Rafhan Maize Products Co. Limited ($RMPL)

So [Foreign Language]. Good Morning, and welcome to the corporate briefing session for Rafhan Maize for the year ended December 31, 2025. We would like to thank you for your participation, taking your time out to be here with us today. My name is Mustafa Zuberi. I'm the Chief Legal Officer and Company Secretary for Rafhan Maize. We are joined by Mr. Adil Saeed Khan, who is our Chief Operating Officer and CFO; and Mr. Humair Ijaz, who is our CEO. Today's agenda, we'll start by Tilawat, followed by address by our Chief Executive, Mr. Humair Ijaz. I'll speak a little bit about our capital structure, and then we'll move on to strategic and operational developments and financial statements followed by the Q&A session. So we would request that during the presentation, you hold your questions, you can put them in the chat box. And during the Q&A session, we will address the ones in the chat box and then we'll give you an opportunity to bring up some more questions. So Butt saab, over to you for Tilawat.

[Foreign Language]

Thank you, Butt saab. Moving forward, we have a statement on forward-looking statements, and this is already available on our website and the link is there on the stock exchange as well. So we hope you've gone through it, we will assume it has been read, and with that, we will move forward. A little bit about us, we are a leading ingredient solutions provider. We operate in food, beverages, personal care, pharmaceuticals, textiles and other industries, which produce products for everyday use. Our head office is in Faisalabad. We have 3 manufacturing facilities, 2 in Punjab, 1 in Sindh. We have been listed on stock exchange since 1990. And our core values are care first, be preferred, owner's mindset, innovate boldly and everyone belongs. We try to incorporate these in our everyday decision-making. We have a very strong ethics and compliance program in place for any grievance redressal that may arise in the organization. With that, I'll hand over to Mr. Humair Ijaz and request him to address the phone. Humair, over to you.

Thank you, Mustafa. [Foreign Language] everyone. Thank you so much for showing your interest in Rafhan Maize and joining this briefing session. Despite a challenging year, we achieved a revenue growth of 5%. We stayed focused on controlling nonproductive costs and improving our processes, which has helped us deliver the net income of PKR 6.5 billion. Our profitability was affected by a prior period government charge and the closure of trade with Afghanistan, but we managed to stay resilient. Our industrial business faced rising energy costs and increasing competition. In response, we accelerated our cost optimization efforts, diversified our product portfolio and expanded into new application areas. These actions have helped us retain existing customers and attract new customers. Our food segment, especially confectionery, was impacted by high sugar and energy prices during the year. However, demand in the processed food segments improved, which was driven by strong customer engagement and innovative solutions. Our dextrose business was challenged by cheaper imports from China. Together with other dextrose manufacturers, we have filed a joint application with the National Tariff Commission and we expect a decision by June on this subject. Our exports remained steady for most of the year. However, during the final quarter, it was softer due to trade closure with Afghanistan, which was a key part of our exports and some pricing pressure from regional competition. Operationally, we believe that we run our plants in a very excellent manner. Our teams have worked very hard to optimize our plant performances, improve our efficiencies, manage our energy costs. Looking ahead, we are also going to complete a 200 ton per day grind and 100 ton per day glucose expansion in September this year, [Foreign Language]. This expansion is in line with our long-term growth and will enable us to better serve our customer needs. We always remain committed to the safety and well-being of our workforce, fostering a secure and inclusive environment. Looking forward, we expect the market to remain volatile given the geopolitical uncertainty and competitive pressure. But we are confident in maintaining our leadership by embracing innovation, focusing on cost and efficiency and strengthening our capabilities. 2026 is going to be an exciting year for Rafhan Maize. The employees remain fully committed to delivering sustainable value to our shareholders. We believe that the introduction of a new equity partner will bring new perspective and additional growth opportunities, enabling us to deliver even stronger results in future, [Foreign Language]. Thank you.

Thank you, Humair. Moving forward to the capital structure. So our major shareholder is Ingredion Incorporated, holding about 71% shares, and 29% of the shares are held by minority shareholders. As you may be aware, a share buyout is currently ongoing by Nishat and its associated companies. So that will have some impact on this moving forward, once the purchasing is completed. Our Board consists of 11 directors, out of which we have 3 directors representing Ingredion Incorporated, and we have 2 Executive Directors, which are Humair Ijaz and Mr. Adil Saeed Khan, who are with us on call today. We have 3 Nonexecutive Directors representing the minority share holding from the Mannoo family. And then we have 3 independent directors, who bring a diversity of experience to our Board of Directors. Now I will hand over to Adil for the financial statements. Adil, over to you.

Thank you very much, Mustafa, and thank you, everyone. So financial statements, I'm sure you all have gone through it, and Humair has summarized it very well in his address. However, if you look at net sales, so it was up by 5%. However, when you look at the cost of goods sold, it went up by 8% corresponding. This was predominantly, like Humair mentioned, because of the prior year RLNG charge issue, which every industry had to face. Had that not been there, so our gross margins would have been higher by 120 bps. And resultantly, the net profit would have been up by 90 basis points. Yes, if you look at -- it was overall a great year despite of the challenges, like Humair mentioned, that there was some ongoing issue with Afghanistan, which is one of the primary markets for us and the borders were closed. With the rising fuel costs and everything, we did not pass 100% of the cost to our customers. And so overall, we were able to deliver good earnings per share of PKR 707. If you look that this trend has changed and we have delivered good results in quarter 1, 2026, and we foresee that it's going to be on a growing trend in the coming months as well. Mustafa, if you can move on. So this is the outlook for balance sheet. If you look at the noncurrent assets, they have gone up. It is predominantly because of some capital expenditure that we have done. I'm going to share that in the coming slides with you. Current assets, major change is because of the corn, the corn prices went up. And because of that, the inventory that we store, we have shared that earlier as well that there are 2 seasons in which we have to buy all the corn and store it. So because of the change in the value, the current assets went up. And resultantly, if you look at the current liabilities, they have more or less gone up with the same amount, and it is mainly related to the corn related payables there. So gross margin, EBITDA, net margin, current ratios. Current ratio is still very healthy, more or less the same, 1.8, 1.7. And steady gross margin of 19%. And this is more or less in line with the strategy where we try to keep our margins within 20% to 21%. And yes, the gross margin for 2025 being 19%, had that one-off charge not been there, so it would have been in the same 20%, 21% ratio. Mustafa, if you can move on, please. So cost evolution, if you look, the major costs are allocated in 3 parts, it's selling, distribution, admin and other expenses. A major change if I talk about, it's the inflation impact where the -- and when we say annual merit increases, the salaries and wages increase which happened there, and some of the freight costs that impacted us. No major change in administrative expenses. It's mainly due to the inflationary increase and the annual merit increase. Other expenses, this mainly constitutes WWF, WPPF and some foreign exchange loss that translates on the transactions. So no major delta, it's predominantly in the same. So key revenue metrics from 2022 to 2025, if you look at it, our revenue has grown versus 2024 to PKR 73.4 billion. Profit before tax, yes, it's a bit low. We have explained that the prior year charge from 2015 to date, which were implemented for the RLNG, that predominantly impacted this. Else, the numbers would have been much positive here. Earnings per share for the same reason has gone down. Capital expenditure, if you look at it. So like Humair mentioned that we have invested in 200 tons per day grind expansion, which is expected to come by the end of this year or quarter 4, which is in line with the long-term plans for us because that's going to give -- provide us more capacity for expansion in both domestic and export markets. Next question. So if we talk about business risks and key drivers, so the key business risks that we face as of now is nothing unusual. It's more or less the same which almost every industry is facing. The inflationary pressure, which results in the increase in operating costs. What we are working on is that we are heavily investing, and we have taken a lot of initiatives to preserve energy cost and which is resulting in favorable impacts for us as well. The geopolitical developments in the Middle East, Afghanistan and all that, that is also impacting our sales and the commodity prices, which we all see how the Brent is moving up and down and some disruption in the supply chain markets regarding some important chemicals. Coal is disruptive. Sulfur, there's a shortage. Luckily, we have been able to manage it and -- but these are the kind of key businesses that we see. Upcoming competition, the competition in this wet milling sector is coming. There are new players coming in. We don't take any competition lightly. So we feel this that competition is healthy. It helps us improve as well, but that is something that we constantly need to work on. Key revenue drivers, we are in the process of making various value-added products from corn, which includes starches, sweetness, dextrin, glucose and byproducts and which are used into food, beverages, pharmaceutical, paper, and textile industries. So these are the major key drivers. We don't have any separate operating segments. Next slide, please. If you talk about -- like I said, we don't have any separate business reporting segments. It's a single reporting. Mustafa already mentioned that we have 3 sites. One is in Faisalabad main, one is in Jaranwala and one we have to cater to the south market which is in Mehran, which is Jamshoro. We are the major -- most prominent player in the domestic market. And we have almost around ballpark, I would say 20% of our head product sales is in export market, which is in these major territories, which is Middle East, Africa, Europe and North America. That's it, Mustafa, I believe.

So thank you, Adil. Thank you, Humair. Now for those of you who have been in our past quarter briefing sessions, we try to maximize the time and opportunity to give you for the Q&A session. So with that, I'll just stop sharing my screen, and we can dive right in. And if there are any questions on the chart box, we'll take them first.

So starting off, we have a question from [ Adil ]. He is asking kindly explain the raw material purchase cycle. At which time of the year do you purchase corn? In which products do you face cheaper Chinese imports? How much cheaper are Chinese imports compared to Rafhan? So Humair, would you like to take the first one, kindly explain raw material purchase cycle?

Sure. So Pakistan has 2 corn seasons, as you are aware, one is spring and one is autumn season. Spring is the bigger season, autumn season is generally the shorter season. Our efforts are always to maximize our purchase during the spring season because traditionally, we have seen that the pricing in the spring season comes out to be relatively lower. So we would be buying at least 80% to 85% of our corn in the spring season, which will start now sometime early June. So we should be focusing on that. For 2, 3 months, we spent a lot of effort on gathering that corn and that then kind of stays with us for the year.

So Humair, the next question pertains to cheaper Chinese imports and what kind of competition are we facing there? So in line with the NTC action that you mentioned, if you would like to take this one as well?

So this was -- this is related to dextrose. Dextrose is one of our products. We produce about 20,000 tons of dextrose and we sell in the market. And the Chinese, we have felt that in the last 2, 3 years, the pricing they are putting in the market is basically dumping. And the reason is that China has very big capacities and so they are going out of their country to place the excessive material at lower costs. So this is an issue not just for Rafhan, this is an issue for other dextrose manufacturers also in Pakistan. So we have jointly filed an application with other manufacturers to NTC for antidumping, and the application is progressing, and we are expecting some decision by end June on this subject.

Thank you, Humair. So Adil, next question is for you. How much gross and net margins do you target? With a follow-up question on what is the average price at which you purchased corn last season?

So margin, like I said, if you look historically, our financial statements, we are -- kind of our margins hover between 20% to 21%. And that's -- that also is due to a mix of a lot of products, right? So there would be some products which might have a lower double-digit margin. There might be some products which might have a higher double-digit margin. So the net company level margin that you target is roughly around 20%, 21%. That's what we feel is the right approach. And if you say what's the average cost of corn, average cost of corn varies from season to season, right? So it's very variable. So if I just quote about last season, so the prices for the autumn season went up to PKR 3,600. There was some window where the prices went down to PKR 2,200. So it keeps on varying. So it's fluctuating and -- yes.

Okay. So next question for you, Adil, is how much CapEx will be needed for new capacity expansion. And then there is a follow-up on corn, but if you can address this one, I'll give it to you.

So if I sound correctly, so we would be spending roughly around, I think, $7 million, $8 million for the capacity expansion that we are doing, which we have already spent on.

So in the next question, they're asking about the different channels and sources from which we procure corn and -- yes.

Yes. So there are 4, 5 different channels. So we procure directly from the farmers. We procure from the mandi as well. There are agents where we go and buy it. Then we have a forum as well where we float daily rates to the market and to all -- everybody where they can come directly on our factories, on our godowns and then we buy directly from them. And then we have market agents as well. So it's a mix of 3, 4 channels through which we go and secure the corn.

Next question is from Zayan Babar Khan from, I believe, it's Arif Habib Limited, AHL, okay. Can we expect the Rafhan transaction to be -- when can we expect the Rafhan transaction to be executed? So I'll just take this one. As management, we are required by law to disclose any information that we have in the stock exchange. And so far, indicatively, we do not have any date. So regulatory approvals are there. This is a transaction between 2 independent shareholders. So the visibility for us is also restricted. Once we get to know, we will release the information on the stock exchange. Next question is what is the levy being charged to the company on captive gas.

What is the levy being charged? I don't -- I need to get back. If we can move on to...

After management change, how does the company foresee payouts? What are the company future plans? So...

Sorry, I missed it, please.

After the management change, how does the company foresee payouts?

Payouts for what? I don't get it.

I would assume it's dividend, but that would obviously depend on the performance and the kind of profit we're generating, but we remain positive about -- we remain very positive about the changeover.

It's very, very -- I cannot comment on the future performance, how it goes. But it's all performance...

Next question is from [ Saad Imran ]. With maize production down by 2.4% year-on-year and the cost of which being 65% of your total cost, do you foresee any dip in gross margins with potential increase in corn price?

So we feel -- see, it's a seasonal thing. So 2.4% dip which you're mentioning, that might be for prior year. We are anticipating a bumper crop this year, that it's going to be really helpful. But whenever if it goes -- corn prices if it goes up or down, we pass it on to the consumer, and that's a very fair model that we have for them. So it shouldn't be a challenge, and we don't see that any corn output in Pakistan will be challenging because it's one of the crops where farmers and everybody is really happy because the market goes up, down. Like I mentioned, there are seasons where they make a lot of money. In autumn, prices shot up to PKR 3,600. There are windows where the supply is abundant, it comes down to PKR 2,300, PKR 2,200. So I don't see any challenge.

Yes. Then we have a question from Zayan Babar again. For how long the international expertise remain after change in shareholding? So again, this is not something we can comment on right now. However, do understand that this is an equity reduction, not a complete sale. So Ingredion will still continue its shareholding and the expertise will still be there, and they will still be our partner. Then we have a question from Adil, again. Can we expect 100% dividend payout ratio once Nishat acquires control? That can only be answered after the control is acquired. Not at this point in time. How much price difference is there between local refined corn prices and export prices?

This is also very subjective. See, it's from customer to customer, region to region, by product as well. So in international markets, there might be some markets where there would be a lot of competition, so you have to be competitive, there would be -- so it's not something which you can point out what's the difference. Corn products when we talk about, I would say -- in short, I would say it's competitive. Yes, but there are certain specialty products, which are not used in Pakistan, but there is the potential in export markets where the margins are way much better versus the local markets.

So next question is, will Ingredion charge royalty. Again, this is a transaction between 2 individual shareholders. And once it's concluded, we may have visibility to the dynamics on what they agree. Before then commenting on it would be irresponsible of us as management. Is there any other questions? Because I believe that was the last of it. Or if I have missed your question, you can raise your hand and just let us know. So I don't see anybody raising their hand or any further questions coming in. So if there are no other questions, then we can just call this session to an end. Thank you, everyone, for joining in. We really appreciate you taking the time. If there are any further questions, you can share them with us later on, and we'll try our best to get back to you. Thank you, Adil and Humair, for joining in as well.

Thank you.

Thank you.

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