Oman Oil Marketing Company SAOG (OOMS) Earnings Call Transcript & Summary

Thank you all for joining us today. It's now 10:00 in the morning on the 14th of April. We're here for the Investor Relations engagement session for the year-end results of 2024. Present with me here today is our CEO, Mr. Tarik Al Junaidi; myself, Ms. Musaab Bingaradi, the CFO. We have Jabir Al Wahaibi, the GM of Strategy in International Retail and the GM of B2B, Amer Jaboob. Thank you all for joining. We'll start the presentation. The first slide you'll see here is our standard structure. One thing different this year that you'll notice on the left side, we've added a new joint venture with a partner called TFG, the new entities called TFG OOMCO. We'll get into that in the later slides, but just to give you a reflection of how our structure looks. Again, just briefly, we're 49% on by OQ. We have a joint venture for electric vehicle chargers and alternative energy called EVO, where we're a 50% partner, on the left. On the right, you see an investment, we hold 9.18% into Muscat Gases, and the bottom four are our subsidiaries that we own 100%, which is OOMCO KSA, operating in the Kingdom of Saudi Arabia; Sultanate Energy Company, LLC, operating in Tanzania; OOMCO Marine Fuels, formerly known as DBT, Duqm Bunker Terminal, operating out of Duqm; and Ahlain International LLC, which holds our C-suite -- C-store, sorry, some digital business as well as our Amazon Cafe franchise. Next, you'll see our -- where we operate and play. Our main core business is retail fuels B2C. We also trade in commercial fuels, B2B, aviation fuels, lubricants, which is about 1% of our portfolio. Nonfuel business, which we referred to earlier, which has a big portion of Ahlain International, storage and distribution, Duqm Bunker Terminal, which is now OOMCO Marine Fuels, Alternative Energy and Digital, which also comes from Ahlain International. You'll see our number of stations globally here is 286. We've added 2 stations in Oman to closed the year at 237 in Oman. We've added a total of 8 stations in Saudi Arabia, which we closed the year of 37 stations. Although we had 30 the previous year, I'll explain on the next slide what happened. Why it's not 38. And we have 12 service stations is Tanzania, the same number as the previous year, a total of 286 in 3 different geographies. For our national fuel retail, we've achieved a 7% year-on-year revenue growth compared to the previous year in 2023. This is due to operational excellence, some other market factors as well as we've opened 2 new stations, which you're aware of the previous year, during the year, which are listed below of both names. And in 2024, these 2 stations contributed to the 7% growth. Our international investments on the left is Saudi and the right is Tanzania. On the left, we've added 8 new stations in the year of 2024, which took us to 38, but we did close 1 station which our number is now at 37 as of the end of 2024. Our sales have surged by almost 55% year-over-year, driven by performance optimization and some of the stations maturing that we've acquired previously. And as we've explained in the past, our profitability is impacted for accounting purposes on the bottom line by IFRS 16 due to the treatment of long-term leases, which essentially is front-loading the interest costs and upfront, but in terms of EBITDA performance, the company is growing successfully year-on-year. On the right, you see our Tanzania, again, it's 12 stations. We've also grown about 32%, mainly due to diversification in the B2B sector. Unfortunately, the entity was impacted by currency fluctuations, which everyone in that jurisdiction was impacted by the bottom market unfortunately. We're looking at different avenues to circumvent and reduce that impact. This is a slide on our Ahlain International. Again, just a brief review. Our Ahlain International has a convenience stores, which we refer to as C stores. We have 59 of them, which in this 2024 contributed the entire revenue of all of the stations these stores to our top line, which is a success for us because we'd previously not had it under OOMCO and now it's under entirely in our control. And we've started to reformat some of these stores to contribute further to a better experience for the customers. We also have another revenue stream, which is our Cafe Amazon franchise, which we've now reached a number of 14 stores, successfully growing, well received by the market. Customers are very happy with the products. And you can see with the numbers as well, the positive momentum that the Cafe Amazon is growing. And our last revenue stream are Ahlain International and digital, which is as well growing. We have about 59 digital units across the network, and we anticipate to continue the growth as the market needs continue to expand and customers respond positively to the digital offerings. Next is our marine fuels. Just from a potential metric point of view successfully at the previous year, we've significantly reduced the losses from 1.7% to 230 bps here in 2024, which we anticipate to continue to improve in 2025 through the tie-up with our now partner, TFG. Initially in 2024, we had just understanding and an operational partnership, which converted to a permanent partnership through a joint venture through by the year-end, which we anticipate to positively add to the group's revenue and bottom line 2025 onwards. TFG is operating in Singapore and one of the biggest players in the ongoing market globally. So we feel this is a very successful step forward for our OOMCO Marine Fuel subsidiary, and we shall anticipate this to, one, position us to drive future growth and enhance financial performance. Just a snapshot on our alternative energy initiatives. We have our green mobility through our EVO now. So OOMCO operates our green mobility through our joint venture, EVO. Two really successful announcements we had through EVO was we have a tie-up with Talabat in terms of ebike, and we're launching the first EV truck through the other partner of EVO, which was through Al Sarooj. We also have expanded our network to 133 active EV chargers across the network and 66 locations across Oman. The breakup is 59 DC chargers and 74 AC chargers. So we anticipate this as the market continues to grow, we'll see different brands entering the market. Customers are responding very well to electric vehicles, so would anticipate this to be a positive revenue generated for the group. In terms of green technology, we have 23 VRs unit installed, which are a vapor recovery system across the network, which contributed us to 124 million kilograms of CO2 savings and almost 0.25 million liters to 0.5 million liters of recovery fuel from the system, and we have 12 solar stations installed across our network, which saved us about 60% savings with 1.3 million kilograms of CO2, which is a very, very positive impact for our company. In terms of alternative fuel, we have biodiesel fuel. We've introduced in 2023 successfully, B5 and B20, and the market is responding very well to that. We can anticipate this to continue to contribute to our revenue in terms of diversification. And we also, again, have a very positive indication from the Ministry of Transport that they awarded OOMCO the first H2 producer in Oman. In terms of just the recognition to our team that did a really good job, we were recognized by MSX as the first ESG report that was published in 2024, which was not mandatory, but it was a big accomplishment for OOMCO and our team. I will go through our last slide on the financial performance. You see on the left side our group, although the revenue top line shrunk by 2%, this was off the back of mainly from our aviation, our commercial due to extenuating market circumstances that have very severe competition, which we anticipate to continue onwards, but we're very specific and we cherry-pick our contracts to make sure there are enough honors and profitable. But positively, as I mentioned earlier, our main area of business grew 7%, which is retail, main chunk of where OOMCO operates and plays. Now this translated to a gross profit of only 1% reduction compared to the previous year. And although other income also -- sorry, other income increased by almost 3%. Our investments improved significantly from the previous year as well. So you can see that translates to our bottom line improvement of about 23% compared to the previous year, which we anticipate as well in 2025 to continue excellent performance to continue to improve our bottom line 2025 onwards as well through the guidance and strategy of our Board of Directors and management secretary as well. I'll close the presentation here and open the forum for questions.

Yes, Mr. Rehama.

I'll start with few questions, if I can continue.

Of course, please.

So over the last 2 years, there has been station additions. But however, the fuel revenues have declined year-on-year. So can you provide the outlook on the fuel volume growth in Oman and KSA given the current demand-supply dynamics?

Sorry, can you rephrase? I heard you said the PO decline. please rephrase your question.

The fuel revenues declined, right?

From which perspective?

The top line revenues?

So as I mentioned, in terms of OOMCO Group, actually, our fuel revenues have increased in terms of our retail business by almost 7%, which is quite significant, actually and the previous year as well, we grew about 4%. So you're looking at the overall group production by about 2%, that's because of our B2B sector, which is commercial, marine and aviation. But the actual fuel market in Oman, we as OOMCO, have grown by 7%, top line.

Okay. Can you provide the outlook? What would the outlook be on the fuel volume growth for the current year?

We anticipate it to continue to grow. I cannot give you an exact indication of what that percentage will be, but we're anticipating 2025 to continued growth as well. All market indicators are showing us that the growth is sustainable and will continue. We also have other -- not only our current network, we have growth in terms of number of stations we anticipate to grow and as well as we refer to them as R&R, which will restore and refurbish some sites, which will improve our growth as well. We're constantly reviewing old performing stations, and we enhance them in terms of refurbishing them. So we anticipate this to continue. In terms of KSA, we have our GM over here. I'll leave that answer to him, and he is very bullish and has a positive outlook on KSA.

Thanks, Musaab. In terms of the KSA, as everyone is seeing that the KSA market is booming. As a result, we are expecting the same also to -- in terms of the revenue of the volume -- revenue of the fuel in KSA is increasing. As you saw that in the presentation, almost 55% growth in the fuel volume, which definitely represent the same in terms of the revenue of the fuel. The expectation of the KSA is to continue to grow. We do have aggressive plan to grow on KSA. As a result, we are expecting the revenue to grow as well with the growth of the number of the stations.

Just to add to my colleagues, so a lot of the growth is really determined by the economy as well. So as long as the economy and it looks very fruitful moving forward, that we will grow. But at the same time, we have looked at other alternatives or other kind of future competition such as electrical and hydrogen. That's why we have already taken initiatives to get into these particular markets. So for electric vehicles, we have established a company EVO, which will handle the electrification network of Oman. And then as well as hydrogen, we are working with EVO as well and with the Ministry of Transport to provide more B2B solutions for hydrogen moving forward.

Okay. You mentioned that the KSA sales grew by 55%. So what drove this growth? Was it the new station rollout, price realization or volume?

Both. I think the new stations is adding quite big volume as well as all the stations get mature. So both the maturity of the older stations or the existing stations and the new stations which the team is adding to the network. Also, the team has a few initiatives to increase the sales in some of the stations like the top loading sales in some of the stations, whereby we are the first company, whose get such permit in the KSA and it works fine with us up to now.

Okay. So also one more question with regards to the green mobility projects you just mentioned. So can you explain a bit on the commercial impact and the scale of these initiatives?

So at least for the electrical vehicle, it is still at the very early stages. Right now, my understanding is that there's about 2,500 electric vehicle cars over here, but we are working and talking very closely with the government because government is looking at initiatives, how to increase this rapidly. So as of now, we have not yet started charging people for using our network, but working closely with the government, we will work on in terms of coming up with a tariff or price tariff where we can able to charge. So that's moving forward, we're expecting hopefully fruitful outcomes in this particular. Hydrogen is again another -- it's working very closely with the government and the big companies where it has to be -- it has to make economic sense for everyone involved. We will not get into this, if we are going to -- if we see that it's not adding economic value, but everyone's aligned and all of us feel that it has to work for everyone. So we're hoping by this year, we will find a better understanding in terms of the pricing and moving forward on these particular projects. Any other questions anyone may have? At the minute, if we don't hear anything, we'll then call it a -- we'll close the session. So maybe a minute from now. Well, so we haven't received any other questions. So I wanted to thank you all for attending this, and we look forward to seeing you all in the next engagement. Thank you very much. And on behalf of the team, we wish you all the best. Thank you.