Oman Cables Industry SAOG (OCAI) Earnings Call Transcript & Summary

Thank you so much, and welcome to the analyst meeting to present the results of Oman Cables for the first half of the year 2025 ended 30th of June 2025. In this meeting, we will be joined by our CEO, Mr. Erkan Aydogdu; and by our Chief Financial Officer, Mr. Marcelo De Paola and myself, Jad Atallah, responsible for Investor Relations. If you can see my screen, I will leave the floor to our CEO, to kick off the meeting and presentation. And thank you, everyone, for attending.

Can you hear me well? Can you hear me well?

Yes.

Yes. Okay. Thank you very much, Jad. [Foreign Language]. Good afternoon. It's my great pleasure to welcome you to our half 1 2025 analyst meeting. Thank you for your time joining us today. The past 6 months have been a period of strong execution and meaningful progress for our company. Despite the dynamic global environment, we have remained focused on our strategy, delivering sustainable growth, enhancing operational excellence and creating long-term value for all our stakeholders. So I will be very brief on the first part. So the agenda is here. I just need to refresh Oman Cables overview very, very briefly. Then, of course, sustainability is becoming more and more in the heart of everything we do. So we just -- I just share with you our strategic priorities. And then I will pass the word to Marcelo to pass through a bit more details on the financial results for the first half. So Oman Cables in overall, we are so proud of the more than 40 years of local presence in Oman. That is the main reason of our existence. But not only we go beyond and we deliver our products and now more and more, we are selling services as we are not only just cable maker, but a solution provider, we are going beyond to serve our solutions to more than 50 countries across the globe. We have 800-plus employees in our company, and our facilities are quite advanced when we compare with the industry references. When we look to the -- one of the areas that makes us unique in this market is we have also leveraging on our strategic and technical partnership, which is, as you know, Prysmian, which is the worldwide leader on cables and solutions. So we have 40 years of experience locally, but we have also, on the other side, 140-plus years of cumulative experience. So that makes a unique value generation because we have a couple of hundreds of the engineers working on the cables and the solutions to make it better, innovative products. And we are very quickly accessible to all these kind of solutions with more than 50-plus countries and more than 100-plus plants in the world. Of course, as you see here, people is in the heart of everything we do. People is very important for us. As Oman Cables, we are following a lot of programs on that front. Innovation is very important as we -- every day, we try to innovate our products and the solutions. And sustainability more and more is becoming a core strategic focus in our activities. So this synergy is -- just wanted to share with you the synergy is really helping and driving a significant value creation for us, but of course, for all the stakeholders. Talking about our strategic priorities, people development, 2024 highlights, of course, with a limited time line, I just wanted to share with you a couple of highlights. First of all, on the left, you see accelerating sustainable growth. So on sustainability, recently in the last period, we already published 3 reports. So you can go through them if you are interested to see what we are doing on that area. You will see a very busy, very detailed, very much inspiring actions going on, on sustainability. And that's why our ESG disclosures for 2024 has been completed. We are one of the first companies in Oman, even when it was voluntary, we were disclosing. Now it's mandatory, and we are trying to take the lead on the sustainability. Again, our biggest, biggest motivation is through Oman Vision 2040, and we try to create all the milestones to reach our national target. Of course, we like to walk the talk. Everybody is talking about sustainability. But in this case, over here, it is part of our daily life. As I said, it's part of our DNA. That's why, in our company, as we speak, we have 90-plus ESG projects. These projects are touching pretty much every part of the sustainability, starting from the climate ambition, going through the innovation ambition and touching to the social part as well. So everybody in the company is quite active in delivering these projects to create value for the company, but beyond for the country and for the planet at the end. Just some milestones on that front. As OCI, we have our first EPDs, which is Environmental Product Declaration. We can simplify it as a passport of product. So how we can understand the product carbon footprint at which levels and which is the part that this carbon footprint is coming from. So EPD is by third-party verification is giving us a passport of the product, which, as Oman Cables, we started to have these declarations. And that is, in some way, the market is evolving on this way slowly, but surely when we look at the rest of the world. So we are moving proactive on that area. In OAPIL, we have the CBAM reporting. For the ones that are not very much familiar with the CBAM, CBAM is a Carbon Border Adjustment Mechanism. So basically, it's a carbon tariff on carbon-intensive products, such as steel, cement and some other, which we are imported to European Union. So we are -- we made a lot of preparations over there. And also ASI certification, which is a very well recognized prestigious certification to create more and more business in the dynamic environment that we are having. So a lot of agenda item over there. Then, of course, the safety standards for us is really very important is Zero & Beyond. So we have 20,000-plus household training. We have 2,500 stakeholders engagement on the standards. So that is really key for us. Third is the innovation, as I was saying, cable maker to solution provider. That's why we were launching some of the new innovative products like E PATH, first in the industry, in Oman, but also in the region to share with the market how our products are environmental friendly, but not because we are telling so, we have the 6 criteria, very much detailed measurable and verified by the third party that our products are environmental friendly. Renewable solutions. We have the Renewable Excellence Center. The renewable shift in the energy electrification world is happening all the way. In our region also, we are following very closely this business. We see volatility in this project pipeline, but we are following very, very closely all the opportunity to rely on the Renewable Excellence Center and putting some advanced solutions on this base. Of course, focus on innovative and sustainable solutions is something that we are trying to put more and more into the marketplace. And last but not the least, our people, our greatest asset. We have -- again, here, just to share with you, we have 400-plus participants for cross-fertilization projects. We have the skills matrix assessment developed in OCI, and we have 60-plus students in SHE STEMS. This is a program that we are very much proud of. So we are upskilling Omani female after the university to increase their probability to find work, find job, prepare them in a very professional way, a very well-structured program. And finally, we are hiring as well. So this is also a great contribution to Oman Vision 2040, we believe. And 180-plus students in the Kids in STEM because these young minds are the feature of the nation. So we try to give a huge support to create some nice concepts, trigger their coding skills, triggering their innovation skills to be able to bridge their talent with the Oman Vision 2040. So as you see, we believe we are more than just a cable maker in many ways. We try to lead the change, advancing products and human capital with a focus on sustainability. So I just want to share with you 3 main areas of our strength, we believe. One is the Sustainability Academy. So not only we are talking about it, but we are implementing all the way sustainability sole focus in our activities, but also in the market, as I was giving more details. And we would like to create an academy that represents all these efforts under one roof. This is a physical place, but it's just not an asset. It will be enriched by a lot of contents, a lot of stakeholders will be invited, and we believe this is a big change that can trigger the journey on the sustainability. So team, as we speak, they are completing the academy upgrading works. And within this year, probably, you may hear a bit more on this academy that we will be opening and then sharing with the community. The second one is the Advanced Testing Lab. As humans, we cannot really understand with our eyes the quality. So we need the laboratory in this industry and the users do not really know the details of this, how important is the quality. That's why we are making a lot of side-by-side event in the market, in Oman, in the GCC, every country almost to share how important is the quality and how one product is different to another by making test. So you need really testing labs. And in this case, we are proud of having this advanced testing lab that we can do all the tests in our land. Just to give you one concrete example, we have the CPR test in OCI, which is a Construction Products Regulation, which is mainly a European kind of requirement for the fire safety on the buildings. And we have it. We created it because we believe we need to be the leaders on this and safety is priority. And more and more, we have to define the products in relation with their performances. And we have that facility available in our premises. And Renewable Excellence Center is we are proactively ready to introduce the capabilities that we are having on the renewables front with the market as we believe renewables will be more and more active in the energy to be less and less dependent on the oil. Of course, every country has a different speed, is a volatile market, but we are able to follow all the opportunities in the marketplace. Just wanted to share these 3 areas importantly. And now I will just want to share with you the first 6 months outlook, how does it look like? So you see on the left up that our sales is moving from OMR 123 million to OMR 137.5 million. So you remember that we are coming from quite a bit growth in the last years, and we continue to improve our sales. And this is coming from the, of course, one part is the metal evaluation impact. One part is the organic growth. So it's a combination of the things, but we are on the right track and with a lot of effort. That's why I was saying in the opening, a strong execution half. Then on the EBITDA, you see that we are also better than the previous year on the EBITDA. Obviously, the market pressure, the competitiveness is getting more and more tougher. That's why we are working more and more on differentiation in the service provider, DNA and sustainability. But we are able to also bring this result into the net result nicely, which is better than the previous year first half. So this is, in a nutshell, our first 6 months outcome. Of course, export to 50-plus countries, and we are -- we believe we are linking the region and the country to a sustainable future, and we will continue to perform in the market. We believe it is a growing market. We are optimistic. Of course, with the volatility that we are seeing in the world, it is not easy, but we are fully equipped to deliver, commit and execute our best. Thank you very much.

Thanks, Erkan. Here, we can see the split for the turnover. Our turnover growth, as I explained before, OMR 138 million versus OMR 124 million for the previous year. In reality, this is coming from domestic and export market. Jad, please. We split by business, this turnover. Basically, the business diversification we have in this region helps us to maintain this growth. And today, you can see more or less in power grid is very important growth and all the other business the same. For the profitability, we achieved OMR 19.2 million versus OMR 18.7 million and continue very strong. This result last year was very strong and continuing this trend this year. If you go -- come back for the turnover, you can see this 11% growth coming for the organic growth, as explained before, basically mainly the power grid and some impact for the metal price. This helped us for this increased turnover. If you go for EBITDA, the EBITDA growth 2%, mainly because of this organic growth and the net result present exactly what happened in EBITDA. No, you can defend this result in EBITDA and net income. You can see delivered value for the stakeholders despite the volatility for the market dynamics. You can remember this year was not easy for the region for the events in the market. Net working capital by sales increased a little. This is necessary to support the growth of the business and use part for the cash flow to support this growth in the business. But you can see net financial position continue to generate cash, OMR 67.83 million versus OMR 60 million in the last year. I think it's -- these are main numbers and figures for Oman Cables.

Thank you, Marcelo. Thank you, Erkan. So now we will open the floor for questions.

So anyone has a question, please raise your hand and go ahead.

This is from Anoop from SICO. Just 2 questions from my side. So on the profitability side, you've highlighted that metal prices helped. But our understanding of the business is that usually the metal exposure is completely hedged. Is that different in the case of Oman Cables? That is question one. And question 2 is, earlier in the call, you already mentioned that market pressures are accelerating. So just wanted to get a sense of where are these pressures coming from? What specific pressures are you dealing with right now? And where are they coming from? Any color on that would be very helpful.

Thank you very much for the questions. So the hedging part is in the turnover, there is an impact on the profitability, as you were saying very correctly. We are hedged on the metals, and we don't rely on the metal value. We don't speculate anything, and we focus our business. But of course, when the metal price is up, your turnover can get an impact. So it's not just for the reason of the increase, there's also the organic growth over there. So the profitability is what able to hold any kind of, let's say, relation with the metal is not there, is protected. Then on the -- of course, the market, we are active in many geographies, in many businesses, and it's very dynamic. So you do one business, but then the next year, that business is a bit lower, but the other business is coming up because of the geography, because of the business, because of the speed, because of the country, because of the other things. When you enter into the things, you see that, of course, there's an established market with the competition. And we are used to compete and we are -- we continue to compete. But of course, with the volatility of the world, probably it is getting a bit higher, but then we are all prepared to deal with that. Thank you for the question.

Thank you, Anoop. Thomas Manna, I can see you are raising your hand.

Has there been any update on the OAPIL conductor capacity expansion?

Yes. Thank you very much also for this question. So the OAPIL conductor, you may remember that we were talking about it, and this is completely completed. So it's up and running. So the capacity of the conductorization is increased. Of course, that helps us to deal with the market dynamics on the conductor side. And yes, it's on track, and we are -- we continue to develop our competencies and capabilities. As again, there, the market is dynamic. There are many impacts, but we are trying to enrich our product offering to create opportunities to mitigate the risks.

Okay. So how much is -- has it added to the capacity?

It's significant, I would say. So we can basically say that it's not minor, but it's not doubling. So a percentage lower than 1. So yes, so we can say kind of 1/3 of the capacity increase in the conductor.

Okay. Understood. Also, OAPIL has been focusing on expanding its market presence. So can you give more details on the new markets or the customer segments targeted?

Sure. In the OAPIL, what we try to do is we try to expand to different markets. And on that part, we have the Europe, we have the Africa, we have the U.S., we have all the rest of the world. So we try to be more and more present to reach out these markets at our best capabilities. So team is working a lot. As I was saying, the ASI certification kind of sustainability things, certifications are a big enabler on that part, but it's not given. So we have to work hard, continue to work hard and enrich these markets. So we are pretty much focusing all the rest of the world. We're selectively looking to the countries, and the commercial team is monitoring all the active markets.

I can see some questions.

Yes, sir. I just had a couple of questions, starting with, could you give us the utilization during first half of the current year, numbers, please?

Yes. The utilization is not easy to give an exact number because we have different product lines, different machines, different channels. What I can say is our capacity is well established and good enough to cover the needs of the local market and also the GCC market and beyond. Our utilization was not very low, but we were not at the top highest utilization as an average.

All right. Perfect. And my next question is, obviously, you mentioned that prices are hedged. So should we be expecting these current gross margins of mid -- close to 13%, 14% to be sustainable in the future?

Yes, it's a great question again. So you know that we are coming from low levels, and we are trying to hold and improve, of course. So what we are trying to do is we try to innovate and create some other ways to hold or improve the marginality. So it's not given. So it's not like we have something and then we can continue forever. So we have to continue to work, continue to work, and we are doing that. So hopefully, the marginality will be there. Of course, there can be up and downs. But in overall, we are spending all the efforts to create some additional opportunities in the market, again, to mitigate the risk of any downside or the marginality.

Perfect. And my last question is, are there any turnarounds or any maintenance planned in this year or the upcoming year? And if so, what would be the capital expenditure on that, please?

Okay. Okay. Thank you for that. Again, it is volatile and maybe it's not so correct to share an absolute number. What I can say is, in the beginning, I was telling our operational excellence is our strength. So our products are sellable pretty much everywhere, but not every products are the same. So you need really operational excellence. And to do that, as you were correctly mentioning, we need to create a proactive maintenance approach, which we are doing. So it's fully digitalization. We are spending all the capital expenditures around it. So we are more and more encouraging to do more than we need to, let me put in this way. And not everybody is doing that way. So that makes also the difference on the quality. So we continue to spend and invest in our assets to protect our advanced facilities.

Right. So I'm sorry, but just a follow-up in the event that there is a maintenance, we expect that the company has enough inventory to carry on with their turnover with their sales, correct?

Yes, maintenance, if I understand well, is our ongoing day-by-day activity. So we don't stop and make a maintenance for our asset and then we continue because the cable production is carried out with a number of machinery quite a bit. So what we do, we plan it throughout the year, and we plan it not because when we have a problem, we plan it proactively, and we invest, we spend CapEx to do better and better, keep the machinery and improving, upgrading it all the time. So we don't have any topic or any risk to the maintenance.

I can see [indiscernible] has a followup question and Sandesh also has some questions. So let me give the question now for Sandesh and then I'll come back to [indiscernible].

I have one question. The cash balance as per the balance sheet is at around OMR 66 million as of June. So I wanted to know that could you please share your plans for this cash, like anything regarding if any CapEx is on the table or any strategic initiatives on place, like anything like what are your plans for this cash? I just wanted to know.

Yes, I spend one word, then I will pass it to Marcelo to be -- probably can give you more color. So of course, the [indiscernible] is the outcome of a good performances, and we are managing it with a very strong discipline as we were touching and, of course, it helps in one side our investments and on other side, it helps us to be financially more resilient in the volatility and so far, so on. So when we have a clear plan of an execution kind of development, of course, we are sharing it with the market. Today, we carried on our plans, our research to organic and inorganic. We are always looking into the options, but not only this year also in the past always. And we have a strong discipline on the cash to have the position. So when we have a clear plan, of course, you will notice it in our communication. Marcelo?

Thank you for the question. In reality, as Erkan commented before, I think the conviction for the cash is very good for the company. I try to use it to support the growth of the company and the business and analyze obviously, all alternatives you have in the market for the CapEx or any other alternative.

Any more questions? So thank you everyone for joining us, and hopefully, we will continue to deliver good results to meet the expectation to the market, towards more and more of growth. So thank you, everyone, for attending, and have a very good day ahead.

Thank you.