Oman Fisheries Company SAOG (OFCI) Earnings Call Transcript & Summary

Hello, good morning. [Foreign Language] Is there anybody on this platform on this beautiful day -- we are about to start the discussion of Oman Fisheries financial publication issued 3 weeks ago. [indiscernible]. Can you give some confirmation that you are hearing us? Any of the attendees? [ Sameer Mohammed ], can you hear us?

[Foreign Language]

Okay. I would like to welcome you to this open discussion. My name is Dawood Al-Wahaibi. I'm the new General Manager of Oman Fisheries Company SAOG. With me today is my colleagues from the Finance Department, Administration and the Supply Chain of the company. And we'll just try to do this and utilize most of the time for the Q&As. Unless somebody would like to hear the transformation strategy of the company prior to the discussion. The transformation as a decision were made by the Board Directors. A smaller committee from the board directors to think and elaborate a better strategy that would lead good placement or a better placement of Oman Fisheries in the business sector within Oman and elsewhere. So that plan took place from the non-profitable August 2024 all the way to the end. The plan has resulted in full provision of the operation -- model operational values of Oman Fisheries going through all the database of the last 10 operations years and now in the way for rectification. So, we came up with a new operating model for the company. We have tested it on a list of and it looks like it will take the company back into profitability in a year or 2 years from now, depending on the cash flow and answering the cash flow requirements. Yes, the need setup for the operation. It has a list of priority fish to be purchased for the fishermen as well as priority for market with a new calculation data sheets for the sales and for the sourcing. We are currently building a sourcing strategy from the fishermen, from the fish providers within Oman. Completely stopped for the moment the trading or buying property frozen material from the fish because we have suffered. Laboratories have suffered volatile issues from fish sources manufacturers. This strategy was approved by the Board of Directors and it's in effect now. We are in the first month of discussion applying the pixels for various elements within the operation. Starting from the sourcing to the processing, the designing of the processing, alignment of processing and packaging materials, etcetera. All the way to the people and capacity within the practice. There is also a bit of work on the structure of the company. Mainly the head office restructuring. This is going on at the moment and hopefully, it will take another 2, 3 months for competition. But what we are trying to do is dine for the operative cost -- non fish operative cost to the process. Fish and the quantities plan to be purchased on the fisherman side. So, in a nutshell, Oman Fisheries has support from the various repeated management change, and it was very sudden, very quick and there was no time to destroy operation values for the company which has led into a major cash burden. At the moment the company is stabilized, financially speaking and government plan in place. And you can all go ahead with any question. The team is prepared to answer any question. We have the financial, administration, people and culture. We have from the Finance Department and from the Supply Chain. And wish you a good day.

Those who wish for us, please raise your hand so we can get to know you and where you are from, so we keep records for your questions and then the need to convey information at the moment. Yes. Mr. [ Shan ]?

Yes sir. Thank you for the brief regarding the new strategy. Now I want to inquire, I want to deep dive a bit into the new strategy, the new restructuring that has been proposed. If I see at your financials, I can see that the company is not making -- It is barely positive on a gross level, right. 90% of your sales just goes into the cost of raw materials consumed. And then there's very little left for the company to expand. How would this change? So, what are the primary drivers that would take down -- to take down the cost of raw materials consumed or would they increase in your sales? I mean, how will the company get a positive margin on an operating level? Because as of now the company is merely profitable on a gross level. So, this is my question as to what mechanics specifically will change?

Yes. My name is Mohammed Usman. I'm the Financial Manager. Currently we are changing a strategy of the company. What has happened that the company had 2 scales, the source of incomes. One was stage of trading fish and the other was landing. Now something had gone wrong in past, 3 years where the chain of trading it kept increasing. And trading means that we buy the bulk of frozen fish and we sell it without utilizing our facilities. As you are aware, you must be aware that we have 5 landing centers. We have 5 big factories on the coastline of Oman. So, all the cost which is associated with these landing centers, it is not recovered if you don't utilize them. So, we have been in the past wrongly prioritizing the trading activities which we reduced it and not recovering the direct cost of the factories. So that has been one of the measures in the strategy. A very high cost of sale. And when we say cost of sales, it is not only fish consumption or the cost of materials, it is the cost of factories. Also, the depreciation, the staff cost, the other associated cost. So that cost has not been recovered. If you have got time to go through the details in our transformation plan, you could see that the revenue proportion in the trading activity in last year was 62%. And from the landing it was only 38%. So, it means the only utilized facilities to generate the revenue of 38%. So, this is something which has majorly gone wrong and we are fixing it now. As we estimate for 2025, the share of the revenue generated from the lending activity it will be 92% and traded to only 8%, which will mean that we are going to recover the major parts of our direct cost through business related to lending, which is the scale of depreciation which is being processed within our factories.

Alright. It makes sense. So, my next question would be if you are planning to change your revenue mix, and your trading portion is obviously not making any profit, so you are taking it down from over 60% to just 8%, how would that impact your sales? Because obviously, your fixed costs are going to remain fixed, right? As you mentioned, your depreciation, your administrative expenses and selling and distribution expenses they are pretty much fixed. So, if you are changing your sales mix, is it that easy to change your sales mix? Or would your revenue take a hit? And if that happens, if your revenue goes down by 20 to 30%, the company would still not be positive on an operating level because your fixed expenses are fixed, sort of.

Let me take this one. This is a very interesting question. And it's tricky, by the way. It's a very different question. See this is, although we are working with fish, but this is a manufacturing process. So, in another way, if you have a manufacturing machinery and a facility and you don't use it, why from other people, particularly the manufacturing material, you will always be less. When your profits and depreciation is keeping from your revenues, what's happening here is that you are rotating the raw material, which is fish in our case, through our own manufacturing facility where the facility is earning first aid and then going to the market with a more competitive price. In the past, one major goal of it was also to store the fish more than 3 months in the cold storage. And from the calculations made by the transformation committee and the local transformation authority, it looks like there are 3 phases spent per kilogram per day in the cold storage warehousing. This has also led to a huge consumption of money that was available to operate the company. So, all together, now going straight, it's a straight line buying the fish from the fishermen, taking them through the manufacturing, our own manufacturing, and then getting the market for that in less than 2 months. It's all forecasted to get the company's expansion going.

Alright, so if I'm understanding it correctly, what you're saying is that the costs associated with the trading part of the revenue is also going to come down, and that's how you're going to make space for profit?

In a mathematical way, yes. Any other questions?

[Foreign Language]

[Foreign Language] Just for the record, Mr. Jackson was with us in the reach here. And yesterday, we were formally introduced. We had a virtual. He is very supportive to the company. And he wishes you all the best of luck in the transformation. And it's one of the companies that he owns a little bit of shares. So, his interest is in the company and the company's success.

[Foreign Language]

[Foreign Language]

Anything else or could I just inform the attendees of other plans that we have with a number of beneficiaries if you wish to learn more? Okay. I think one of the things that we are working on is the transformation and placing the company in where it deserves, as the oldest company and the most recognized local brand in the world, which is the Parsi. Parsi is always trending on social media, whatever the case is. We have decided to convert the [ Rana ] manufacturing, or the Rana processing unit, into RTE. That's ready-to-meet products, where the equipment is 80% already installed and we will start some of the manufacturing processes at the company in half a day, where the people, the specialists, are arriving. They are already appointed. The day of finishing is already selected and there will be no time until we hit the market for the first pilot for testing and screening of the taste in the American market. Our first products will be the local products, and we are in the start-up. The production line is capable of producing 4,000 kg of products per day, and our product for the first year, when we are sampling, is less than 30% of this produced by utilizing low-priced local fish and increasing the value of that fish in this manufacturing process. So, that's part of the new placement for the new market that we are heading to. If you guys have no other questions, then thank you very much for attending, unless there is a relevant question. Sameer or [indiscernible].

All right. From our side, thank you very much for making the time and attending the session and wish you all the best. Have a good holiday for the Eid, and from our side, we are done as long as there are no further questions.