Oman Refreshment Company SAOG (ORCI) Earnings Call Transcript & Summary

Good afternoon, and welcome to shareholders' discussion. We'll have a brief presentation by Imran, who is the Group CFO. Imran.

Thank you, Mr. Youssef. Good afternoon, everyone. Welcome to our MSX discussion for 2024 results. And I will briefly talk about our results, key drivers of 2024 and how we look at 2025. A quick introduction about the group. So Oman Refreshment Group, we have Oman Refreshment, which is a company based in Oman for 50 years now. And we are involved in manufacturing and distribution of soft drinks, water, juices, plus we also trade in consumer packaged goods. We have 2 business verticals, commercial franchise and commercial business partners, and we have the rights to distribute the PepsiCo brands beverages here in Oman. Our own juice brand is called Topfruit. Second company, which is based also in Oman, more than now 20 years is we acquired that company in 2018, which is basically involved in the distribution of Lavazza coffee and management of vending machines. Our third leg of the business is based in Algeria. The business was founded more than 25 years ago. The group acquired that business in 2021. And basically, we hold the franchise rights to produce, fill and distribute the PepsiCo range of soft drinks. Before going into 2024 results, we are sharing our strategic priorities where in terms of our vision, we want to grow the shareholders' value by being the leading supplier and as well as in Algeria, where we want to obviously play a bigger role in beverages, juices and consumer packaged goods in both countries as well. We want to bring happiness to our consumers, retailers, employees, shareholders and obviously, globe as well. Our values are very important to us, which is around these 5 quality, integrity, meritocracy, commitment and respect. And in terms of our guiding principles, we strongly believe in doing the right thing. And we obviously act as leaders, role models. And we -- an important part is celebrating and encouraging performance from our employees. Looking at the 2024 financial year at the group level, I think it's important to mention really that the performance was driven by the geopolitical situation, which arose as a result of the Palestine and Gaza situation. And as a result of that, our turnover dropped by 35%, resulting in a drop in the gross profit before tax as well as profit after tax. [Technical Difficulty] We apologize for a technical glitch there. So that is how our -- as I said, left side of the [ progress ] looks like. And also, it has an impact on our profitability ratios from gross margin to profit before tax and profit after tax. As a result of this whole situation, it took a big hit on that one. I think on the other hand, it's important to -- for people to appreciate that despite this impact on our top line and bottom line, if you look at our current ratio, we made sure that the current ratio is by and large, in line with last year. And more importantly, I think I want to point out, if you look at our net gearing ratio, it has actually dropped significantly. It has dropped significantly 2024 versus 2023, which shows management efforts in managing the cash position of the company. And on the right side, as you can see as well, the cash has slightly improved versus 2024 despite a very soft year in terms of our profitability. And as I briefly said, if you look at the drivers behind that, it was driven by, unfortunately, this geopolitical situation in the region driven by the Palestine-Israel war. And that also encouraged imported brands to come to this market, and they were also launched as well. So I think as far as the management actions are concerned, I think it's extremely important to understand that despite all this situation, we made sure that we continue to support our consumers, we continue to support our retailers through different promotions. As an example, we did under the crown promotion on gold coins. We also had strong promotions for our modern trade and for traditional trade consumers as well. We also looked at channel-wise focus where we launched Mountain Dew in a 250 ml can. And management made sure that there are strong productivity actions taken across the company to bring more shareholder value on the table. We balance these things off with CSR where we distributed wheelchairs for people who have disabilities. And we also provided Family Hero electrical certification with 40 children. Looking at our 2025 initiatives, it is based on 5 pillars. We strongly believe in consumers where we want to get back to our consumers to make sure that we provide the right products to our consumers in the right channels to our consumers as well. Productivity is one of the key pillars of our strategic vision that I shared early on as well. So we continue to be mindful of that. We have teams behind that who work day and night to make this happen. We believe in processes and policies. The company is investing behind the right tools, making people equipped as well at the same time. Our people pillar for us is a very important one. We believe people drive your business, and we are always there to support our people through policies, through processes, through our actions on a day-to-day basis as well. We, as a company, are also mindful of our responsibility to this environment and not only Oman, but globally as well. And we do have our ESG policies in place. We have our reports in place to make sure that we deliver on this commitment as well. That is the last slide I have, and I'll ask if there are any questions. At this stage, I will be happy to take any questions.

There's a question from [ Mr. Shaoor ].

Am I audible?

Yes, we can hear you. Please go ahead.

Perfect. As you mentioned that due to the recent geopolitical disturbances, the company turned from a very good profit-making company to an operating loss in your sales by 34%, everything. So yes, we understand, we appreciate that. Now on the future, like in this year and then on the coming years, how do you expect consumer trends to evolve? Do you expect them to remain sticky to the new products and the change -- Do you expect the change to persist? Or do you expect the consumers to revert back to the products that you market?

I mean our strength is basically the brands that we represent. So the brands that we have, I mean, when we compare to other similar products rank among the highest in terms of consumer preference. Now this is on one hand. The other hand is all the initiatives that we do, the marketing initiatives that we do, the sales initiatives that we do and our engagement with our consumers. So I mean, the 5 pillars presented by Imran show the focus of this year and consumer engagement is something that is very important as part of the strategy. All the initiatives in place, okay, will enable consumers to gradually go back to our brands and then our company going back to the preferred position when it comes to consumer purchase in the market. I hope I answered your question.

Yes, yes, sure. 100%. So during this -- in the start of these couple of months, have you seen any improvement in sales or is it the same like it was the previous year?

We see positive, I would say, shift, and we see a positive prospect with the future. So as we speak, we see growth in some categories, and then we're looking positively to the balance of the year.

Okay. But I expect that the company would need more growth in order to turn profitable at an operating level? Or is that already covered with the current growth that -- so for example, if you assume that the current growth that you are saying that you're talking about, if it continues throughout the year, would the company be able to generate a profit on an operating level?

That's our aim. That's what we work for.

Right. Could you give us a guidance on what -- currently, what capacity utilization is Oman Refreshments operating at?

I didn't get your question. Can you repeat it, please, slowly?

Yes. So -- I'm sorry. So I'm asking about the capacity utilization. What is the current capacity utilization that the company is operating at?

That's a quite confidential information. I cannot disclose. However, our groups in Oman or Algeria, we work always on capacities. And when we talk about capacities, that's total company capacities. One of them is manufacturing, but there are other capacities that we look at. And our horizon is always 5 years, okay, to cater for demand and particularly demand from our consumers. Thank you. Any other questions? If no further question, we will be sharing this meeting recording on MSN website. And thank you all for your participation. You take care. Bye-bye.