National Gas Company SAOG (NGCI) Earnings Call Transcript & Summary

[Foreign Language] Good afternoon. We will keep 1 or 2 minutes before some people are late a little bit. We will start. I didn't get confirmation from you if you heard me or not, I suppose it's yes, okay. Thank you for coming today for sharing with us, and we will share with you our results of the first half of '25, and we will discuss a little bit the outcome also of the second half if we have time. I will take your question after my presentation. We will go through quickly about the challenge we are still facing in Oman, mainly in LPG market. What was the opportunity we have done and work on it initiative in H1 and the performance as published in last month in July. Next please. The challenge is always roughly the same as we discussed in the last quarter. Margin erosion is still on the place due to regulated price and no hike since '94 despite 50% cost increase from salary, from [ SPSP ], from trucks, from fuel and from maintenance cost. Market condition today, we are still 28 player as oversupply in Oman and the realization by metric ton, it's still going down since the last 5 years, mainly for bulk. It's quite stable for refill. Energy practice are still ongoing, mainly for cylinder refill, which is not totally tested and so. But I think the Ministry, the civil defense and I think the whole standard team in the ministry are really going on the ground, doing their job, pushing to clean the market, and we are trying to support as much we can with their strong support also. And I think we see some small, small change going on the ground via the trucks, via our control of cylinders. Efficient growth means the volume is still most likely stable in the country. Margin, it's also hard to increase due to the condition of the market, reducing market make it hard to cover our indirect costs. What is the measure? The measure is we are still pushing to get a price increase from MoCI for mainly the refill business. But they have set up the new branded rules, which has -- will impact price for us, but we are asking MoCI support, a counterpart, which is a slight increase of OMR 5 per cylinder, still waiting some feedback from them. And I think it's a little bit challenging for them also to respond positively. Regarding the outlook, the branding rules have been published as we discussed last time and entering force in 1st of January '25. At that time, we are speaking with you. We didn't get any official instruction from the MoCI to implement it. We ask for clarification. We are still waiting some clarification. Even on the ground, some small players received an official letter that they can start 1st of July, they can start their branding, 50% of their work. Product mix optimization, now we are pushing to optimize our margin and to support our cost by pushing the bulk. We got a lot of customers are asking to convert from natural gas to LPG. We are supporting them mainly in Sohar. This cylinder business, it's growing slightly outside Muscat because Muscat start to be saturated today to convert cylinder to D-cylinder. NC+, it's really also driven by shipyard and welding activity, which is very going down also. Lubricant, we are trying to sustain this new business line by promoting very actively with a strong support from India of HPCL. And the cylinder refill business, I think today, we are maintaining our market share. We are maintaining our slight profitability in the 5 branch we have in Sultanate. Market fairness advocacy, we have engaged a lot of discussion with MoCI, we have a new General Manager today addressing LPG business. It's a very supportive guy. We are opening a lot of subjects, and I hope they are also promoting LPG and they are supporting us for the new exhibition will be November 25 in Muscat to promote Oman and to promote LPG activity in the country. Cost control, we continue. Each Rial is very important for us to measure and we don't spend for spending. We are asking also our team to be more efficient. And any CapEx is very, very limited to safety mainly. And if there is new project for growth, we will -- if the Board approves. Market share strategy, as I told you today, our strategy is to maintain our refill position as one of the leader and for bulk, it's clear that we are the leader in the country with 80% market share in domestic for LPG segment. Towards the opportunity and expanding opportunity, we are exploring multiple options. What has been materialized for the second and first half of the year, it's the acquisition of Samahram Gas in Salalah. We have acquired 80% stake in this LLC company. It's a very new asset, a good company who has a good market share. We have not presence in Salalah region in Dhofar. It's open for us a new territory and it's a strategic expansion, thinking also about the long-term future. It's a door for Yemen, when Yemen will be stable one day. Mainly our objective as a group is to improve the customer service, increase safety standard and start to see if there is any opportunity in bulk activity mainly. The management in Samahram Gas remains the same. There is no change about the strategy, about the pricing, about the people and our partner is still the CEO of this company, and we will continue as it is. We have -- we only consolidate as a group level here. For Saudi, as you know, we want only to update you that Saudi bid has been submitted some months ago, in February the audit was done. I think the report was submit by the technical committee in Saudi to the Ministry of Energy. Since 1st of July, now we are waiting the feedback from energy. We got an official answer in 25th of July that they are still studying. The tender is still ongoing. We hope that in Q4 or earlier, we get final answer for this license to start working on it in '26. From performance highlights for H1 '25, as I told you, there is 3 points. We are a profit-driven strategy today. We try to mix better our product bulk and LPG cylinder and lubricants. We increased our volume significantly by more than 30% for bulk mainly to support our indirect costs and to sustain our margin. Efficiency-wise, we have implemented a lot of measures and efficiency to reduce the cost of G&A, of operation. And I think our efficiency today is at the maximum, very high. And we are streamlined with the new ERP, a new version of Epicor. It helped us also to implement some digital aspects. We have launched in H1 a digital invoicing for our D-Cylinder. The truck has a tablet that the customer can sign, he can pay directly. I think we are also starting digitization of our job, which will reduce the cost of invoicing, cost of invoice. For outcome, I think the main result, which is the positive we can share with you, we have grown the revenue by 35%. It's not a small amount, reduced the cost by 8%, which had a positive impact. We reduced our loss by 66%, which is roughly OMR 83,000 compared to last year, 28 -- we have published today a loss of only OMR 28,000 compared to OMR 83,000 last year. It's a significant drop. Still, we are, I think, come from red to orange. We would like to be green at the end of the year. This is our main strategy. The next slide is the result we have published, as we say here, and I think you know them also, revenue-wise, we are at OMR 5.5 million as a parent company, close to OMR 44 million at the group level, plus 35% in one side and plus 9% from the other side. As you see, the administrative cost has been drastically reduced by 8% and 1% at the group level. And the profit OMR [ 28 ] minus for the group and minus OMR [ 350 ] roughly for the group level, which is mainly impacted by the lower performance of our entity in Saudi, and we will explain it a little bit later in the next slide. And for the main highlight for the group and the parent, as I told you, revenue, we speak about it, gross profit has increased by 4% in the parent and dropped in group level by 17%. Mainly how we can explain this drop is timing of mismatch due to pending negotiation of variation order in Malaysia. We have signed a very big project last year. We have done extra project costs and so, if you will, which is recorded in H1. Revenue is not booked now. We are awaiting the variation order from the customer. It will come probably by the second half of the year. G&A and selling expense for the parent were reduced by OMR 50,000, 8% at a group by only 1% means due to the same, I think, we are stable in Malaysia and decreasing the numbers of the people also at the G&A level in Saudi because we are managing from Oman. Operating loss and after depreciation, we say loss reduced by 53% or 71% at the group level, it has been increased again due to this Saudi underperformance in Malaysia. Finance costs, we are pushing ourselves to decrease our finance cost by 5% at the parent and by 6% at the group level. Mainly we are only borrowing for working capital. The main borrowing is in Malaysia to pay the products we are importing in [indiscernible]. Profit of the year loss reduced, as I told you from parent, OMR [ 55 ]. And at the group level, we have a loss of OMR [ 248 ]. We hope that we can recover partially some of it in the second. To finish only a small highlight of the project we have executed in Oman. We are still moving, developing, growing the bulk. This is a Great Wall Drilling Company. It's a Chinese company who is asking us making drilling like working with the big guy. It's a supply of LPG installation, you see these 2 tankers are fixed in the middle of desert and they are using LPG to inject steam in the green to make petrol going flower and more smoother and so on. It's a contract we have signed for 3 years, and it helped us to get some good margin on this. The second one is the Global Integrated Engineering, Duqm Salt. Duqm Salt is one of the biggest producer of salt in Oman, and they are expanding. We have installed this system for them, which is a restoration of LPG system, and they are using it to produce salt for the Sultanate. I think I finished my presentation here, to give you the main aspect, and it will be -- I'm open to take any questions from your side. If there is no question from your side, I would like to thank you again for being here with us, and we will close this call now. Thank you again, and I wish you a nice day and a nice weekend. Thank you.