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

Good morning, shareholders, honored guests, thanks everyone for the attendance today in sharing the [ Q3-Q4 ] conference update of Oman Cement Company. We welcome you all to the discussion on Oman Cement unaudited financials for the 9 months period ended 30th September, which was also disclosed on the MSX website on 28th of October 2025. It's my pleasure to introduce myself here, [ indiscernible ], Finance Business Partner. And also [ indiscernible ], here we have the Chief Financial Officer, Mr. Fatick Al Balushi; and we have Mr. Ganesh, Budget, Costing and Taxation Manager and we will shortly be having also Mr. AbdAllah Al Siyabi, Treasury Manager that will attend the session and take us through any updates or requests and clarifications from our guest side. We shall start the [ session ].

Can you just bring the slides. Gentlemen, and young ladies, audience, dear respected investors, just allow us to bring the slides on the screen. Yes, thank you [ indiscernible ]. Dear audience interested investors and analysts from the market. Thank you for bearing with us to bring the slides on the screen. Can you just confirm that you can hear us, please rather than we start and then all the audience might have not received our voice on the other side. Anyone can confirm, please?

[Foreign Language]

[Foreign Language]

[Foreign Language]

You control the audience. Anyone comes, say mute them, okay? Unless if they come. So we start. For the performance of the 9 months ended September, we are moving to give the highlights on the financials, go directly to the financial please because the pack on the Q&A session will be following towards the end of the [ indiscernible ]. So if you get to compare the previous period to the current period of Q3 2024 versus 2025, there's no significant improvement in the sales due to the competitions coming from across the border, as well also over the sea side. And there is a slightly lower performance compared to the previous prior period by almost having less 2.8%, equating almost like 20,000 metric ton shortfall to the previous 2024 September end. And this reflects by itself about how the market is moving. And Oman Cement is trying to maintain position once it comes to the realized sales price and also the volume, the revenues overall impacted the metrics. However, once it comes to comparable of the clinker production it's lower than whatever we expected as a budget because it has been quite for the shutdown of Kiln 3, which is almost 50% capacity of the plant and some kind of breakdown, which has been quite covered. And in Q4, as we are now in October, we've seen in November, the whole pick up is coming to a right offset. And hopefully, it can conclude the year in a positive stand to the shortfall of the comparable to the period of the prior year. In a nutshell, once it comes to the performance of the financials, next slide. So once it comes to the financial metrics, and speaking about the revenues, going down to the EBITDA margins and the impact comparable for September 2025 to the last December 2024, you will find the EBITDA margin sluggishly gone low due to the lower clinker production, which hopefully by this end of the year, we will catch up. So this EBITDA margin, hopefully, it will recover. Once it comes to the net profit margin towards the end of the year of 2024, you will find it almost gapping around roughly 4 point-plus percent, 5% if we round it up. And this is mainly driven because of the shortfall or I would call the differences and the delta in a proper language between the noncore profit generated income from the interest on cash, either cash in the bank or being put in the specific investments in the fixed deposit instruments. As of last year, we've been having sufficient millions around like 40-plus being quite deployed in the market and has been retaining good interest income. That's why also the impact of tax attached to this has loaded differently the performance in the net profit margin from 16.34% in the end of the last year and 9 months landing at 11.72%. Next, please. And if I take the comparable period, you'll find for the 9 months, the 9 months of 2024 versus the 9 months of 2025. Still, the EBITDA margin is also within 1.5% lower due to the same reason which we've spoken about the clinker shortfall. Hopefully, this will be quite covered within the coming remaining period of this year before we close. The story resides the same once it comes to the net profit margin. Earlier of you -- we've spoken about the end of the year of 2024 was at 16.3%, while in the last year 2024 September end, it was 17.54% and got impacted by a differential of almost 6-point-something percent due to the main 2 contributors: first of all, the interest income generated from those kind of cash being placed in different tactical investments; and the amount of tax that has been paid in differential to the past year. Next slide. The overall performance of the stocks, as you've seen that it has been quite in a reasonable range between the 450 (sic) [ RO 0.450 ] to the 490 (sic) [ RO 0.490 ] and settling down to a recent closing of yesterday at 473 (sic) [ RO 0.473 ]. Hopefully, the reflection of the performance will be quite improving towards the end of the year with our kind of K3 shutdown has been completed and up and running after this normalization and ramping up for bringing the additional capacity of clinker in place around September month, which is the last part of Q3, which has not reflectively giving a bit of right balance for this kind of delta to stand positive. With that, I will leave the floor to the audience if there's any question. We are all ears and [ indiscernible ] will orchestrate the pick the questions from the audience. And allow me also to introduce -- sorry, just a minute. Allow me to introduce if you -- can you see us? Allow me to introduce my -- our new colleagues who joined us recently almost 3 weeks ago. The Board Secretary and Legal Officer, Nujood Al Maqbaly. She joined from another listed company, Falcon, what? Arabia Falcon Insurance. And we are completely trying to keep the momentum with the complete professional career be available Omanis and multinationals. So over to questions, please.

[Operator Instructions] Shaoor?

I just had a couple of questions. Starting with -- you rightly mentioned that the performance this year for 9 months in comparison to the last year has had some effect of the other operating income. That is understandable. But my question relates to the sequential performance. If you see your gross margins during the first quarter and the second quarter and the third quarter, there has been a declining trend, right? So what has led to this decline quarter-on-quarter over the previous 3 quarters?

Yes. See now, first of all, this kind of heavy impact of freight ocean strategy still continues. Honestly, not just Oman Cement, but other producers being quite even the grinding stations who are importing the clinker to liquidate and generate cement, they are also suffering from this kind of impact of the fight of the imported cement or the cement that comes across the border or across the sea, which is honestly competing against a very, I would call it, unleveled playground. Unleveled playground, once it comes to their kind of subsidies covered that supported by the home countries of those specific producers or the very -- I will not call it competitive per se, but there's a bit of unreasonable cheap costs, which we cannot keep and bringing here due to the EVA, the economic value addition that the country wants the manufacturers or the producers to maintain and deliver. Among this, you would have this kind of the manpower, wherever our manpower stands at the higher level to the committed baseline requirement. So we have a 75% harmonization versus an industry requirement of 30%, and we still maintain it. And also this kind of escalation to the cost, which are mainly the natural gas year-on-year, the 3% as well also the impact of this peak and off-peak components for the power. These have been quite moving on an escalated trend. And also the volume has been quite relatively sluggishly low. So all these cumulatively has been quite contributing along some kind of trips of the plants and specific furnaces or cans. And the major one that K3 has really impacted us unfavorably during that time.

Okay. It makes sense. So based on your guidance, we should assume that the current margins are there to sustain if there is no regulation against these imported competition, the current margins would sustain?

Yes. I think let me pronounce your name, [ Shaoor or Sahoor ].

Sir, it's Shaoor.

Shaoor, I would be interested to meet any interested broker or analyst to take you around whatever we take of endeavor with the government and the regulator. Honestly, we had some kind of meetings even with the other peers. And this is a message to all the audience here and also investors. All the industry players here are working to complement as peers and never as a competition per se. And we have been also voicing this specific matter up to the authorities. Authority honestly, they have a very, very, very listening ears and processing mind. They are taking things balancedly. They are taking things rightly. And hopefully, within these kind of movements and momentum that we created over the last few months, things might materialize hopefully within November or subsequent December, I wish before the year-end. If things move right and materialize correctly, then the whole change of this kind of drive of the competition, which is based on unleveled playground might reposition all cement producer, and not just one cement, I wish all the peers to come positive. So at least we keep all those kind of local circular economy boosted right and this kind of generation of the hard currency to be quite positive rather than we repatriated to the across the border transactions.

So if I'm understanding correctly, you're saying that progress is expected by the year-end this year, Inshallah.

Hopefully, we pray it before because honestly, we have some excessive momentum involving other peers and voicing this to the regulator on specific practices, which is not levelled playground.

Right. It makes sense. Secondly, you mentioned, and you mentioned today as well that you have an unleveled playground. And also previously in an earlier call, if I remember correctly, you said that there is some quality standards that you have to adhere to, which obviously overseas producers do not necessarily take care of, and that involves using coal. My question is, if you are using coal as fuel in your kilns? And if you are not using coal, what is your source of heat for the clinker?

Okay. So now our kind of source of heat comes from the natural gas as kind of energy source. And we have already spoken about the natural gas. There is an escalation trend from 2015, wherever the price of purchasing the gas was based at $1.5 per MBtu or per molecules of natural gas price and escalated at a compounded rate of 3% year-on-year. So whatever we used to pay at 2015 at $1.5, now we are paying around $4.03. So you see almost like 3x from almost less than 10 years period. The increase of the cost of the natural gas, which is the fuel and the energy mainly for firing and producing the cement and clinker to the cement, and as well as the tariffs once it comes to the power. So there is this kind of escalation costs we agree. It's something that also we need to work it. Coal is, as you see the price and the trend is still competitive for others, but others also using pet coke and other alternatives, which at that time, we had the plan for putting a project in Duqum on this swing ability to make sure whatever the best trending molecules of those alternative fuel either natural gas, either pet coke or coal, so we can swing to whatever best margin and achieve more competitive price that can yield us a very reasonable cost driver as it comes to the fuel.

Okay. So building up on your conversation, it looks like you -- can you use coal? Is it that you cannot use coal, you're not allowed to use coal? Or is it that you are still exploring options? Because from what I understand, $4 per MMBtu gas would be quite costly relative to using coal for the heating.

See, it cannot continue to carry forward with this 3% indefinite because later on, the cost of the natural gas definitely will be quite skyrocketing and might not be bearable on my cost drivers and we would need to find alternatives. That's why we also took some kind of initiatives in alternative fuel or AFR. If I say AFR, that stands for alternative fuel and raw materials. So Oman Cement has already done those quests long even before the strategic partner, Huaxin-Holcim took over the government stake. And among which we have already put an investment of around $5-plus million in a project attached to the company, which is tire ships. Wherever we get to receive the tires of ships from Be'ah and we digest them, so we substitute also natural gas. This has been put in place by end of 2023. Unfortunately, those kind of macro global effects of the Ukraine-Russian war has resulted into increase of cost of those specific tires which used to be a waste and then it came to be quite a resource of financial gain and was -- were not made available to Be'ah's landfills and the quantity was not continuously supplied to Oman Cement. And we are working collectively with Be'ah and the other stakeholders in order to resume this specific supply, which can really give us a good sizable percentage reduction to a level of 5% if things moves into a continuous supply of these tire ships, 5% reduction or replacement of the natural gas. You may also might have read on our kind of reports quarter-on-quarter, we keep that alternative fuel of MSW municipal solid waste-RDF, which is refuse-derived fuel and we are working it with the other parties on this quest to deliver this specific project. There are some challenges on the economics and some kind of challenges on the price lifting, which is still need to be quite agreed. And we will give an update to the market once we just move concretely on this project. But we are taking this initiative in transition, not just only for lowering the cost, but also on the commitment to decarbonization as collaborating to the Vision 2040 itself and net zero by 2050. And in addition, just to give you more information, more highlights on this transition also from natural gas. Honestly, we have some discussion with the IGC and with -- indirectly with the government on potential and potential explorative alternative. I cannot specify them in spot now, but there is a sizable potential. If it comes and announced in the country, then whatever you might have already started with in your question might come to be an alternative resource to the natural gas, along with others. And we will bring it to the notice of the shareholders, investors and yourself once we meet subsequently in quarter 4 Inshallah, if things moves or the subsequent quarter in Q1 of 2026. Hopefully, I have addressed your question, gentleman. If there's any others, we are all ears here.

Yes, sir, it's loud and clear. Just one follow-up question. The other source that you mentioned, which would enable 5% reduction -- close to 5% reduction in the natural gas. You said that it is expected soon. Could you put a time line to this? When should we be expecting this to materialize this 5% reduction in cost, if there is a time line?

Sorry, could you repeat what you have said?

Yes, sir. I said that you mentioned that you are looking, you are eyeing an alternative source to the natural gas, which would hopefully provide a 5% reduction to the natural gas cost. And it is expected soon, as you mentioned. It was disrupted previously. But could you give us a time line as to when should we be expecting this to materialize and therefore, improvement in your margins by reduction of the cost by 5%.

Honestly, we are working collectively and collaboratively with Be'ah to circumvent this kind of shortfall. I may have already highlighted, I don't know whether you have attended this quarter 2 discussion. There is some direction from the cabinet and the government, which we really respect and appreciate their kind of momentum, directing that all this kind of tires to be quite kept within the country. And that was around the start of the year in the Q1 with an enforcement to be in place by June, allowing those people who are still using or piling the tires to regularize their position in a legitimate way until June. And then if I'm not mistaken, was it June 5 or June 15 of this year, the enforcement happened. And they gave a final notice of regularization till end of the year for those companies who are not really adherent, or they do have some kind of complaints and issues of bonds, debts and Omanis being quite on their board before they bar their license if they are not compliant or find them or put their penalties whatsoever. And the regularization is on course, hopefully, on the right track. So if things happen, in our discussion with our partners, they indicated it will take around 6 months from the last meeting. And the last meeting happened around October start. So if I take a factor of that 6 months for a proper harmonization and bringing this kind of continuous supply of tires to the landfill, it will take around somewhere around end of March, April itself. So hopefully, by Q1 end or Q2 starts in 2026, this will be realized as a kind of a supporting factor in the transition and the cost improvement once it comes to the margin help and delivering better performance Inshallah.

Hope that's clear, Shaoor.

Inshallah. Yes, that addresses my question. One last question from my side. Are you eyeing any expansion of the current capacity in the near future?

Sorry, asking about growth and capacity enhancement?

Yes, sir, yes, in the near future.

See, now we have this frequent meeting with the peers in the industry. And our capacity, honestly, as of total, we are utilizing almost 60% to 70% of our total capacity in the country. So there is no-brainer that we just put additional capacity unless there is a disruptive technology that's going to go earmarking a very cheap total cost per metric ton produced or make it quite differently standing to any competition, then that kind of capacity will be brought immediately. But as of current, collectively, the total supply or the total available capacity in the country is almost standing at 60% to 70% utilization. So I still have almost 30% to 40% according to the season, the time, the month of the year is not utilized fully. So usually, our shareholders and also the Board representing the shareholders like even the audience attending from here might not be quite -- be helping or be quite positively thinking that putting some good money of shareholders in a place which is not appropriately generating the right return. And management is taking things rationally and collectively with the industry peers to propose the right time of investment to put additional capacity. For your information, we had -- maybe I don't know whether I've just highlighted this previously. We had the engagement with the ministries on specifically mega projects of the developments of residential, commercial units and others and the demand matching the kind of somebody -- are you hearing me because it looks like somebody putting a message. Shall I continue? Are you listening guys?

Yes, sir, sir. You are audible.

So we met some of those dignitaries and a part of commitment. They pulled the cement industry, the steel industries and whether we will be able to match the demand if it comes. And we gave it quite straight, and we still give the same that if the demand certainties is put in ink and committed even we go approach our shareholders among some of you might be there or representing or recommending that we will just be putting the investment whenever it is required to match the positive trends in the growth of the demand once it's happening. Announcement pipeline is there. So many of those projects happening, His Majesty cities, the [ higher ] frontier, other kind of developers, the Egyptians developing the Barker side, the [ Ity's], the whole developments there, but the sufficiency of the existing total capacity in the market make it quite not the right time to invest into additional capacity for the time being. But we can disclose and give you a further update if market dynamics change and demand quite surpass the digits. Thank you, Shaoor.

That's assuring that the management is actively looking at these things.

We are totally engaged. And if you have any questions, you can even reach us any time, either in such sessions or even away from this. And can you just put the contact so people can reach through the contact while they are talking. And please, if any other audience have any question, we are all ears here.

[Foreign Language].

[Foreign Language].

[Foreign Language].

[Foreign Language] Joice is jumping with the hand up. [Foreign Language]

[Foreign Language].

Mr. Joice?

Just a quick clarification on your clinker capacity right now after the debottlenecking project is over. You mentioned earlier that it would be around 10,000 tonnes to 11,000 tonnes per day. Is it still standing? Or is there any major change in the capacity?

Yes. Now the earlier, it was 10,000 tonnes. So we are ramping it to 10,000 tonnes to 11,000 tonnes on consistent demand. And honestly, if you get to see that in our disclosures on the financials, we start selling clinker. In the prior year, we've been sluggishly selling maybe a few thousand here and there. But now up to, I think, last quarter, we sold around 15,000 tonnes, if I'm not mistaken, the figure. Wherever Ganesh comes, let him open the financial for me. So we have continuously now been supplying to the local grinding stations, which is nearby, which makes them very quiet pushing back on those invading and I will not call them dumping, but very unleveled play of selling the cement to the market. And we try to support the industry collectively. But we have also a bit of capping on the capacity to -- on the clinker which we cannot satisfy to supply clinker to all producers in the market. But once it comes to the cement, all the players collectively will be covering the requirement and above if it stands within the level of 9 million metric ton to 10 million metric ton demand in the country period. Joice?

And sir, if I look at the annual capacity, your clinker capacity, how -- at what level will you be putting it? Is it 3 million tonnes?

Now available capacity for us that we can deliver up to 4 million tonnes. We can deliver up to 4 million tonnes provided that the whole plant runs smooth, nice with no trips or unplanned shutdowns or whatsoever reason directly or indirectly.

Okay. Got it. And see, Fatick, I was observing some changes in your realization levels during this quarter. Specifically, there was a dip in last quarter and there is a 5% hike in this quarter. What are the reasons for this? Is it the market accepting it? Or is it because of the reduction in production due to the K3 shutdown? And how are you seeing the realization levels currently? And what's your view going forward?

These are management tactics in order to stabilize potential impact coming forward. In 2026 once it comes to the escalation inflation adjusted percentage either to the overall costs and build to those cost drivers that we have highlighted or aforementioned discussed in the previous question. We have -- honestly, Joice, we have adjusted prices upwards in specific products, which we felt that the competing across borders or across sea, they are making it a bit of exerted heavy weight on the industries. But we adjusted from Oman Cement. We have been trying to make it balanced. And I wish if I have my Commercial Director next to me here, you will see how hard his life is coming, how hard he is trying to, I would call, conceptually put the customers to stay loyal. Unfortunately, the customers looks for sometimes in a quick turn on a price-sensitive buyer market, dictating a term that give me at this price, commit for it long, not for a year or another. Otherwise, I'll find my source to go across the border or those people who are available to deliver it. I'm not speaking about the peers. Peers in the market here are suffering from this kind of unfavorable forces. And Oman Cement has taken the role of a leading cement producer who comfort the continuous supply and availability to the market with no compromising to quality and standing positive as the elderly brother in the market, in the industry who stand solid once it comes to no kind of accepting of red ocean. We've been bidding once it comes to volume in specific instance, and that's what we highlighted the 2% sluggishly there, but also contributing to some kind of improvement and enhancement on this K3 shutdown. And we are tweaking the prices to make it quite nourished naturally to come to a real right level, allow other peers also becoming positive because many of other peers, they are really suffering either due to other exogenic factors that they cannot control it and they cannot push and because of the regulators dictating these kind of terms on the prices, being power being quite other requirements or because of the very heating discounts, I would call it, or prices that have been offered by the imported cement or the cements coming across the border and across the sea, which if you compare it to the prior years, there was some kind of quality charge, conformity charges and tariffs, which has been quite piling revenues and income to the country to the Ministry of Finance, which is now discontinued due to the issue of that war, which we've spoken about in Ukraine and Russia. And the government is looking maybe into how they stabilize or reestablish the right means of comfort to the industry. This is something that we need to bring it to your attention as well.

So how do you see the prices moving forward? Are you seeing that the OMR 20.5 is a thing of past? And are we likely to sustain about OMR 21 for this quarter and maybe for 2026 because of the product -- the change in product mix?

See, now it depends on how the year or 2026 lifting will continue to happen. And whether it will be stable or it will be aggressive positive slope of growth of the demand. If the ferrous scenario of being stable, then I would say the prices might have some kind of heat of competition from the unfavorably cross-borders coming products, which is still quite fighting against price. However, if whatever momentum that we have spoken about and whatever the peers we have already exhausted the forces before the government has made it a bit of different stance and new rules or practices comes to a place, among which last period, we've spoken about this Omani quality mark, they say that they will be starting or thinking to launch around Q3. This I forgot to highlight, which is also good news that the Ministry of Commerce and Industry, they've taken a bit of aggressive movement on this Oman Quality Mark and specifically concentrating on the cement. So by mid of September, they started this kind of workshop to gather the momentum. And I think by October, they have done a specific hardline publishing of the guidelines. And now by November and December, they are asking us as peers in the industry to get audited and certified. If this is passed, also, it will give you a standing out star comparable to the other imported products, which later on those products in order to come to be sold as Oman Quality Mark produced products, they will need to be certified, and this will create them to bring their quality adjusted to the cost or their cost should be adjusted to the quality of the tick of the mark because this Oman Quality Mark is not just only for the local producers, but also for all those products coming across the border to make them level to level or closer to the level of Omani products once it comes to the investment in the manpower, to the investment into the quality and check and balances, to the investment of the economic added value once it comes to the corporate social responsibilities, to the investment into circulating further economic value, to the country itself and other metrics, which the ministry is putting there for the audit. And we expect that we engage with the Oman Quality Mark audits somewhere this month end or starting December. And they have already the government listed like 3 international bodies who are authorized to do the certification post the audit. And hopefully, by January, I can come to you on the quarter 1 discussion to highlight that we are also certified by the specific agent appointed as Omani Quality Mark product manufacturer and to be the lead. We want to be the first in the industry to achieve this, Inshallah. Over to you, Joice and the rest from the audience. If there is no question, we will proceed. Any others?

Any other questions?

If not, then we go to Jasim. Jasim has questions, and we'll put it in Arabic. Joice, anything from your side? I hope I addressed your question.

I'm done. Thank you very much.

Thank you, gentleman. So we go to [ Sheikh Jasim ].

[Foreign Language].

[Foreign Language].

[Foreign Language].

[Foreign Language] positive trend, increased cost or reduction cost in the mathematics?

[Foreign Language].

[Foreign Language] power increased or decreased? I am asking the gentleman to show me the financial. I remember it's also increased. [Foreign Language] power has been increased because of also what we did. We try to shift...

[Foreign Language].

[Foreign Language] financial it's increased, not decreased. Might be a typo because I see the financial, looking towards the September '24 versus '25. It was [ 6.58 ] in 2024 and then decreased, sorry, increase in 2025 versus 2024. Just allow me to check the figure exactly on the report.

I think he's checking one of the existing ports from the grid.

Okay, Jasim, looking this to a collective approach because we have a local CPP generating the power and also importing from the regulatory. [Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language].

[Foreign Language] correct me if I'm wrong. What is the import quantities from the market once it comes to cross sea, Iranian? Roughly is around [ indiscernible ]. [Foreign Language]

[Foreign Language]

[Foreign Language] CEO is also not everyday, should be there and there is a gap of Chief Operating Officer. So that support of the Chief Operating Officer technically would be required. And this has been arranged and brought by the Board directions to create a sustainability in the business. [Foreign Language] If there no other questions, we wish to close.

[Foreign Language] Gentlemen, I wanted to thank, I mean, your colleagues, Mr. Fatick and, all the Omanis are really well, taken care of the discussion, and wish you all the best, Inshallah. Again, I am thankful to be in this meeting. All the best, Inshallah. [Foreign Language]

[Foreign Language] Thank you, audience, and we stand responding whenever you wish to clarify. All the best. I'm looking forward to the next engagement, Inshallah, with a positive performance and non-negative figure, Inshallah. Thank you.

Thank you, everyone.