Oman Cement Company SAOG ($OCOI)

So a warm good morning to distinguished guests shareholders, investors, financial analysts. Welcome to the discussion session on the Oman Cement Company's Unaudited Financial Statements for the first 3 months period ended 31st March 2026, of which statements were disclosed on the MSX website on 28th April 2026. Allow me to introduce the management attending this discussion session. Myself, [indiscernible] Finance Business Partner. I have Mr.Fatick Al Balushi, Chief Financial Officer; Mr. Ganesh, Cost, Budget and Taxation Manager here; and Mr. Abdullah Siyabi, Treasury Manager, along with Mr. Manish, the Financial Controller; and Ms. [indiscernible], Board Secretary and Legal Adviser at Oman Cement's Company. A warm welcome to everyone. Can you just confirm that my slides are showing -- appearing on the screen?

Yes, we can see.

Thank you very much.

Okay. Can you move through disclaimer.

[indiscernible].

Mr. Abdullah Siyab will take over the presentation to the agenda, please [indiscernible].

Thank you. [Foreign Language]. We would like to thank you and welcome you in this session. And we'll start with the disclaimer. As you are aware, this presentation was prepared for discussion only, and it was prepared based on the public information, which is available in MSX website. And it is not invitation for or a recommendation for analyst. Based on the Q1 presentation slides, we will go through main items, which are we will start with the [ OCC-back. ] And then we will highlight the unaudited financial statements of Q1 2026. Then we will end up with the Q&A. You may insert your questions in the chat as well. Next, another. As you see that -- as you know, we are -- our target is to be a leader in the cement industries with concrete values. Next. Okay. In terms of clinker production in Q1 is higher than budgets by almost 13,000 and higher than Q1 by almost 21,000 metric tons. The cement sales of Q1 versus Q1 '25 slightly lower by 16,000. Next. In terms of financial highlights of the EBITDA as it is showing in the slides, the Q1 of 2026 is the highest EBITDA margin of Q1 since 2020. Next. And in terms of margin and it's showing -- as also showing in the slides of the Q1, also it's the highest EBITDA margin versus the year since 2019. The main contribution of operation effectiveness, the higher cement sales price, lower storage spare parts and maintenance costs, lower packing materials consumptions, higher clinker reductions by almost 21,000 as mentioned, consumption of old hydrated clinker, lower material handling costs. Next. In terms of market -- analysis of market share prices. As you are aware, the share price of the company is OMR [indiscernible] as on 12th May. Next. With this, I would like to hand over the speech to Mr. Fatick , CFO, to respond your Q&A of this session. And thank you.

Thank you, Abdullah. Thank you the gentlemen and ladies. Thanks for your interest and also coming to interact with Oman Cement on the performance of Q1. Abdullah is a Treasury Manager and also one of those potential successor in developing the capacity to chief levels. And we are here to interact with you regarding the performance. If you have any questions or highlights that you want to also give it as a kind of note to us, we will be all ears and available to answer. Please, [indiscernible].

Yes, audience, anyone would like to raise a question. We have a question here from [ Rao ]. Cost of imported materials, given the Middle East tensions, there is a risk of rising costs for imported raw materials. To what extent is this expected to impact the profitability of the company? Alternative fuel, what is the update on this? What is the expected capacity of the AFR? And what CapEx would be required on the same?

So thank you, [ Rao ]. Once it comes to the -- I would call them -- hopefully, it will not be quite a long-lasting issue, the tension in the region and the escalation that's coming from every part once it comes to the logistics and supply chain and also availability on a very right time lead to deliver to the manufacturing units, either Oman Cement and others, once it comes to specific material or critical spares. So this is already felt everywhere. Oman Cement has circumvent this learning from the 2022 matter, which has honestly replicated itself in a very close proximity and highlight concentrated effect. As 2022, the Ukraine-Russian war put some [indiscernible] into practice to us. So we improved on our kind of procurement philosophy and the strategies on tendering that we pass the risk to the contractor or the suppliers, once it comes to any kind of disruption. Even if it is force majeure by not just putting the kind of hedge mechanism to stay on the supplier side or the counterparty, but as well insisting that if there is an inventory or supply of material, then we insist that the inventory should be in a very close proximity to Oman Cement in a warehouse that could be quite brought in timely and just in time or concept delivery. So we have taken this approach on critical materials, and we moved progressively. However, even with this kind of insert and comfort that we have created over the last 4 to 5 years now, we still see some disruption happening because of the war risk, which people get to load it through this tension to the marine logistics and even the inland. And this mainly comes as a pass-through concept of cost, which is mainly -- could be quite, in some instance, shared split between the client and the suppliers or pass-through to the customers. This is one part of the story, but we have been quite controlling this specific momentum in a balanced approach. But in eventuality, if the situation prevails to continue, then there is a need of passing specific adjustment to the market once it comes to the average selling price. This is once it comes to the tension and situation and the tactics that the company has taken since the start of this war in February and built on whatever experience we have already muscled over the years since this kind of experience in 2022 from the Ukraine-Russian war. What was the other question, [ Rao ]?

[ Rao ], I hope the answer is clarified here because you also raised your hands for a question.

Yes, I have also another couple of questions related to industry, if you allow me to ask the question.

Yes, please. But can -- what was the second question so at least we will....

The second question was alternative fuel.

Yes. On the alternative fuel, the alternative fuel, we are moving -- sorry. We are moving with the stakeholders in this specific consideration JVs/projects. And there's a bit of, I would call it, discussion on specific commercial elements and the chemical structure of the JV that needs to be brought in order to develop this project down on the ground and the scalability. So this is some kind of progressive work. Still, it's in, I would call it in the final end. Hopefully, within this Q2 before it ends, we will have some clear line to bring news to the market [Foreign Language]. But this doesn't have to stay and specifically once it comes to the major project that we have spoken about or it is the MSW RDF concept. However, collectively and simultaneously and we started long that we have already established an alternative fuel and replacement of raw materials department, capitalizing on the existence of the strategic partner, Holcim-Huaxin into indirect holding of Oman Cement shares or controlling major shares through Abra of Mauritius by building the experience and capitalizing on their existence and the competencies. Now we have team on ground. And also, we've just also announced further vacancies in this department recently. So if you know any good potential partners or people whom you feel or across, please pass the message as we are building the team. As in Oman, it would be one of its first in time to be quite a good waste management and waste disposal mechanism through the cement industries. And it would be a good experience and building for the people in town and in the country. [indiscernible ,is there any other question? Otherwise, I will move to the other people, please.

Yes. I have a couple of questions, if you allow me to ask.

Yes, please.

What is the current capacity of Oman to produce the cement?

You mean the nameplate capacity?

Yes, total country's capacity.

Yes. We have around 3.5 million-plus marginally added 100 by the efficiency, so 3.6 million. But there are some further tweaks and efficiencies the team are working. It could be ramped into a nameplate capacity plus 10% to 15%, so it can go to 4 million if we keep pressing on the pedal and the accelerator for supplying to the demand if the demand comes to be aggregated and increased.

And one more question. How is the current situation like a lot of cement was imported from the Iran. So in the current situation, is cement coming from Iran?

I would say it is coming, but maybe not that prevalent continuous stage because also whatever happening due to this kind of tension, the energy costs in the nearby countries also causing trouble for them to supply in a competitive price. We witnessed now, honestly, in Q2, which later on in July, we'll come and discuss it with you and highlight. We've seen uptick of lifting of the volume in Oman Cement over the days. In spite whatever Abdullah has highlighted on the first slide that the sales was marginally lower than Q1 of 2025. So we have a full faith that if things moves and continue, the Q2 will be a supreme to the Qs of 2 over the past years.

Has this situation, like you have mentioned that the volume has increased during quarter 2 due to current situation in the regions. Has the margin also increased?

Come again, you were speaking about the margins?

Yes, yes.

Yes. Margin, I think Abdullah, can you bring the slide? Can you bring the slide of the EBITDA and the margin, net profit margins? Because see, it's positively trending. And we see for even going forward in the Q2 [Foreign Language] it will be better because there are some levers that we have taken to push back on any kind of cost escalation and trying also to adjust on the average selling price for whatsoever market that used to be shying away from our side on a level playground for the existing sales. So if you can see the percentage, Abdullah, can you speak about it? The percentage increase on the net profit.

So let me come closer because it's a bit far from the screen here. You see that year-on-year once it comes to the net profit margin, it was around 12%. And if you compare it to the Q1, which is not annualized here, it is around almost 19.5%. Can you show the other slide. While if you compare to Q1 Q-to-Q, you will find the Q1 '25 is almost 16.7% and Q1 of '26 is almost like 19.5%. So there is an improvement of around 3% on overall Q-to-Q. But we expect that Q2 will be [Foreign Language] in a better performance.

So is there any major...

As Abdullah said also is considered among the highest year-on-year and Q-on-Q. But still, I stretch the muscle of the team and the working KPI performance studies to ensure that also Q2 [Foreign Language] to be better than Q1. Yes, please.

Sorry, I'm taking much time. Is there a big difference between the price? Like what was the imported price and what is the current local cement price?

Pricing between which? Different regions or pricing between different countries, are you heading here?

No, price difference between imported cement, which was imported in Oman and the local cement prices?

Yes, it is there. It is there. People will not be quite able to sell unless they give a kind of preferential prices to the customers. But we've seen the customers because also they don't have the continuous supply coming. It's also being moved from wherever they used to -- shy from Oman Cement and buy from others across the ocean, across the border. They come to us due to the availability matter and also due to the quality also and continuous supply. Any other questions, [ Rao ]?

Allow me to pass the mic to Mr. [ Shaoor. ] Sorry if I'm pronouncing the name wrongly here.

No. Yes, it's fine. Congratulations on a great set of numbers. I hope I'm audible.

Yes, we can hear you.

So I have a couple of questions in building up on what [ Rao ] was asking. Obviously, the first quarter during the current year, you had mentioned a decline in sales, that's probably somewhat expected because of the Ramadan this quarter and then Eid and then the geopolitical tensions. We were actually surprised when we saw an uptick in revenue and that you explained is because of the higher selling prices. Now moving on to the second quarter. These higher selling prices should we expect them to be there? And if so, you also mentioned one interesting component is that during this quarter, you had some consumption of old hydrated clinker, which contributed to the gross margins. And when we go through your cost of sales, there is an inventory adjustment, which reduces your cost of sales by around OMR 1 million, which is a big number. I'm assuming that this has contributed to your gross margin. So my question is during the second quarter, should we expect the margins on the gross level to be the same in the high 20% range, 28% this quarter? Or should we expect these margins to come down slightly in the second and subsequent quarters?

Can you hear me?

Yes, I can hear.

Am I loud and clear? Okay. So margin, if you get to hear, I will take it from the back end of the questions. So going forward, we see it positively [Foreign Language]. As we -- the trend of the price, it will be sustained because also we are looking into adjusting some specific prices on the bulk for specific long-time customers due to the raising concern and the issues of the availability and the material, if need to be considered, even if it is a closed inventory with the suppliers and due to the continuous raising concern of the cost coming directly or indirectly to the fuel, to the tires or to the vehicle, transportation, logistics, whatsoever loading of the people, manpower side from those contracted or supplier relations. It would need to be quite sweetened and offsetted through the market, in a reasonable sensible manner. Mostly the pushback on any kind of cost escalation, but in slight adjustment, it needs to be quite considered for specific contracts. This is one. Expecting the margin to continue trending positively. That's what we feel it as of now, we are almost in the mid of May. So we are left only with another almost 45 days or 47 days. We expect that positive trend will continue. And hopefully, the Q2 will be better than whatever we are presenting here. Any other question?

Yes, [Foreign Language], it will. Let's hope. My second question is regarding your cost of energy. So you guys had mentioned that you use gas as fuel to -- for fuel and power. And you had an agreement of a certain percentage, if I'm not wrong, 3% escalation every year. Now obviously, with the gas prices rising internationally so high, have you guys been facing any issues with an elevated escalation? Or are your gas prices sort of fixed with the predetermined rates?

I think you started right understanding. The escalation is always cumulatively compound year-on-year for the 3% since 2015 onwards. So whatever used to be at $1.5, we are now being paying $4.15 per MMBtu. As well also, there is this kind of adjustment in the natural gas formula of calculation on the quantity from lower heating value to use gross heating value, which is also having an impact of around roughly between 10% to 11% to my total intake, which is also a cost that we need to absorb and move. And if you -- maybe yourself and [ Rao ] also chatted on the alternative fuel. We are honestly not just waiting for the mega or major project that need to be concluded within this period. We are moving on the alternative fuel sourcing and even the team. So we have now a full-fledged team. We invested also in quality and lab testing associated to the alternative fuel. We brought equipment and apparatus that would measure the [indiscernible] value of different materials to be used and not just waiting for the project to come. As well also, we invested in shredders, EUR 1 million plus. We invested on also machineries that can be helping in the transit and the relation with the existing supplier. And that's also potential for our kind of reduction on the energy cost. Also subsequently once in a tactical manner wherever we used to drive our kind of power within the captive power plant, we consider it to be quite shut down during the peak time as of current because the peak time is quite huge in the cost once it comes to the power. And we move comparatively to take from the grid in a balanced approach. Clear, any other question, please?

Yes, clear. A couple of more questions, if you allow. So if I'm not wrong, so from what you've told me, I gathered that whatever the prices of natural gas are in the international markets, they can go up or down. Your formula is fixed at a 3% escalation per annum cumulatively. Is that correct?

Yes. But 2026, we had another jump of cost to the quantity, which is another 10% to 11%, which we are trying to circumvent from other approaches of alternative fuel and tactical swings between the users during off peak and maybe considering of pausing specific operation and specific element to make it quite fit on our overall cost of structure.

Perfect. Okay. When you mentioned that during this, hopefully, before the Q2 end, you guys would be able to announce some development under the alternative fuel thing. So would you be able to give us a little more clarity on what this project is and how much savings should we expect the capacity if that's possible?

I will apologize not -- I cannot just share the whole economics and the highlights till things get clear because there are different situation of the different scenarios that could be considered on the corporate structure as well on the JV. So allow us to conclude it. And once it's made final in the final option, we'll come with the full clarity to the market, so market can take a proper decision on investing this.

And my last question is because of the recent issues, we have obviously -- you mentioned that the prices have gone up to pass on the costs, right? And the dumping from the region has now stopped, which is a good thing. But my question is when things settle and we go to a normal course of business, should we expect this spike to be temporary, whatever is happening right now? Or should we now expect that with the efficiencies that you guys brought in, you would be able to compete with the imported cement or dump cement and things will not go back to as bad as they were before?

Now we are -- sorry. [indiscernible], please, if you can mute your mic or [indiscernible] you can control this. You mute his mic. [indiscernible], please mute your mic because it's coming through in the discussion. [Shaoor], you are speaking about this kind of cost and whether we'll be able to manage to mitigate. We have been studying all those kind of mitigation solutions, among which even freezing specific contracts for long-term commitment on volume. We've been also looking into the alternative fuel and trying to source bigger quantities, not even locally from outside if that is feasible. So the company has been quite pursuing all alternative means to not to pass significant huge load to the market and try to absorb whatever it could after trying also to push back and circumvented by ring-fenced these kind of commercial clauses in their contracts. This is what we keep doing, and we'll also try to practice it aggressively by all means. Further, we are working on specific new revenue streams. And if it comes, then we will bring this up and announce it in this Q2 meet with the market around July [Foreign Language]. But that is in a bit of, I would call it, accelerated mood to bring this alternative revenue stream soon [Foreign Language], which is also the motto that the Board and the shareholders would like to bring to the company. Rather than creating only a cement producing or manufacturing company, but to transit to a construction group or construction material company. That's what we are intending. Similar to the group, the group, which is a major controller as Huaxin, they have also started as Huaxin Cement, but now they are redesignated as Huaxin Construction Group. So hopefully, we will try to replicate some of whatever been quite of success stories and learn from the best practices to leverage on a quick time to reach a need and keep the leading in the industries in Oman as one paramount line for Oman Cement brand and name. [ Shaoor ], hopefully, I attend your question, if there's any other?

We have a question here from Mr. [ Muhese. ] And he's raising that competitive pressure from regional dumping -- and can you please provide some insights on the cement and clinker quantities that were coming from UAE and Iran. Similar question is raised here, management regarding the Iran cement and...

Overall, I'll just give you the overall country profile. The range of this annual demand is ranging between 8 million to somewhere around 12 million, 13 million max, if it is a huge peak, very aggressive infrastructure development year. Currently, we see that the total of 8 million to 9 million is the capacity that's demanded in the country. Oman Cement, Raysut Cements integrated, the units can be bridging almost 7 million plus/minus. The remaining could be also service from the other existing grinding station being [indiscernible] being Sohar Cement, which part of Raysut Cement itself in the north as well also Al Arabia here in Rusayl and other [indiscernible] primary station collectively. So if we, in situation of availability of clinker, we may go a little bit lower than the market demanding if the very peak year happens to continue and the circumstances prevail that it will last for long on this tension in the region. On your question, what are the latest plant utilization and realization trends that are observed in the second quarter. We are on the 99% and 98% stages mostly on all parameters. The only part whenever it comes to -- in Q1, there was specific -- each holiday it is going lower. And there is also the time whenever the rain happens and if there's any shutdown. Other than that, we are all in the top range of the 95% and above. Once it comes to your third question, given the recent announcement of the Greater Mascut initiative and the new projects, how do you see the support and price scenarios evolving in North Oman? North Oman, maybe can come if the momentum of the announcement, whatever you see it in the market, it takes a bit of time to be realized on actual demand. And this, we might see it happening maybe in H2 itself if these projects announced bit to be quite specialized from the concept to put on ground. Concept of offtake for cement ready-mix and other construction materials, we have not seen it yet happening. Maybe in the part of Q2, once it comes, we will evaluate and also give you a highlight around that. But we are positive. However, on sufficiency, we can create sufficiency to the local market even with those kind of projects. As also the government has asked us not just only for Greater Mascut but even before this announcement once it comes to the frontier, other projects that the [indiscernible] and so on the confirmation of availability to supply, we stood committed on to that area, and we continue to be. Unless there is a massive, massive, massive greater projects come simultaneously, then we will need to back up on the support also from the north once it comes to Sohar Cement, the Al Arabia or Al Jazira in Madinah and Riyadh. And also for your information also to create such a comfort, we -- from last year, we started selling clinker, which we have not been doing in earlier years, and we keep the inventory here. So inventory buffer, we still have some sizable buffer on ground to continue to manage a month plus period for the local production, but also we sell part of this clinker to the partner, either grinding station or partners under the other groups. So this is some feel on your [indiscernible] question. Once it comes to any update on the modernization initiative that was discussed earlier? You are speaking about debottlenecking and efficiencies, we are continuously studying and are reviewing our current processes. But if you are speaking about the [indiscernible] that we have already concluded last year, and we added around 10% to the capacity with a very small investment of the [ OMR 1 million. ] Are there any further capacity additions on the clinker or grinding? This is a continuous process where we evaluate wherever we could. And we have also that deep access to the competent people experience grow, not just on the process, but also on the quarry and mining. We have brought some recent people on the ground to optimize our mix, optimize our current extraction and as we highlighted for creation of further stream of revenues [Foreign Language]. Any planned shutdown schedule for the next 1 year? If yes, which quarter? This will -- as of now, we cleared in the first quarter a few shutdowns. Do we have anything on -- then we have in the third quarter, one also shutdowns happen. But still with the kind of circumventing shutdown, this is either regularly planned, but we take it in a small, very tight outage period. So if the shutdown comes to be quite of 20 days, we also create incentives with no compromising to the quality and finishing of the jobs, incentives to the team, which we introduced. If they perform and manage to shortcut, they would get incentivized on a monthly basis for that achievement and their payroll. So this is something that we also brought it actively in order to catch up on the period and be available to the market. Hopefully, we have highlighted and address your question, gentleman. Is there any other questions from the audience, please?

[ Rao, ] I think you're still raising your hands. I hope we clarified your question or you have further questions.

No, I have no questions.

Any further questions from the participants in our discussion?

If no, then I leave it to [indiscernible].

Any further questions once again? So in this case, allow me to thank you all for your participants and taking interest in our discussion session. I will here end this discussion session on the company's unaudited financial statements for the 3-month period ended 31st March 2026. Allow me to pass the mic to the Chief Financial Officer of the company to close the meeting.

Dear ladies and gentlemen, thank you for your interest. Audience, we stand to be quite reciprocating the interest that you are passing on to get to learn them about Oman Cement performance and the commitment and projects to come. Please feel free to reach if you need further clarity. We are available to support and. If I am not there, then the contacts are available here for you to reach. Abdullah is also -- he started to take the role on this kind of discussion interactively. We are building the competency, the people availability and the succession planning. With that, we say thank you. Have a great day, great week, great month and quarter, a year and years to come with a peace wish to be all around for all mankind and this tension to be quite stemmed out in no time. Prayer to all. Thank you. Bye-bye.