Riyadh Cables Group Company ($4142)

Good afternoon, everyone. Thanks for joining. I'm Amit Mulani from Al Rajhi Capital, and we welcome you all to Riyadh Cables FY '25 Earnings Call. From the management, we have CEO, Mr. Borjan Sehovac; CFO, Mr. Bahaa Eissa; and CSO, Mr. Mouaaz Al-Younes. We'll be having a presentation followed by a Q&A session at the end. [indiscernible] Mr. Mouaaz, over to you.

Good afternoon, ladies and gentlemen, and thank you for attending Riyadh Cable's Financial Year 2025 Earnings Call. Today, we'll provide a quick overview of the company, and then we will talk about the company's performance during year 2025. Next, we will review the financials for the same period. And lastly, we'll provide a reflection on the current regional situations. With that being said, I'll leave it to Borjan, CEO.

Thank you, Mouaaz. Good afternoon, ladies and gentlemen, Ramadan Kareem. I hope you are all well and safe. And welcome to Riyadh Cable's earnings call for the financial year 2025. For your background, just to remind you that Riyadh Cable Group is the largest regional player in the Middle East and Africa. We produce any type of wires and cables used in generations, in transmission like overhead lines, high voltage and extra high-voltage cables; distribution, medium voltage, low-voltage cables and end users low voltage and wires. We also manufacture good quantities of fiber optical cables used in data transmission. We are able to produce any type of cables needed in the market using our center of excellence plants located in Riyadh, without forgetting to mention our plants in UAE, Iraq and the newly added plants in Tashkent, Uzbekistan and in the [indiscernible] which are we operating. Moving to the financial performance highlights. Once again, we are pleased to announce an excellent set of results marked by record high financial KPIs. Achieved revenues are in excess of SAR 10 billion, 18% -- 18.5% growth compared to previous year. Record high sold volume of 271,000 tons, which is an increase of 18.4% compared to the previous year. And we are also keeping an excellent utilization rate at 96%. In fact, also the quarter 4 was quite strong, having sold 67,000 tons approximately, pretty much same as in quarter 3, which, by the way, was the record high volume sold at almost 70,000 tons. Profitability metrics are also continuing to be excellent with gross profit per ton above SAR 6,300 per ton, almost 14% increase versus previous year, an excellent achievement in EBITDA of SAR 1.35 billion, 30% better performance than previous year and an exceptional 33% increase in the net profit, which stands at SAR 1.085 billion. CapEx, we spent during the year is SAR 356 million, as we have always announced last year, the increase of the CapEx because as well due to continuous expansion and acquisition in Uzbekistan. In fact, also with this great level of CapEx, we have been able to create a free cash flow of SAR 630 million despite acquisition, of course, and expansions. And we are still holding a very low net debt-to-equity ratio, which is 0.11 multiple. Moving to the backlog. We are holding 163,000 tons of confirmed orders equivalent to SAR 5.2 billion. And these details we can see as well later in the dedicated slide. Showing the key performance drivers, we can see that sales volume increased backed again by an excellent export. In fact, we are so proud that we are doing good in export and very good as well in transmission, both for non-Saudi and domestic operations. In the next point, we can see solid demand driven revenue increased -- which increased by 18%. Again, domestic market very good with excellent export. And all segments have been performed fairly well. As anticipated in Q4, we have seen a small slowdown of local utility, but this happened as well last year. It's a kind of seasonality. And as always, we were able to fully recover with other channels and other customers and increasing even more our export flows. Gross profit per ton increased by 14% as a result of good mix and cost efficiencies, surely as well affected by high utilization at 96%. Net profit increased by 30% by -- backed basically by stronger operating income and very, very firm control on overall cost. In fact, G&A now it is -- and S&D are pretty much below of our target of 3% of the revenue. Free cash flow, SAR 630 million positive. As promised, the cash generation accelerated in the last quarter, if you remember from the previous earnings call, thanks to good control of working capital and despite the investments, we have increased from quarter 3, which was SAR 240 million free cash flow to SAR 613 million actually of free cash flow. Moving to the Slide 10. Quarter-on-quarter, we can see the revenue increased by 10%, also due to 15% increase in the sold volume. If we compare full year revenue, this increased by 18%, reaching record high SAR 10.6 billion. This is due to increased volume. And in fact, we have also achieved a record sold volume above 270,000 tons. As mentioned, the market remains solid, both domestic and export. All cable segments have been doing very well from the full 2025. We have started also the year with excellent performances. Of course, now we all hope the geopolitical situation will improve in the next days and weeks to come. With regards to the split between copper and aluminum on a full year basis, we can note and see the typical split, which is approximately 60%-40% in favor to copper. Moving to the next slide. We can see the backlog of SAR 5.1 billion and the volume of the backlog equivalent to 163,000 tons. This is pretty much same as the previous quarter. These are all confirmed orders in our system. And of course, let me just remind you that in the normal geopolitical circumstances, this is one of the best indicator of the solidity of the future performance of our group. This strong demand keeps also our utilization rate at a quite high level of 96%, which also brings very good operational efficiencies. Now I hand it to Bahaa for more financial highlights. Thank you.

Thank you, Borjan, and good afternoon, everyone. As Borjan mentioned, gross profits and EBITDA have grown and showed improvements. If we look at quarter 4 figures, gross profit was -- has grown by 11% over the previous quarter to SAR 446 million. But what's most important is the gross profit for the full year has grown by 35% to SAR 1,733 million compared to 2024. This big improvement -- so this big increase has been achieved through the higher volume that we have sold, which reached 271,000 tons compared to 229,000 tons in '24, coupled with product mix, order selection and efficiencies. Same thing here applies for EBITDA, which has grown by 30% to SAR 1,352 million for the full year when compared to 2024. Again, this was driven by higher revenues, product mix and efficient cost control. Looking at the cash flow. Again, excellent cash flow has been generated by the group. Despite the increase in receivable CapEx and inventory, the group's free cash flow for the year 2025 reached SAR 613 million, while operating cash flow was at SAR 970 million. Again, this was driven by strong profits and provisions, reflecting the good working capital management. This healthy cash flow has allowed the group to be able to be consistent in its dividend payments, which we can see where the group has already paid SAR 2 per share in October 2025 pertaining to the first half of 2025. And the Board has just approved another SAR 2.25 for H2 of this year, bringing the total dividends paid to SAR 4.25 per share, which brings the total dividends cash being paid out to SAR 636 million for 2025. Now that's a growth of over 21% over dividends that was paid in 2024, which was SAR 524 million. On the hedging and pricing mechanism, as we have previously stated, our hedging and pricing strategy doesn't neutralize the commodity price fluctuation. Again, this chart that we're looking at shows that profitability per ton of the metal sold. And as seen the profitability figures have shown a growth during the period to SAR 6,323 per ton in 2025. Again, that's a growth of 14% over the previous year. Again, this growth has been achieved through operational efficiencies, product mix, cost efficiencies and pricing strategy. The bottom chart that we're looking at shows that regardless of fluctuations in the metal prices, profitability is not impacted by such movement because it is calculated as an absolute number. If we look at the average copper price for the past 4 years, we can see that such fluctuations did not impact the profitability that we are looking at. As a note, just to show you how the movement in 2025, copper prices have fluctuated between $8,500 and $12,500 this year, that's a swing in price movements of about 40%. And yet if we look at our profitability, even on a quarter-to-quarter basis, it's just continuously growing and steady with no fluctuations. With that, I hand it over now to Mouaaz.

Thank you, Bahaa. So in here, we wanted to provide a perspective on the current regional situation. We would like to let our stakeholders know that management continues to closely monitor the regional developments and their potential implications for the company's operations, logistics and supply chain. While currently, Saudi Arabia remains a stable primary market supported by ongoing investment in power, energy and infrastructure projects, the current regional environment may introduce certain operational challenges. These may include logistical constraints, delays in shipping routes, higher freight and insurance costs and potential disruptions to the timely supply of certain raw materials sourced from the region. Operationally, the company is taking proactive steps to possibly mitigate part of the risks where possible. Shipments are being rerouted to alternative ports sometimes, and the company continues to rely on a diversified supplier base with multiple qualified raw material sources. Strategic inventory levels and regional sourcing of certain critical materials also provide additional flexibility in managing potential disruptions. At present, contracts and deliveries remain broadly on track. We did not receive any cancellations or project delays as of today. Thus, operations across the region continue as planned. However, management recognizes that the continued volatility in the regional environment might or may result in delays to certain projects, adjustment to delivery or schedules or temporary increases in operating and logistical costs. Accordingly, the company remains vigilant and continues to closely monitor developments, as said earlier, while maintaining active coordination with customers and suppliers to manage any potential operational impacts. The company's diversified market presence and the resilient supply chain structure and the strong financial position that we have lived provide a more solid foundation to navigate the current environment. The company will continue to monitor the situation closely and will disclose any material developments or impacts in accordance with the applicable laws, regulations and disclosure requirements to the market. Over to you, Borjan.

Thank you, Mouaaz. Ladies and gentlemen, with the current geopolitical situation, we have decided not to provide any year-end guidance as of today because the current regional situation and continuous work development makes us a little bit uncomfortable to predict the next 10 months. What I can mention is that the beginning of the year was very good from sales and profitability point of view. And what I can also mention that in a normal circumstances with no regional tension, our preliminary year-end guidance would have been, let's say, an increase of minimum 10% over the net profit. So we all hope that this situation will improve as soon as possible. And rest assured that we will always do our best to respond quickly to any challenge. So thank you very much. I believe we can move to the Q&A session.

[Operator Instructions] We have -- the first question is from the line of [ Khalid. ]

I have a couple of questions with regards to the supply chain and the crisis happening currently before I go into the financials and what happened during this quarter. Could you just elaborate more in terms of the -- our current sourcing for raw materials? The copper and aluminum, are we getting it from Saudi? Are we getting it from locally? Or is it from abroad? And what portion of aluminum are we sourcing from Alba?

Thank you very much for the good question. So good part of the critical raw materials comes from the country and from the region. So this is important to highlight. With Alba, we don't have any current supplies. We know about a few slowdowns that may be happening in Alba. But we have as well other very much reputable suppliers in the country in the region. So for time being, aluminum absolutely is available as well as many other materials because you know that between KSA and UAE, there is very good supply of other materials using the cables. Of course, copper is coming normally, as we always mentioned, from China -- sorry, from Africa, I apologize for this. And here, we have, of course, some rerouting on the West Coast ports. So for time being, we are able to manage the deliveries of this critical material. Then this is at least for these days and coming weeks.

Okay. So it's safe to say that our lack of guidance is solely a measure of conservatism rather than any effect we faced in the last 2 weeks or 3 weeks?

Yes. Yes.

I'd like to just shift away to the sort of the financials and this -- the fourth quarter's results. Thankfully, we met guidance, 30% growth on the bottom line. However, I'd like to understand a bit more into what happened exactly in the Q-over-Q results, especially the decline in gross profit. We saw both volumes and gross profit per ton decline, and you mentioned a slowdown in utilities. Could you elaborate a bit more on what exactly happened in that point? And following on to that, full year, we had SAR 465 million in provisions. We noted previously that we will see some reversals in the fourth quarter. We didn't see that -- my rough calculation is around SAR 25 million in provisions in the fourth quarter. Could you just elaborate more into what happened there exactly, especially with the Iraq trade receivables?

Thank you, Khalid, for the question. I will start with the first couple of questions that we have done about the quarter 4 against quarter 3. The quarters are pretty much similar. And we all know that quarter 4 normally is a little bit slower than quarter 3. We have seen this as well in the other years. We have anticipated, if you remember, some possible slowdown on utilities that we have basically fully recovered with other segments and other cable export, increasing the export and our customer base. So if you are referring, let's say, 2,000, 3,000 tons difference between two quarters for us, this is not any significant difference, surely. I always would like to look at year-over-year. But what I said, and I want to repeat that the first months of this year, we have seen a very strong volumes. And this was, for us, let's say, a very good start of the year, let me just tell you. Then of course, we don't know how the things will develop with all the regional situation. But this is just to tell you that the entrance to the new year and it is stronger than the exit of the previous year, okay?

Clear. And just to note on that, was AAK consolidated for the fourth quarter or no?

AAK, we consolidated it only in the 1 month, of December, because the acquisition was in the last days of November. So there is no any AAK effect in our numbers as of basically as of 2025, very, very small amount. And for the provisions, I'll pass it as well to Bahaa.

Yes, the provisions did increase, but this was on -- if you're talking about the receivables ECL, this was primarily related to receivables coming in from Iraq as the outstandings did move from one bucket of [indiscernible] to another bucket, which has resulted in this. We were hoping that the new government would be formed in Iraq during the fourth quarter, but unfortunately, this did not take place. So that has been one of the reasons that these payments has been delayed. I remind you, we still do get a few million dollars every month coming in from Iraq. So there is an inflow coming in. This is mostly related to operational. But on the CapEx, there is -- as you have seen, there is a delay. Historically, we have never had any issues with the Iraq pay. It's always been a case of a delay. And that delay causes the ECL to go up.

Could you just quantify the provisions for the fourth quarter and quantify the receivables currently at stand with Iraq government?

What we have added during the year was SAR 152 million for Iraq -- sorry, for the ECL, okay, which as I said, which covers mostly pertains to the Iraqi receivables. Our total receivables for the whole group was about SAR 2.4 billion.

We'll move to the next participant. And the next in the line is [indiscernible]

Congratulations on a great year. Just one question on the market opportunity. So I mean, this is pre-conflict. If we look at Saudi Electricity's CapEx, so it's sort of almost doubled from what used to be SAR 40 billion to SAR 50 billion run rate per year to close to about SAR 100 billion now -- SAR 90 billion to SAR 100 billion now. And the guidance for FY '26 as well remains strong. So considering the fact that you have such an accelerated spend now and the fact that some projects might be deferred or delayed because of the restructuring that is going on, I mean, do you see what -- I mean, what -- has your perspective on the market opportunity beyond '27 or '28 sort of changed? Or are you still very confident that, that demand trajectory that we have seen sort of remains for the next 5 years?

I will be practical and then I will leave it to Mouaaz. If you look at our order intake, this was a very good question as well a couple of years ago, if you remember. And if you look at order intake and the backlog that we are getting with all the offers and tenders, but the most, of course, important is the secured orders backlog. These are year-over-year increasing in general, and we are increasing drastically our volume and our sales. So we have both components going up. And most of this order backlog is in Saudi and are linked to a very healthy projects like more security of the grids, transmission, solar, solar needs to be transmitted nearby the cities, strategic projects that are still ongoing from King Salman Park, expansion of the airports, many, many projects are still happening. So today, if you see as well quarter-on-quarter and usually end of the year, not there is a budgeting then beginning of the year could be sometimes some delays in the order intake. We did not have any delays. We have basically the same order intake and even better volume as a confirmed backlog. And this backlog is -- some of these projects have 1 year, 1.5 years tenure. So we are already arriving to possibly end of the year and beginning of the next year in the pre-war situation, of course. So our drivers that we have seen are still very strong because interconnections, infrastructure, security of the grids, good transmission, undergrounding all the projects, you have seen as well more and more with the city, the underground overheads are eliminated and the cables are going underground. So all these principles are pre-war situation, very healthy and actually very, very confident. Mouaaz, do you have to add anything?

No, I think, that's it. As far as our view on the next coming years, I mean, before this crisis, we had run a market analysis, our usual yearly practice. And it seemed to us like within the markets that we operate in, the growth rate is going to continue to be similar to what we have forecasted in the past. There's nothing outstanding or different. So we're expecting about 4% to 5% growth in Saudi Arabia side, about 6% to 8% in Iraq and then GCC is about 2% to 3% across the board. No changes here. Though there are some changes in the shifting of priorities and recalibrations on the spending and so on. But overall, the market growth rate is pretty much the same.

The next in line is [ Aakarsh. ]

Two questions from my end, if I may. First one is in terms of the gross profit per ton. So fourth quarter looks like it was the weakest out of all the four quarters in 2025. But like the split between copper and aluminum is broadly the same in 2025. So what exactly changed in the fourth quarter? That's the first one. And second is in terms of your non-KSA revenue. So as of 2024, your non-KSA revenue was 26%, but you do have factories in UAE and other places. So how much of that is actually exports from Saudi, which might be impacted because of what's going on?

Yes. Thank you for your question. With regard to the increase in gross profit by 11% from quarter 3 to quarter 4, this is mainly attributed to the product mix that we sold during the fourth quarter. So this is products with higher margins on them, which have led to the increase in the gross profit increase that you've seen. For the other part of the question?

The other question was how much out of the 60-some percent that we produce here in Saudi Arabia is sold outside? Is that -- was that the question?

Yes, Mouaaz, that's correct.

I would say, single digit, probably in the range of 7% to 10% is exported. So what's actually produced and sold within the Saudi Arabian market and staying in Saudi Arabia is about 50% to 55%, something like that.

Okay. Okay. And on the first one, the question was that in terms of gross profit per ton, not the actual volumes. It seems like gross profit per ton was the weakest in the fourth quarter. So just wanted to know what led to that?

It is due to the product mix. Having some customer a little bit slowdown and they recover, the repeat in the beginning of the year, it is due to the mix. So some months, we have a much stronger, let's say, real estate markets where you have good quantities of copper at surely lower profitability than extra high voltage. Sometimes as well in aluminum, you have different products, transmission over headlines or medium voltage or low voltage or solar or solar low voltage as well. So the effect of a slight decrease of the last quarter gross profit per ton is mainly due to this.

If I can just squeeze in one more as a follow-up. So thank you for giving the guidance that you had pre this situation, which was you said that you were expecting somewhere in the range of 10% Y-o-Y net profit growth. Can you just breakdown of how much would that be attributed to volumes and how much of that would be an increase in gross profit? If you can just give some idea, is it 50-50? Or is it some other ratio?

Good question, very good question. Most of this, it will be increase in volumes. Because I believe, we have now a good level of mix between each product. So keeping, let's say, the same profitability, similar profitability, we -- our increase will have been -- came mostly because of the increase of the volume, means more capacity and as well integration with optical cable.

We'll move to the next participant. [indiscernible]

I just had a couple of questions regarding your hedging mechanism. So would you just elaborate more exactly how do you hedge or, for example, for how long are you hedged, for example, for a quarter or 2 quarters? That's my first question. And my second, you've mentioned that you source copper mainly from Africa, which had some rerouting because of what's happening now. Regarding aluminum, from where exactly do you source it?

I will answer the second question, which is easier. So look, the copper from Africa, yes, before was problems of Yemen and we were routing to Daman. Now the problem is Daman, we are routing to Jeddah. So I mean, of course, things happen, and we just need to act before and will be ready for it. Aluminum instead is, as we always want to be one of the best local content company. Most of the aluminum is coming from local sources. And of course, we have always a provision for the regional sources and other external sources, because we don't want to rely never ever on one single supply. So this was, let's say, the big action that the company has done many, many years ago. We have a good list of possible suppliers, and we have good possible backups as long as, let's say, the goods can reach any port, this will be surely safe, firstly secured by the country, the region and then if needed as well out of the region. And for the hedging, I'll leave it to Bahaa. Thank you.

For the hedging, it's quite simple really. What we do is when we get a confirmed order that is signed, what we do is we go ahead and we buy the control, we lock the pricing in the market for that specific project. So whatever cost it is, and it gets passed on to the client. So what happens is we know how much it's going to cost us and the client knows how much it's going to cost us. And this is done, as I said, for the bulk of our purchases, which are usually against orders. On the retail side of the business, which is about 30% -- roughly constituting 25% to 30%, what we do is we do a hedge whereby we agree on forward rates with anywhere containers from 1 to 3 months. And these get reflected on a monthly basis into our inventory and accordingly, our selling price. But we do not take any positions that are not related or tied up to specific orders.

Okay. Noted. Just one more question regarding the copper shipments that are being rerouted. Are these impacting Q1? So were these in the past month? Or are these shipments mainly related to inventory regarding Q2 or Q3?

Good. As of today, we don't have any disruption today. So no cancellations. The factories are working as normal. All our sites are open. And as of today, we have no impact of any situation. So we all hope that the future will get better. But a good question that I can answer with very much comfort. The first months were quite good. And as of today, all our operations are normal.

Right. So during the past 16 or 17 days of the war, as we mentioned earlier, we didn't encounter any issues. Pretty much everything is streamlined. Yes, there are some things that we have to overcome, some challenges. However, I mean, nothing that's disrupted or major. Now as far as -- we mentioned earlier as well that we maintain some strategic stock of raw material. So that's something that we would be using if needed.

Great. And just there was a previous question. I want to make sure that I got it correctly. So during your exports, so 10% of your production in Saudi is exported or 50%?

10% probably, because out of what's being produced in Saudi Arabia is going to export markets and give and take, it really depends.

Now we will move to the questions that we have in the chat box. The first question is from [indiscernible]. He's asking, could you tell me your segment-wise market share for high, medium and low voltage? And the same question applies for the utilization as well. Like could you also provide the segment-wise utilization for high medium and low-voltage cables?

Our market share is in the range of 38% for -- across the markets, right, or across all segments. Our highest market share is in extra high-voltage cables, where we only have one other manufacturer here in Saudi Arabia who makes these cables. As far as overhead power lines and high-voltage products, it's us and two others. So I mean, I would say we're in the range of 40% market share for these products. For medium, it's about 25% to 30%, for low voltage and building wires, we're talking about 40% range as well, give and take. As far as the other part of the question, the capacity utilization, I mean we are in the 90s range for high -- extra high overhead. As far as the medium voltage, I would say we're in the high 80s. And then for the low voltage and building wire, we're also in the high 80s range.

Okay. And in terms of backlog, which segment presents a backlog like in terms of number?

Right. Transmission products is a little above 65% of the backlog. And then the low voltage and solar products is probably or is about 10% or so. And then distribution products are in the range of 20%.

Okay. Makes sense. We'll move to the next question. It's from [ Chaitanya. ] I'll read it out. You mentioned about the seasonality impact in 4Q. Could you please elaborate more on seasonality in your business as first 3 quarters [indiscernible] did not follow the same trend of seasonality as 2024?

Yes. We don't have, let's say, big fluctuation between the quarters. So let me be clear. Our business doesn't have seasonality. So any big or any significant seasonality. We have holidays, of course, as everyone, and we have projects which can be accelerated, which can be postponed and you put other projects in pipeline. We have different customers. We have different -- which has also different needs in a different period of the year. But quarter-on-quarter, gentlemen, we always reached more or less the same volume. There is no any significant difference. Growing always compared to previous year. I believe almost every quarter has grown significantly in both revenue and the volume. And the fluctuation on the, let's say, absolute value of the gross profit or net profit, it is as very minimal. So we don't have any significant seasonality that I believe it is worth to entertain during this earnings call. Plus/minus SAR 5 million, SAR 10 million out of SAR 280 million, it is not seasonality. It is just mix effect, acceleration of some projects compared to other projects, but it is very much a normal and standard practice. So nothing to really to go into detail.

We have one question regarding the scenario, the current scenario that we have. So you've got for bid and worst-case scenario. If you are unable to deliver to clients, can you apply force majeure? Are your sites covered through insurance or worst situation or not covered?

So we can -- we have seen as well some companies not related to us, don't get me wrong, applying some kind of force majeure. We can, of course, apply force majeure. For the time being, we don't -- as of today, I want to say as of today, we are not drafting any letter, let me say. Second point is that we have as well insurances, which we are discussing in details about including the war in case of something happened. But as of today, this is the situation and what will happen in 2, 3 months from now really is very difficult to predict.

For the insurance, is the war situation is covered or not? I think he's referring to the clause of the insurance.

I mean, this is -- I mean, there are some policies, obviously, that cover it, some that don't. It depends on the location, depends on the site and what we really intend by coverage. It's a very broad question that we wouldn't answer at this point. But I would tell you that we pay premiums for good coverage that we anticipate for the most common disruptions.

Okay. Second question is regarding the raw material. When you import raw material, do you pay the freight charge? This is likely to increase the cost of freight due to the current situation. Can this be passed on the clients or you have to absorb it?

Very good question. So we have estimated already, let's say, weeks ago, what would be the possible impact on the cost. We have already updated all our costings. So we are passing this cost to the customers, to the market. So this is our, let's say, all the strategy not to absorb cost, but to pass immediately any kind of risk to the customers.

Keeping in mind that this is not unique to Riyadh Cables only. So this applies to everybody within the industry, right? And we have the highest local content. We rely a lot on locally procured materials as much as possible. So I mean, we see a lower risk than others, obviously, within the same industry. However, this applies to everybody. So the market is going to react to this. The prices might go up if there are anything and the market should take it if the demand is there.

Okay. The next question is regarding the GP per ton. Going forward, can we expect it to remain stable or decline slightly due to geopolitical tensions?

Referring as well to our backlog and projects that we are executing, which will remain quite stable. This is as a normal condition. So absolutely, we have seen our backlog and orders from the pricing point of view pretty much same level.

The next question is from [ Tanmay. ] Since only 1 month of AAK was consolidated in FY '25, could you help us understand the expected impact in FY '26 in terms of scale and margin profile, whether we should anticipate any notable integration costs?

I don't understand integration cost, but what we are doing is the procurement synergies instead. To answer to first part of your question, we have declared that the revenue of AAK for the next year it will be around SAR 400 million. I believe now looking a little bit in average of our profitability, you can assume what will be then the net profit or gross profit level. But we are not going to disclose details of any of our affiliates, because we are always reporting on a group level.

Right. Keeping in mind that the size of AAK and other affiliates doesn't compare to the size of the group overall volumes and sales. Yes, they contribute, but I mean, we can't -- disclosing these numbers individually doesn't make any sense.

Okay. There are a couple of questions regarding net profit growth and ECL. I think these are answered, so we are not taking that. Moving on to next question. I think this is regarding Syrian operations. Can you provide an update on Syrian operations and opportunity of growth there?

Well, as far as Syria, back in January, we had disclosed to the market that we had completed signing the agreement with the Syrian sovereign fund. We had assumed management of this plant back in February. And we have been upgrading and working on rehabilitating the plant now and slowly shipping some materials to be able to produce slowly and sell the Syrian market directly from that plant. It's still too early to realize any numbers from that facility. I would expect to see some numbers from it probably closer to Q3, Q4, some serious numbers that are of mentioned, Q3, Q4 of this year.

The next question is regarding M&A. Any acquisition strategies are currently considered? If so, is this to support any particular operating segment or any geographical region of diversifying the revenue?

We believe that we have already accelerated a very good M&A opportunities, call it, Uzbekistan or, let's say, more operating JV opportunity in Syria. Of course, we are the largest cable manufacturers in the region and one of the largest worldwide. And we are also -- we always have aspiration to grow. And for the time being, we don't have anything hot on the table, let me say, but our eyes are always open. So absolutely, yes. Today, we want to focus as well, of course, any possible opportunity of M&A, but to focus on integration, what we have acquired, how to get the maximum out of the plants that -- new plants that we are operating, efficiency, process, synergies and step up those plants in order to further grow. And then, of course, any other inorganic opportunity as well, it will be evaluated in the future.

The next question is on the capacity expansion. Are you still increasing your capacity by 6% to 8% per annum?

This is still an ongoing plan, and it's due to expire in 2027. Once we reach that, I'm sure we'll come up with another expansion plan for the next 5 years or so.

We move to take questions online. [indiscernible]

I have just one final question. So with regards to this quarter, we saw commodity prices increase massively. And in terms of the unhedged segment, in theory, it should have grown in profitability significantly to reflect that move in commodities. And we did not see that reflected in the financials. Could you elaborate as to why did the contribution from that segment decrease? Or was it offsetting a grander decline from the utilities decline?

Sorry, [indiscernible], but we don't have any unhedged material. So we hedge...

The retail segment.

Also retail segment, we -- of course, we have the hedging policy and the costing policy, and this is immediately included in the price. So you have no long position, short position running. You hedge -- in the future, when you hedge your basically stock. So everything is fully hedged, can be naturally hedged as well. So we don't see actually the profitability was quite good in all segments, including retail. So any impact on increase of copper or aluminum, absolutely.

Okay. Could you elaborate how do you hedge exactly the retail segment?

Look, you have either natural hedging or short position. So natural hedging is that you know the forecast each month. I know exactly how much I'm going to sell. I have my committed orders that I need to deliver next month. So I'm hedging that material today for the delivery of the next month. So it is called natural hedging. It's very much -- it's easy to predict very much easy, because we have our distributors, we know what is their need. They disclose us the volume needed. So it is a quite straightforward operation.

Let me just add one more thing here to what Borjan has said. And as I've mentioned it earlier, we do not speculate. We do not take positions that are not covered. We're not in this business. Our business is to make -- manufacture cables. And that's what we do. And whenever we have an order, we hedge it. For the retail side, as just mentioned earlier, we anticipate, we know what would be the turnover or the volume, and we hedge that accordingly.

Okay. One final question is from the chat box. Can we expect a negative impact on your Syrian operations due to geopolitical tensions?

Look, due to geopolitical situation, I believe we want to refrain to comment any expectation for the future. Let us -- I mean, otherwise, it will be a bigger speculation or going to normal. Today, actually, Syria is well positioned.

Right. I mean the ports are open there, and then we're shipping material through land freight. So no issues there.

Exactly. So -- but so far, all good.

Perfect. Thank you so much management for your insights and being available on the call. With that, I will hand over to you for any concluding remarks.

Thank you, Anil. Thank you all. As I said, I believe the full year was excellent. The beginning of the year was excellent as well. What will happen in the future, hopefully, will be all good news. I hope that all of you are safe. And I really want to wish to all of you a very good Ramadan Kareem and Eid Kareem. Thank you very much.

Thank you, management. Thank you participants for attending the call. This call is now concluded.