Oman Cement Company SAOG (OCOI) Earnings Call Transcript & Summary

Good morning, this is [indiscernible]. Welcome to the discussion session on the Oman Cement Company unaudited financial statement for the 6 months period ended on 30th June 2025. It's a pleasure to have you all shareholders, financial analysis and interested shareholders, please allow me to welcome the OCC management, Mr. Yaping, the CEO of the company, the finance team, Mr. Fatick, CFO, Budget and Cost Manager, Mr. Manish; and Controller, Mr. Ganesh -- Manish, sorry, and our Treasury Manager, Mr. AbdAllah Al Siyabi. Shall we start with the...

Bring in the presentation. Allow us a time, I think [ Vada ] is a new joiner. She is the finance business partner, and she is in her almost the fifth week with us. And we are trying to bring the sharp, competent people from the market, other Omani to be quite successors and taking care of the interaction with the stakeholders valued like yourself. So we are bringing -- sorry, this sometimes the system glitch gets into a bit of trouble to us. I'm just bringing it up here. Can you see the presentation, please, presentation slides? Can you see the presentation slides, please. I assume that can see the slides. So we'll start on the session. Thank you, Vada for the introduction, and thanks for the interested shareholders, analysts and the market for this session. We will cover the highlights on the Q2 H1 completed by June end. And we'll go through the regular practices of keeping our pact updated and to deliver whatever maximum value to the shareholders, and stakeholders in this Oman Cement universe. So we still hold the fact that we continue to be leading the cement industry, where the concrete value to capitalize on strength and to contribute towards the Vision 2040, developing the pillars to foster the construction industries by all contribution possible. According to the strategy set and the plans to deliver growth as we move. Once the market prevail positive, we are also that commitment to invest if required. Overall, unfortunate circumstances due to the market and the competition and the scenario of this clinker and cement is still inflowing from the border side from the neighborhood countries. The unfortunate circumstances on the sales has not delivered the expected targeted results. As per budget, we're supposed to deliver around 1.6 million tonnes sold. Unfortunately, it was sluggishly low by almost 33% to the budget for this year. However, if I compare it to the past period of 2024 H1, you will find it gapping almost like 1.87% which is in a nutshell, if we speak about numbers. So that's a shortfall of around 31,000 tonnes from the previous period. Which by itself speaks about the issues, about the market and the lifting. However clinker production in 2025, H1 has been contributed positive due to one lever, which is supposed to be taken place. That lever was the shutdown for K3. K3 that's the kiln number three, which is 50% of our production capacity to optimize on the clinker production that we've highlighted about this projects to come. So we're supposed to have it around May and June but we postponed shifting it to this end of July, albeit shutdown is ongoing, started 26 and we'll be expanding until the end of the month of August. After the August, so September onwards, hopefully, we'll have that improvement on the clinker values between 8% to 10%, given this kind of improvement in quality as well. Speaking about the parameters once we go to the performance on the financial highlights, you will find from our side that while we have not delivered the best results for 1 comparative to H1 2024, our EBITDA margin stood the best overall comparable to the previous years, for the H1. It has delivered a 27.38%, reference, if you can see this line from the 2019 was 23%, roughly, and it was ranging between 26% to somewhere around 17% and 15%. But 2025, this has been contributed massively because of this initiative internally that we have taken on the tightening the belt and trying to deliver maximized value. On a tactical market reach and retention of customers, and not being quiet going into a price war with our peers in the country because that will not help the industry itself, and we maintain the dialogue with the peers to continue. We have compared earlier that the year to half and then if you compare the half-to-half previous periods, you will still also the EBITDA margin stands positive in this highlights. From our side, if you get to see the -- this as we reflected from the trust that you guys have put in Oman Cement and the stock prices have been moving and hovering around the 500 basis. With that, we continue our pact to continue to fight any kind of unfavorable forces. But this has to be collective trust with the peers in the industries with the government trust and the qualities and the Omani produce quality products from Oman Cement and the other players in this cement industries. With that, I would wish to open the floor for Q&A. If you have anything to bring it from your side, to clarify, to question, we are all ears here. Thank you.

Joice, please, you may comment.

First question is on your volume, cement volume. You said there is a lifting issue. Could you please elaborate on this aspect?

Market forces that, people now turn towards more of -- they're getting to be a buyer cycle, wherever the buyer looks for, whatever cheap material that they can save. And not I would call the end user, but maybe in the value chain of this construction material, you'll find distributors, agents and contracting or developers who are taking projects, and they are what you call cost conscious. And some of them they are also being quite contained on bidding prices for projects wherever they need to deliver the value to that, and they want to mark it up to a proper percentage of their own comforted margin to deliver that specific winning and getting the award of that tender. But this is the whole multi-sector, multi stakes playing it unfavorably. But the major, major force is unleveled playground from the competition which comes to embed their players here in the market, the peers being us as an integrated company and the other in the north, in the south, in the mid around us.

So Fatick, if I recall earlier, we were talking about UAE players or players from outside of Oman. But right now, you're mentioning about the domestic peers, and you also made a statement that you don't want to get into price war with the domestic peers. So are we seeing a lot of price pressure from the domestic peers as well apart from the UAE?

That's -- it's a kind of indirect force because they are faced also with this heated pressure. Oman Cement has never rushed into a price war or even lowering the quality or compromising the quality of products but has maintained position that we want to stay defending the local economy and supporting the supply to demand, which has been over years and you have witnessed how Oman Cement has poised itself to be standing as a partner. The other peers may be, unfortunately, they are facing some challenges because there are some challenges on the cash flow, some challenge on the performance, previous histories, they would like to also stay afloat positively. And they've been directly impacted because they are in the tangent area, in the area wherever this imported cements comes to be or clinker come to the country. So this is one major element, which is earlier we have some kind of, I would call it, quality conformity charges being in place, which has been leveled down around 2023, and it has not been brought back. If that by itself comes into force, it might also give a bit of quality and confirm the checks on the imported product cements or whatsoever clinker to the industry. And also give a bit of relief for the people who are really being quite going into a price reduction to satisfy market retention because they don't want to lose the customer. Customers now have different windows wherever they can shop from even external parties to lift and eventually, it might be checked, might not be checked, that's another question of validity. But the issue is still those external factors or external bodies who are sending the material down to the country, they are really having very cheap cost -- I would not call very cheap costs, but it's very competitive cost once it comes to their cost structure because they don't have this kind of loading once it comes to that fuel being natural gas charge at 3% year-on-year. They don't have the manpower commitment, like Oman Cement and other player, they are in the 75 range percentage of Omanization on top, their average, what we call cost structure for the blue collar would be in the range of around OMR 100 to OMR 200 per month, give and take total cost to company maybe in the range of OMR 300 to OMR 400 but we -- and the average size for this kind of employment, we have a cost of around OMR 1,000, so we still abide by the ICV, the economic value addition. And we still find a way to maneuver to circumvent, but this cannot be sustaining for long if we really don't improve on the cost structure significantly or there is a kind of a bit of strict vigilant check and balances happens to those kind of products coming from external parties. Collectively, we have also reached to the government and spoken about that, the local supply is close to whatever current demand. There is no heavy intense developments are structures that has been converted. Yes, announcement came up and Alhamdulillah his Majesty's cities, the 18 project, Al Khuwair Frontier. This has been announcement and multiple projects been awarded to Galfar and Al Tasnim and other players in the market, which has made us ready. But the realization or actualization of those projects to come to the reality on the exact time frame, it takes a bit of split. And it doesn't come immediately to revive the market, very heavy as of the previous year. But rest assured, whatever management, company, board and shareholders who are steering the move of this shift towards a better performance year-on-year, we will never spare any single rock not turn if there is a value under it. That's our commitment and that's what we continue with. But we need a collective voice, a collective stands, people who speaks to the stakeholders also echo whatever we are echoing for the industry because this industry, we are the upstream side. the midstream and the downstream, if they later on get an implication from the companies or the industry players get suffocated or trouble. This will reflect to their continuous supply and sustainable supply to demand to the market. Joice, any other question, please?

And see, when you say the demand and supply scenario is very much balanced from the local producers. And so in terms of realization, where does Oman Cement stands? You have around -- last year, you had around OMR 21 realization, average realization which has come down to closer to OMR 20, and where do you see the competition average realization currently? What's the selling price in the market? That's what I wanted to understand.

See, on the NSR, the realization itself, unfortunately, we end up giving -- as we see -- there is -- as we said, it's a buyer market. The buyers starting a bit of asking for discounts or what we call rebate in essence of product, so we already gave a bit of consideration but not too much that we lower it down. So that was roughly in the range of 200 to 300 basis, but it depends on the product type. And these are sales discount factor according to our slab of performance against the product lifted. So whatever you highlighted on the average NSR, we are in the range of now somewhere around OMR 19.5 to the OMR 20, but it depends on what is the contract and the volume committed and the lifting itself.

Okay. And how do you see the NSR moving forward?

We still hold our position as of now. Unless there is unfavorable force comes to attack heavily, and we maintain our position specifically that we will have additional clinker to come. And we have the grinding stations, which are companies nearby like Al Arabia Cement, like Al Madina, even Raysut, in the north Sohar, they are our peers. We are their support if needed. If they are finding the local ICVs to be maximized. So we are available with them. We try to balance the market itself. So we try to even create sufficiencies on the intermediary product, which initially, I would say, in the previous years, we have not sold clinker because it's the precious commodity that people are after and it was a buffer contingency that helped us to save 2022 as well also we continue in 2023. And now in 2024 and 2025, we are having very minimal stock as we will try to also make our kind of cash structure to be standing this with no trapped cash in the inventory.

And in terms of your market positioning. Is there any significant change in your market share? You've had around close to 50% in market share until very recently. So where do you see the market share, especially, Fatick, I'm asking this question primarily because when you say there is a lot of pressure from the peers in terms of price as well as in quantity. So just wanted to gauge how much of pressure Oman Cement is able to withstand.

Honestly, we are tactically rebalancing our position on delivering this strategy with the partners. The customers are not customers or buyers for us. There are our partners and a loyalty program that we endure to take it even with this adjustment, which we told between the 150 to 200 to 300 basis according to each contract performance. And we also safeguard the shareholders and stakeholders interest, investors once it comes to do sales. We don't do like other players in the market or other places, giving open credit, we safeguard with bank guarantees. There's no kind of, I would call it, maximum exposure that if you compare Oman Cement to any other players, even in the GCC, even other international. We are ring-fenced the whole bank guarantees to support that. And this is one also depriving element for people to come as Oman Cement insisting so on and so on. But we are comforting the customers from additional added services. or about to attend them being standing on wherever they want us to come with them, being open to discuss even most of the time, CEOs and as we meet those customers. We don't leave them only to the commercial end market. We hear out from them, we see whatever is going in the market. There are so much of issues and the awareness that need to be passed to the market, but this is just only Oman Cement. It's a collective steer from all stakeholders, regulators, government players, our peers and us. So we -- if I answer your question or reshape it rightly, we've spoken about projects. Now some of the projects are pushed into the north side and the north side, the access of those imported cement is much immediate to them. The distance here gives a bit of a market check and balance, where the people ask for a bit of consideration and discount, which we have taken positively, but not in all and we balance according to have a weighted average NSR that delivers value to us. Joice, any other question? Yes. And I leave also -- I'll give Yaping to give addition to this.

Okay. Just one point, for the market, we put the quality as a higher priority, we still keep the same, the same market share. But in some markets as the price war is going. So in some markets, when the customer or the contractor put a less priority on the quality, the market share is changing. Just like Fatick said, even though the projects are shifting from Muscat to the Sohar or north part, the contractor, Galfar and the Tasnim, they still stick to us.

We value the partnership. We keep that on. And as we said, if I may go back to the slides. The first one, if you see it, our speaker whatever Yaping highlighted, I maybe have not emphasized on it because this is already coded in our genes. So our DNA does have brand quality, which is not -- never compromised, and we don't do like whatsoever people for after quick gains. I don't want to put any connotation, but people need to be quite checking their balances. And unfortunately, also the awareness is for the workers, for the people on the projects, if need be, either retail or corporate or government, this need to be quite ring fenced. We've seen people who are inappropriately using specific products, which is made for a specific use has been put into a different use, which is really impacting also the sustainability, safety and the quality outcome of those projects and infrastructure or the residential commercial and industrial unit. Thank you, Joice. Any other question from the audience? Joice, if you have done?

Can I ask 1 more question?

Yes, Joice.

Just could you please touch upon the CapEx plans? You said your K3 expansion plan is postponed. So I assume that has started -- that is supposed to start in July. I assume that is started by now. When is it expected to complete? And when are we expecting the new cement -- new clinker to start production? And also on the -- there was another JV project that you have mentioned earlier. So I don't know if you can touch upon all the expansion plans and the CapEx investments that are required, that would be much appreciated.

Yes. Smart point, gentlemen, because we say that supply to demand, we are almost collectively, we can supply. This project, which we have spoken about is the clinker cooler on K3. This will give around 8% to 10%, as we said, the additional volume and improve on the quality as it would cool the clinker better and make it ready for the market. So this -- as we said, we have already in the prior plan for 2025, it's supposed to take in May, June, we have postponed to July. And that's why the H1 results, you have seen it has been quite sluggishly lower. So I'm -- due to this position, we have shifted the shutdown to be in July. So July 26, the shutdown has started, which is currently ongoing. By end of August or this month, we assume that we will start the firing of the kiln and resume this production from the 50% capacity at K3. This will give us a position also to help and sell clinker, as a matter of fact, we have some partners now knocking. If you go on my financial, you'll find in the Q1, we have sold around worth of OMR 17,000 -- riyal or tonnes? 17,000 tonnes in Q1. And for Q3, you will find that we also will highlight that we started selling. As a matter of fact even during our shutdown we are selling to the partners now to start building the relation for the forward and comforting them not to go to the external sources, which is across the sea or wherever it is coming. So this is one on the first project, the other projects on the JV, we are on a very, I would call it, aggressive still working toward those interested or party in the ecosystem of this specific project. And hopefully, in Q3, we'll be able to give some announcement as we progress. That round is between now, there's 2 parts of the projects. There is one part is on the preprocessing and sorting and then the other part is the core processing. This will highlight about the month we just have the final confirmation in the JV, and we bring it to the market itself. But on the size of the investment, it would range between $65 million to somewhere around $100 million. How will it be split it? How will we dice it in the shareholder structure. And this capital structure, we'll bring it up to you to the market. So at least you understand how Oman Cement work. Joice, Thank you. I assume now we have already drained all the questions for also the other people, unless others like David, Sandesh and the rest of the audience have some questions. We are all here, please. Rashid?

This is Rashid from U Capital. I just want to ask a couple of questions. The first question is, what is your average cement selling price?

Yes. You have the weighted average on overall between the OMR 19 to OMR 19.5 to OMR 20 according to this competition and the market. So we still will maintain that position.

Okay. Great. So you don't expect any changes?

No, there is a slight change, and we gave away for the discount, but that is in the range between 200, 300. maximum 500. I'm saying our weighted average around 300 basis figures.

The second question is that, is there any quality checks that we need to be aware of?

No, unless you are away about something we are the best standard on the quality. We are the reference in the market. So if you want to check any other products, you can bring them and take our product even blindfolded, which is another unknown bag and let them test it. We are the standard of the reference share, so we don't compare to other, others compared to us. This doesn't put us to stand complacent. This is not an ego. This is a kind of a confirmation on the standard of competence people and products of industry, which has been proven over the last 4 decades, delivering whatever they've spoken about. Any other audience. Sandesh, please?

My question is on the presentation, which over there you mentioned that the -- your production was lower than your budgeted for 1H '25 in the second slide, I guess, you mentioned it. So I wanted to understand what would be the outlook for FY '25, like the budgeted production for both clinker and cement, like a range, if you can provide us?

See, we are trying to beat the target for the last year, roughly. And again, this is whatever we've always been quite stretched. We don't even feel comforted to sleep. Even we agreed with the shareholders, with the Board itself to stretch our targets and even the remuneration means once it comes with the bonuses, to the variable component for the year. So last year, we pact with them were around 17 million. This year, our pact with them is 18 million, in spite all those increase in the percentage of cost not speaking about the natural gas, not speaking about the manpower, but also the market and the distress and the geopolitical loading and availability of all those critical material specifically once it comes to OEM. And we have repositioned ourselves also now to rely on the plant of the planet. China now comes to be very kind of supportive once it comes to a competitive sourcing of specific material. Even in the OEM, we have shifted our ideologies if there is a specific parameter assets, integrate with not compromise to integrate that we can replace the OEM product, which has come to be expensive with another potentially and proved of concept has been run over years and deliver the same results and better, we shift. So this is the beauty of taking calculated risk also with the new investors and Yaping is representing Hoshan, the group, which is also backed by a European investors, the Hoshan. So all this experience are coming here to prove it can add value.

Also speaking on the EBITDA margin, like you mentioned that you had seen an improvement in your EBITDA margin for 1H '25 despite the lower revenue, considering the initiatives which you have taken. So can we expect this to be sustainable for this entire year and for the next year also?

Well, that's what we -- if you hear me on the start we are trying to stretch our performance to be year-on-year better. So it's not about staying complacent. It's not about staying comforted and happy with whatever results. We always say there is always room for improvement. But the only thing we take it as priorities and tackling all those unfavorable variables that are impacting the market, the economy and the industry itself and the players and the peers and us. That's our kind of commitment to deliver, inshallah. I hear the nice gurus, the fellow friends, the expatriates speaking and asking, but also there is Jasim Hamdan. Please, any Omani, any GCC, any gurus, anyone from the investor, we are all available here for you. So Jasim, please comment.

[Foreign Language] Sorry, the CEO Mr. Zhu Yaping, I'll be speaking in our language a little bit because this an open company, I think our colleagues has already discussed so many issues, for us as a local investors, I think we should talk in our language also. I just speak language is not elected. Hello?

[Foreign Language]

[Foreign Language]

[Foreign Language] I'll repeat what I have said, that rest assured that the management will not spare any rock unturned if there is a value below it. And that's the commitment. What we did, we did a bit of -- we call it implicit directives that we slow on specific replacement, which are not critical. [Foreign Language]

[Foreign Language]

Audience, if anyone has any question, please bring it up, or else Jasim will continue. [Foreign Language] Okay, Jasim, we're all ears.

[Foreign Language]

[Foreign Language]

[Foreign Language] Sorry, Mr. Zhu Yaping, I spoke in Arabic, but my colleagues, they will probably transfer -- translate to you what have been discussion, discussion with them. I mean I hope it was [Foreign Language].

[Foreign Language] The same goes to all the audience, analysts, brokers, investors, interested potentials. We are all available. These are our contacts. Thank you for the very interactive session. If anyone has still any questions, please raise your hand or speak, we are still available here to attend any questions before we conclude the session. [Foreign Language] So there is no questions from the floor. With that, Vada, we conclude.

In this case, we would like to thank all the distinguished guest, stakeholders, financial analysts who have attended this session. And I'd also like to thank -- we hope that we covered all areas of your concern and clarification. Wishing both sides all the best. I would like to also end this session thanking the OCC management for all their efforts, Mr. Yaping, CEO of the company; Mr. Fatick Al Balushi, CFO, Mr. Ganesh, Budget and Control Manager. Thank you very much for your time. Mr. Manish, Financial Control, thank you for your time, Mr. AbdAllah Al Siyabi, Treasury Manager, thank you for your time.

Thank you for you, Vada, also. Thank you.

All the best, sir. Thank you very much.