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

[Indiscernible] Good morning, everyone, and thank you for joining us today. It's a pleasure to welcome you to our H1 2026 Analyst Meeting. Today, I would like to share our first half performance, our perspective on the market environment and how Oman Cables continues to position itself to capture the structural opportunities created by energy transition, electrification and digital infrastructure. Around us, energy systems are evolving rapidly through electrification, renewable energy, digital infrastructure and the AI-driven demand. These trends are fundamentally increasing the need for resilient, high-quality electrical infrastructure. Within this context, Oman Cables is evolving from a traditional cable manufacturer into a trusted solutions provider, combining over 40 years of the local manufacturing excellence with Prysmian's global technology and innovation. While the external environment remains dynamic, we believe our strategy, investments and disciplined execution position us well for sustainable long-term growth. With that, let me begin by discussing the environment in which we are operating. The first topic is naturally the geopolitical environment. [Presentation] Okay. Perfect. The first topic is literally the geopolitical environment. The Middle East continues to experience regional tensions affecting shipping routes, logistics and commodity markets. While these developments create uncertainty, I am pleased to say that they have not materially impacted our operations or customer commitments. This reflects the resilience we have built over many years through diversified suppliers, alternative logistics routes, disciplined inventory management and strong governance under our Emergency Risk Committee. In today's environment, resilience has become a competitive advantage. Customers developing critical infrastructure increasingly value reliability of supply alongside quality and cost. We maintain a disciplined approach to risk management and our mitigation measures continue to be effective. The only thing that we are closely monitoring on this environment is, of course, the price volatility of the metal and the nonmetal raw material and also pressure on the net working capital due to the inventories and also the high value of the materials input. Then I would like to pass through the macroeconomics and the business environment, how we see that. Turning to the macroeconomic environment. Global growth has moderated and commodity markets remain volatile. However, the structural outlook for our industry remains very positive. The current regional dynamics could even accelerate Oman's attractiveness as a resilient logistics, industrial and investment hub supported by its strategic location and political stability. The energy transition, electrification, renewable investments, industrial expansion and digital infrastructure continue to drive long-term demand for cables and electrical solutions. For Oman specifically, Vision 2040, political stability and increasing investment in infrastructure position the country well for sustainable industrial growth. While we acknowledge short-term volatility, we remain confident about the long-term fundamentals of our targets. This slide summarize who we are. We combined over 40 years of manufacturing excellence in Oman with more than 150 years of Prysmian global technology leadership. Today, we export to more than 50 countries, operate for advanced industrial facilities and proudly serve as Prysmian regional headquarters for the Middle East, Africa, Russia and Turkey. Our strength lies in combining deep local roots with global capabilities, allowing us to compete internationally while continuing to create value within Oman. Sustainability, accelerating sustainable growth. For us, sustainability is not a reporting exercise. It is a business strategy. Our road map is fully aligned with Oman Vision 2040 and the global energy transition. As electricity becomes increasingly central to economic development, sustainability, innovation, governance and people development become key competitive differentiators. Every investment we make is designed to strengthen long-term value creation while supporting customers in building cleaner, safer and more efficient infrastructure. I'm very pleased to also share with you that in the very recent days, independent third-party, namely WADI Rating has made the positioning of the companies on the sustainable efforts. Oman Cables OCI is in an elite disclosure position. I'm happy to also share that OCI is fourth in the rating among all listed companies on MSX. And OCI is first in the rating in the industrial sector. That also proves how committed we are on sustainability. Another important element that I would like to share is evolving is from cable manufacturer to the solution provider. We are touching this point more and more. This is probably a lot of strategic evolution what is happening around the world. The market is evolving beyond simply supplying cables. It's not anymore just manufacturing or supplying cables. Customers increasingly expect integrated solutions supporting renewable energy, grid modernization, electrification, mobility and digital infrastructure. That is exactly where Oman Cables is heading. Through the strategic investments such as Plant 3 that we shared before, this is additional medium voltage capacity that as we speak, is under construction, and we plan to complete in Q4 2027. And our Renewable Excellence Center and our broader technical capabilities, we are moving higher up the value chain. Our ambition is not only to manufacture cables but to become the preferred partner for critical infrastructure solutions. So let's look to the H1 2026 performance, turning to our first half performance. Our revenues increased strongly to OMR 172.2 million. Of course, as you see, realized immediately, there's a big jump on the revenues also due to the cost inflation of the metals and other materials. We were successfully able to protect our marginality, our profitability and end the H1 with OMR 14.5 million EBITDA. And also, we were able to bring this into the net result of OMR 11.4 million in the first half of 2026. Our Scope 1 and 2 emissions has been by location based plus 4% as we are also growing. We are also looking to the baseline 2024, which is plus 3%, which we are putting a lot of efforts on the decarbonization road map. We are focusing on the recycled content. We are focusing on the sustainable products and differentiating innovations like E PATH, ecological first table that has been recognized internationally and certified by the third party that our carbon emissions on our products is lower on this category. Of course, we are working a lot on the design to cost principles to enhance competitiveness, efficiency and long-term value creation. You may realize that as a percentage-wise, EBITDA over sales are percentage-wise is lower in 2026, but it's very much a mechanical calculation. If we embed high price of the metals and we normalize this impact, our profitability is standing strong like the previous periods, very similar to previous periods. Just to note also this one. On the empowering stakeholders, long-term success, we believe, requires more than just financial performance, we believe strong engagement with customers, regulators, investors, academy and industry partners strength both governance and competitiveness. We have launched a lot of activities in our academy as well, whether through sustainable to We, Assurance Day, IFRS [indiscernible] initiatives, we continue building transparency capability and trust across our ecosystem. Ultimately, stronger stakeholder relationships support stronger business performance. Last but not the least, I would like to share also our commitment, our community involvement and CSR. As we are evolving at every dimension, our CSR approach has evolved significantly as well. Today, our focus is creating shared value rather than simply supporting individual initiatives. Through local content, SME development, education and community engagement, we strengthen our talent pipeline, reinforce our social license to operate and contribute directly to Oman Vision 2040. For us, local value creation extends beyond what we manufacture. It is about developing people, capabilities and long-term industrial resilience. Having said that, we can go into the deeper financial details of the first half with Marcelo.

Thank you Erkan. Here you can see -- now you can see here basically the growth. And basically, the distribution, domestic export more or less the same rate for the previous year. By business, the mix of the business increased basic electrification helping us to increase the sales and the good mix for electrification help us in profitability you can see in the next slide. You can see that the slide, the split by business for the mix for electrification and create value for the company now is OMR 19.7 million in 2026. If we compare 2004, 2005 and 2006, you can see the growth, but basically this impact for the metal price increase as commented before. EBITDA margin in absolute value increased around 2% EBITDA and net profit around 1% -- is possible from the customer and strong cost control allow us to have stability profitability level and grow [indiscernible]. Well, net working capital divided by sales, you can see a 0 increase, but more or less in line for what happened in the previous year, 23.6%. The net finance position closed OMR 63.9 million. Continued focus obviously to discipline in net working capital in the company. Okay, Erkan?

Thank you, Marcelo. As we are about to conclude today's presentation, the first half of 2026 has demonstrated the resilience of our business and the strength of our strategy. Despite operating in a dynamic environment, we have continued to deliver solid operational and financial performance while making meaningful progress on our long-term strategic priorities. Looking ahead, our focus remains very clear. We believe Oman Cables is operating at the intersection of several long-term structural trends, renewable energy electrification, digital infrastructure, AI-driven power demand and industry development. Supported by our strong local presence, Prysmian global technology, continued investments and disciplined execution, we are confident that Oman Cables is well-positioned to create sustainable value for our shareholders, customers and the Sultanate of Oman over the years ahead. We will continue to strengthen the resilience of our operations. Sorry, if you can mute yourself, I hear now is okay, I guess. So we will continue to strengthen the resilience of our operations through disciplined governance, proactive risk management and supply chain agility. Finally, we will continue investing in innovation, sustainability and our people, strengthening our competitive position while creating long-term value for our shareholders and supporting Oman's Vision 2040. Our ambition is simply to grow sustainably, innovate broadly and delivering together. Thank you very much.

[Operator Instructions]

I have a couple of questions. I'd like to begin with the expansion that was mentioned, which is expected to be -- to come online by Q4 2027, if the management would be so kind to give us some details about that and the expected contribution?

Yes, sure. The expansion that we are talking, which we simply name Plant 3 is an expansion of the medium voltage capability, a certain category of the products that is in the heart of the many businesses intersection like the power grid, the electrification and also the specialties in Oman and in GCC. So that will further add enhanced capabilities and capacity into Oman Cables strategy. We are talking about 8,000 tonnes to 10,000 tonnes. It depends pretty much the product mix and the category, and it will be live towards the last quarter 2027. Of course, the latest evolution of the supply chain routes is a point of attention for us, but our teams are following very closely. And as we speak right now, we do not foresee a delay, and we are working very hard to make it happen. Thank you for the question.

My second question pertains to the working capital. We have seen a significant rise in trade receivables. Is it just the record date thing because balance sheet as at or has there been some change in the working capital requirements?

If I can say something then Marcelo, please complement if I miss anything. Obviously, as the business is growing up and turnover, of course, the receivable is having its impact, and there has been some technical overdue which in the beginning of July, we see that this is already going on the better direction. So receivables, despite the growth of the company and the activity, we do not see critical piece on the receivable. Marcelo?

In reality, the discipline for available stock to avoid any disruption in the business is required because of the situation in the region. But the other important point is the price for the metal is very high. It is obviously increase our net working capital. But you can see the percentage for the net working capital by sales is more or less in line for the previous year.

That explains -- and if you allow me one last question. This capacity expansion that you mentioned, 8,000 tonnes to 10,000 tonnes, how much of it the expenditure has already been paid? And how much more CapEx should we expect to see going out of the cash flows in this year and next year? And then what -- does the company have any plans for the remaining cash because that is a subsequent number?

Yes, definitely, as we speak, the expenditures on this CapEx is evolving. And I can say that this is within the plan. So there is no big change on our plans on the expenditure allocation of the year. And that is how we proceed with it. I can say that still, of course, to come. It is not a small investment. It is a large investment going on, and it will support our business. Your second question has been -- sorry, can you repeat?

Yes. My second question was after the expansion actually comes online and whatever the cash the company has left, are there any plans for that remaining cash because they are a sizable number, and I would expect them to remain sizable even after the expenditures for CapEx.

Of course, we are always looking for the opportunities. We do not -- we really evaluate in depth the opportunities in front of us. Now the cash is becoming even more important in this volatility. And thanks financial strength that we are having in the company that allows us to operate different from the market players. We are very strongly placed our position to deliver our commitments to the customers. So the strong cash position in this volatility helps. Meanwhile, we are scouting potential opportunities. If we see an opportunity that is evolving, of course, we will be sharing with the market.

First is regarding this commodity price volatility. So it has been observed that the commodity price has been on a record high. So how are you able to pass this higher price to the end customers? And do you see any postponement or cancellation of any orders, revision of contracts, anything like that? And moreover, do we see any customers change preference like high end, high-margin products that changed during the first half of '26?

Thank you very much for the question. Of course, the question is very good. What we do is -- we do not speculate on the metal prices, and we hedge the orders on 100% back-to-back basis. So the high volatility of the market on the metal side, we are hedging this 100%. Then, of course, there are other ingredients, which is not that easy to hedge. And at a certain point, we have to reflect this to the market. That's why I was saying that on the other side, we are working a lot on the design to cost, try to be even more efficient in our operations, and we manage in this way. So there is, of course, always a time lag of this increase that you need a bit more time to deliver, execute and expect. So far as our profitability confirms, we were successful on that one. Of course, it is not an easy job, but we are quite experienced on driving such volatilities. We are coming back from different, different headwinds. So our financial strength, our discipline on execution and also the global technology is helping us to sustain our profitability. Obviously, we are looking to the better margin product portfolio applications, and we try to compete at every level on these megatrends that I was already touching. Thank you for the question.

And one more question. Like EPS working, my working is coming to OMR 0.065. That is you have a profit of OMR 5.7 million and the number of shares outstanding is 89.7 million. So it's coming to OMR 0.065. But that figure is not matching with your income sheet. Can you please comment on how that match?