Raysut Cement Company SAOG (RCCI) Earnings Call Transcript & Summary

[Foreign Language] Welcome to this session, quarterly investor/analyst meeting of Raysut Cement Company, and executive management are here to take this session and we welcome you again. We will open questions later. First, I would like to introduce our CFO to give us some highlights, and then we will open the session. Please, Mr. Raashid.

Thank you very much, Dr. Hilal. Good evening, everyone, and welcome to the H1 investor analyst call. This is your platform. It is a platform which is open where you can ask your questions to management. And by way of introduction, our acting CEO, Dr. Hilal, we've got Haitham al-Tai, who is the Chief Commercial Officer, introducing myself. I'm Raashid Ali, I'm the new CFO over here. We've got Salman Malik as the Financial Controller, and we've got Kashan over there, who is controlling all of you and also takes care of finance at the Salalah plant. I just want to welcome you first and then start with a small introduction about where we are and where we are coming from. As you know, Raysut appointed a new Board of Directors in March of this year, and the management of Raysut together under the leadership of Dr. Hilal has embarked on a path where we can achieve sustainable growth and profitability and stabilize the company. The Board itself is building on initiatives of the previous leadership and wants to move forward essentially on the 5 strategic pillars, which we'll talk about. I'm sure you've read the Chairman statement, which came out in our H1 results, which actually lists out the 5 key pillars that would be leading Raysut, I'd like to put it from volatility to value. That's where we want to go, and instill confidence in the investor community, the analyst community, our shareholders, our stakeholders. Do we have challenges? Yes, we do. Are we confident of overcoming those challenges? The answer is yes. It's a new era. It's a new management. The Board is extremely confident of turning this around with the underpinned actions that they've listed in the Chairman's statement, and we continue with our journey, while we speak and collaborate with our vendors, our customers, reconnecting with everyone and taking Raysut to a more stable and sustainable path over the next quarter as quarter-by-quarter, it's a journey. So with that, I'd like to open the floor to you and take your questions. Please introduce yourselves before you ask a question, raise your hand and we'll let you introduce yourself, ask your question. If the question is not forward-looking, we would give you an answer. If it's forward looking, we are not allowed to share much information. The floor is all yours.

Anybody want to ask question, has any inquiry, he can raise his hand, and we will open the microphone for him.

Any questions, just raise your hand and we'll unmute you, so there's no echos when we are talking. You will have to raise your hand to ask questions. Sandesh, if you have a question, raise your hand. Please go ahead.

So I wanted to understand like what are your business plans going forward. Like I understand it's like you are not allowed to share much information, but still like considering your equity is around OMR 6 million, like what are further plans for that, so it would be good?

So the plans are such that if you read the Chairman statement, it lists out 5 pillars, it's resolution of all legacy issues, organizational restructuring, which will be around -- across the company, restructuring doesn't mean just people. We'll restructure our processes, how efficient we are, bring about operational excellence, enhance our operational performance, particularly strengthen our cash flow management, while the overarching umbrella over there would be corporate governance. In terms of -- I know where your question is going about our erosion of equity, there is a meeting, there's an extraordinary general meeting planned in the near future where the decision will be taken on a capital raise.

Okay. Understood. Also speaking on the production part, like currently, what's the utilization your like for this first half? Or what was the utilization for your plans?

I'll let Dr. Hilal take that question.

Our production for the last 6 months compared to '24 is -- for the group is around 80% utilization. Last year, '24, it was around 65% approximately. So there is improvement in our production and in efficiency of the plants across the group.

Which, actually Sandesh, is also reflective in our revenues, if you see our revenues for the first 6 months versus last year, up by OMR 10 million. That's, yes -- so we are working towards the path to recovery. Are we there? No. Are we confident are we going to get there? The answer is yes.

Okay. Okay. Understood. And also regarding your plans towards your cost like because your cost also have increased for the first half. So on that as well, if you can touch up a bit?

Sorry, which costs? Can you be a bit specific?

Cost of sales.

So I'll answer that. In general, there has been -- there has been a little bit of inflationary pressure on raw materials. One of the other things is because we are so tight on working capital at the moment, our ability to negotiate hard with our suppliers is slightly impaired. We are working towards making sure that we get more favorable terms from our vendors in order to work on our margins. And I'll let Haitham elaborate a little more on the sales strategy, so you get a sense of we are working on both fronts, not just the cost front. We are working on increasing our margins with pricing. And Haitham, go ahead. Yes.

So thank you very much. And as my colleague said, on one side, we have increased the sales, which led to increase the revenues. However, that was by opening new markets. And in some markets, the distance also played a role to enter these markets. And moving forward, we will have a better negotiation tool once we are better financially, which we are in that direction as well, the cost of some raw materials was increased in some areas. However, once we manage, we will start to increase the -- we might start to increase -- to look at our current selling prices to see how to narrow the deficit against the cost of sales.

Okay. Also speaking on the working capital, which you mentioned that it was you have a tight working capital currently. So are you planning -- what -- one thing regarding -- for the debt part, like regarding working capital, are you planning to raise some debt to meet your working capital expenditures already or it's through your normal operations, which you are planning?

So Sandesh, it's a mix of both. We are trying to be far more efficient in how we do business. At the same time, we've opened dialogue with our bankers to stand by us and support us. We've got a robust strategic plan in place. And I'm very confident that our bankers would come and stand by us and ease up certain lines of working capital in order for us both. It's not just -- we need to invest in efficiency, in order to get the benefits of it later. So it's -- we are working on all fronts, and everyone is completely committed to deliver results and value to our shareholders.

And any plans for debt reprofiling? Like any talks with the banks currently going on?

Meaning, yes, I can't disclose much. It's not about reprofiling, it's about easing up working capital. Once we have working capital, we are extending credit and getting credit solves half your problem. At the moment, we are tight, and we are working with our bankers to show them results as you've seen in the financials for the 6 months ended 2025. We are giving a lot of confidence. Sales have grown OMR 10 million, gross profit has doubled and our losses have narrowed down. We are very confident that the next 6 months will take us a lot closer or even better than what we predict it would be.

Okay. Understood. If I may, if I ask more questions, will that be okay?

Please go ahead. But if someone else puts their hand up, I will...

yes, okay.

We will give everyone a chance.

Yes, sure. I was going through the income statement. There is one line item which says gain/losses arising from difference between previous amortized cost and fair value of financial assets reclassified out of amortized cost into fair value. Can you explain me what exactly this is? It has a negative amount of OMR 262,000.

The fair value loss -- unrealized fair value loss on the shares Raysut Cement holding or certain scripts.

It's basically the publicly scripted shares, which we hold in 3 different companies, which are adjusted to fair value at every closing.

Okay. Okay. Understood. Okay. And my last question is, going forward for the next 6 months, how do you see the market, the overall cement market for you?

Yes. We see a very good demand coming forward. Most of the big projects that we start will be little bit around. So basically, not only in Oman, even in the region, we are very much optimistic.

Thank you, Sandesh. Any further questions? We leave the floor -- any other questions? Just raise your hand so we can unmute you and you can ask a question if you have.

[Foreign Language] Because I joined just recently, who is chairing the meeting? I mean Dr. Hilal, or who is it?

Yes. Yes. Mr. Hilal is chairing the meeting. [Foreign Language] [Technical Difficulty]

[Foreign Language]

[Foreign Language] CFO Raashid, Raashid Ali, he is the CFO, he now is appointed. And then with you here, Haitham Al-Tai the lowest CCO is the Commercial Chief. Then we have Mr. Yasir, Head of Legal; and Mr. Salman, Financial Controller and [indiscernible]

[Foreign Language] Sorry. For recent -- Mr. Raashid, recent production capacity is around 3 point-something million tonnes yearly.

As a cement, yes.

And you're using probably below the capacity, which is around 2 million.

Exactly. Okay.

Then just what you call this -- seeing the cost of sales, what you call it the energy cost. Last year, it was, I think, around probably -- with this capacity, I mean, when I compare it with the cement Oman, I was surprised really with the cost was higher than the other company. I mean they are producing, I think, around 3.3 for the year -- 3.3 million tonnes. And their cost was around OMR 2 million for this electricity cost. And meanwhile, Raysut Cement, Raysut factory was producing around 2 million tonnes and the cost was around OMR 70 million. So is there any cost, I mean, attached to this. Even this year for your production, I don't know. I mean, your income is raised to OMR 21 million. And this -- your cost of material, whatever, it has gone from OMR 14 million to OMR 14.3 million to OMR 18.8 million. So in fact, I mean, the electricity cost also has gone around OMR 1 million, to OMR 8.2 million from OMR 7.3 million. So is there any reason -- I mean, because this is affecting you at the end of the day, the profit. Is there any reason that cost, I mean, is higher than the other -- probably other factory they're using -- I mean the same project -- they're doing the same project.

Input here and your inquiry about the cost of energy. Of course, the annual cost of energy is increasing. And this is due to that there is a 3% accumulative increase every year on the gas, as you may be aware about it. And also, we have annual production -- as you increase the production, definitely, you need more energy, more electricity. So in general, it will be -- it will increase if your production go up. But on the other hand, also, the company is working on several projects to reduce and to make the plant more optimum in terms of reducing the energy per tonne of cement. At the end of the day, you need to compare apple-to-apple, we need to find out the cost per tonne. And that is what we are working on it. We have several projects, which we should make them working and available. And for your concern, what I see here for the fuel, gas and electricity consumption, yes, it is -- it goes up. And this is as I remark here that this is due to the increase in the production. We go -- I mean the utilization of the plant goes up by almost 20% to 25% higher than last year. And this, you will need more consumption of all the resources, including the raw material, the electricity, gas and all these items you will need. Also, the high tariff of electricity in the summer, this will impact the consumption of electricity in the period between May to August. In this period, the electricity will be different than the usual tariff in other period of the year. If you compare us with other cement plants, some other cement plants in the country, they are using -- they have their own power plant and generating electricity from the power plant, it will be cheaper than buy it from the grid. The grid will be the price of the -- from the electricity company, which it is fixed and agreed. And from power plant, of course, if you have your own power plant, it will reduce the cost of electricity. And that is the case in some other cement plants in Oman. I hope I could...

Thank you Hilal, I mean that's what I noticed because as I said from other -- your cost last year [Technical Difficulty] The other question is about other -- it is because I have seen the P&L account in Arabic. So there is a cost of [Technical Difficulty] last year, last 6 months compared to 3.337 [Technical Difficulty]

We didn't hear the question.

There's cost. There is from 900 something last year, it's gone to 3.3. What is this exactly?

I couldn't hear. Your voice is breaking. So we can't tell you. We could hear 3.3, but we didn't understand what you're asking.

And the cost -- one of the cost lines, there is -- last year, it was -- it is written in Arabic. I've seen it. The cost of other materials, sale of other materials.

Cost of sales of other material or other goods.

Factory goods you mean?

One is depreciation and the other is staff costs. Those are the numbers which are...

There is one from 900 last year, OMR 900,000. It is increased to OMR 3.337 million.

Can you refer to any page or any comment?

MSX PL, what you call this, let me -- because I put it -- let me take it out from the computer.

You are referring from XBRL version of -- so there are some items are clubbed. So if you see our Raysut Cement website, you can download the IFRS version also from there. So you can have a better understanding of internationally recognized standards.

We'll take another question, and we'll come back to you till then while you're looking for it. Sandesh, you have a question?

Yes. I have 2 questions. One is regarding your export market, like you do export in markets like Yemen, Maldives and Eastern Africa. So can you just touch upon like what are the -- how the business environment is there over there regarding cement? Like what all challenges you face and what's the pricing pressure over there? Just...

Maldives, we have our own company. For the other Africa exports, I'll let Haitham or Dr. Hilal take the question.

Yes. So as normal, when there is a market, there is more than one supplier. We are trying our level best to enter these markets, so whether it's Africa or nearby countries. The challenge that we're facing is that we're having competitors from different areas and who are -- some of them having better advantage edge than us. However, we are continuing to supply, and we are trying our best to open new markets. I'm not sure what is your question exactly.

I just wanted you to throw some color on our export markets. And do you face any challenges there or foresee?

Yes. So we are maintaining our levels in export markets. We are maintaining -- we're trying to dominate to increase our market share in the areas that we are, and we're trying to maximize our sales. And this is our situation right now.

I think, Raysut Cement is pioneering in this aspect in -- it's well known. It needed also in many countries in Africa and in nearby our neighbors. And our quality is very accepted there, markets, they are looking for. But we are trying to balance between local supply and the export.

Okay. Understood. And speaking on the Oman market, like I wanted to understand how -- to what extent is the -- like I can say, the competition coming from imports, like imports from other countries into Oman, like just wanted to understand the competition from there from that aspect as well.

So we are facing the big element on that. There is, for example, the Iranian cement is coming to our country and competing with us. And we felt that this is something need to be addressed. We have our own cost, our own cost of sales, our own regulations, and we think that the government can be more supportive in trying to see how they can -- I will not say stop, but manage the quantities that are coming in without affecting the internal supplier. This is something we are -- I hope that we'll be taking very soon. But the sooner we taking, the better that you will see improvements from our factories, the prices, the sales domain in the market. I mean, there is more than other factors. Some countries, they have other benefits. For example, the cost of labor is very cheap, cost of energy is cheap. And maybe they have other reasons also to [indiscernible] for example, getting dollars on this while we have our own challenges as well. So we have -- once the government accept to become -- to tighten this and to put more regulation on this, I think the situation will be much better. Any other questions, inquiry comments, you are welcome to this session.

We need one more minute?

One more minute and then maybe we close the session.

You can start giving closing note to close the meeting.

Okay. Then in this case, I mean before we end this, we hope that we could cover some and we give some information about how the RCC is going on. And we hope next quarter, we can meet again and have more interaction with you. Hope good for all and the best.

Thank you very much. Really appreciate your platform and your questions, and we will see you soon in the next quarter. Thank you.