, the same products have not done so well. So we are focusing on different marketing strategies throughout the region to different distributors come back again with the same share of market?

Okay. Okay. And so you are planning to push more in GCC at the same time. So what's the ideal sales mix that you might be targeting for GCC markets?

GCC, we used to target -- we actually target above 80% because that's where we remain profitable beyond GCC. The cost of distribution and the involvement of channel is very high. We consider GCC and Oman, including Oman as core markets where we want to grow our sales.

Okay. You had a good margin compared to Q3 last year. Usually, Q3 is your best quarter -- Q3 and Q4 are your best quarters. What are the reasons for this improvement in margins during this quarter? And how sustainable these margins would be? Let's say, I'm talking about gross profit margin of around 18% in this quarter and EBITDA margin around 11%. So is this a sustainable run rate going forward? Or will there be major volatility during different quarters.

No, there is a seasonality in the industry. So as soon as winter starts, the market start picking up in this region. And with the summers coming in or with the summer vacations falling in, the demand shrunk. So that's how -- but the expenses more or less remain fixed in nature, whether it is factory-related expenses or the admin-related expenses. So that also impacts gross profit as well because the entire thing within the factory level also is not variable. So hiring and firing labor is not easily possible. So expenses remains intact, and that impacts the gross profit of the company. Answering to your question, yes, there will be an impact in the next 2 quarters. But again, with the winter starting in, we'll be back in full course.

Okay. Got it. And coming to your operations, do you have -- are you offering only in the snack segment? Or are you planning to get into the chocolate and confectionery segment as well? Because right now, there is no major players coming from Oman. So is there any thoughts on that side?

We will not getting into the chocolate segment, but, yes, we are already doing confectionery to third-party manufacturing and which will continue. Once we will have adequate market for the confectioneries, then we'll think of having the plant set of kind of a thing. But right now, it's a kind of trading models for us.

Okay. And when did you start this business? Was it there for a long period of time? Or is it recently started?

It's been there from 1.5 years now.

Okay. And how is the traction there?

No, we are currently keeping within Oman. We are not expanding in the GCC region as such because when you are doing only trading, the cost of purchase is very high. It's not sustainable price to go -- to expand within GCC. So we are focusing the growth within Oman as of now.

Okay. And how is the feedback? That was my question. Market feedback.

No. That's very well accepted in the market. There are no market return as such. The sales has been growing consistently.

Okay. So the ultimate plan would be maybe starting into confectioneries, right? And would you be considering any trading opportunities in chocolates?

If there will be any good opportunity since we have a full-fledged distribution setup within Oman, and we have our own distributor within GCC region, yes, we may like to get into. But again, that won't be my decision only. That will be with the Board approval and all. So we may -- if there is any good proposal coming up, we may take up.

That's the reason why I asked this question. Probably there might be some cannibalization and conflict between your major owners and the company itself. So I just wanted to know whether you will be trying to get any synergies coming from these 2 parties?

National Biscuits work independently with the Board's input and Audit Committee inputs. So we don't see any kind of barriers from any third party.

Do we have any more questions? So thank you everyone, for joining the meeting. We'll close the meeting now. Thank you.