Riyadh Cables Group Company ($4142)

Good afternoon, ladies and gentlemen. This is [indiscernible] from EFG Hermes Research speaking, and I'd like to welcome you all to the Riyadh Cable Group's First Quarter of 2026 Results Conference Call. With us on the line today, we have Mr. Borjan Sehovac, the CEO; Mr. Bahaa Eissa, the CFO; and Mr. Mouaaz Al-Younes, CFO. Without further delay, I'd like to hand over the call to Mouaaz. Please go ahead.

Thank you, EFG team. Ladies and gentlemen, thank you for attending Riyadh Cables' Q1 '26 earnings call. Today, as usual, we will provide a quick overview of the company. Then we will talk about the company's performance during first quarter. Next, we will review the financials for the same period. Afterwards, we will provide a reflection on the current regional situation. And lastly, we will discuss the management's outlook and the way forward. I'll leave it now to Mr. Borjan, CEO.

Good afternoon, ladies and gentlemen, and welcome to Riyadh Cables' earnings call for the first quarter 2026. For your ground, just to remind you all that Riyadh Cables Group is the largest regional player in wires and cable industries since more than 40 years. We manufacture and supply all type of cables used in generation, transmission, like overhead lines, high-voltage and extra high-voltage cables, distribution, which includes medium voltage and low-voltage cables, and then users like low-voltage and wires. We manufacture also fiber optical cable, which is used in data transmission. Our plants in Sharjah are sorry, we produce most of the cables in our center of excellence cetera without forgetting -- of course, our plant in UAE, Sharjah, Bagdahd in Iraq and newly added plants in Tashkeuzbekistan and in the [indiscernible] area. Moving to the performance -- financial performance highlights. Despite the current operating environment and ongoing regional certainty Riyadh Cables Group once again delivered a very solid operational and financial performance during the first quarter 2026. Revenue reached almost SAR 2.8 billion, a record level of revenues in 1 quarter, which represents an increase of 11% compared to quarter 1, 2025 and supported by strong marketing and very heady execution levels across all our core segments. Sales volumes reached 68,000 tons increased by 4% year-on-year, while also utilization remained at quite a strong level of 94%, again reflecting stable operational performance. Profitability metrics also remained healthy during this quarter. Gross profit per tonne remained above SAR 6,300 per ton, continuing at one of the strongest level achieved by our group. This performance reflects a disciplined pricing strategy despite ongoing cost pressure and regional volatility. We have achieved an excellent EBITDA of SAR 353 million, one of the highest ever achieved, almost 14% increase versus previous year, while also the net profit increased by 10% to SAR 282 million. Free cash flow is at a negative SAR [ 19 ] million, mainly due to higher inventory levels and working capital because of our own positioning during this quarter as we have increased strategic inventory to strengthen operational continuity and supply chain flexibility under, of course, the current regional environment. At the same time, the balance sheet remains very healthy with the net debt to equity maintained and only multiple of 0%, 11%. Moving to the backlog, we are holding 143 kilotons of confirmed orders equivalent to an excellent level of SAR 5.5 billion, an increase above 10% compared to December 2025. I showing key performance drivers, we can see that the sales volume increased 4%, which we consider a solid performance given both the current geopolitical environment. And this was seasonal impact of Ramadan and Eid during quarter 1. In the next quarter, we can see solid demand driven revenue, which increased by 11%. In fact, the performance, as I mentioned before, our full business sector was quite good. No any major impact due to regional work within this first quarter. Gross profit per ton remained at a very healthy level, in line with the quarter 1, 2025 and slightly above quarter 4, '25 level. Our pricing strategy once again was the key success. This is a very important point because we kept the profitability considering the cross -- considering the cost increase across the region. Net profit increased by 10%, slightly ahead even our internal expectations for the quarter. It has been quite a challenging quarter. But once again, the company, thanks to our great committed people, we were able to deliver very solid set of results. As mentioned, SAR 19 million of free cash flow negative. Surely, this will improve in the next quarters. But at the same time, we are prioritizing the safety stock of material in order to guarantee the continuity of our operations. Moving to Slide 10. Quarter 1 and quarter 4 2025, you can see both revenue and volume at the same level, while compared to the previous year, these are increasing, respectively, by 11% and 4%. As mentioned, the market remains quite solid both domestic and export. We did not face any significant delays or cancellation. On the contrary, we have been -- we have even seen some acceleration in the market from a few customers. And during this period of regional war, in many cases, has been witnessed how the energy system is vulnerable in the region. So we could be expecting as well in the next period, good investment for energy security, energy reliability and more interconnected grids. The spec between [indiscernible] remains balanced. We can see that aluminum share increased a bit compared to quarter 4 due to project phasing and mix, but everything is in the north. Moving to the backlog slide, you can see an excellent level of SAR 5.5 billion, which is an increase of 7% versus the quarter 1 '25 and 11% versus the quarter 4 '25. So despite geopolitics, despite cost increases in the region, we have increased our backlog by SAR 600 million from end of December. So I just want to remind you that these are all confirmed orders in our SAP system and the normal geopolitical circumstances, this is one of the best indicator of the business solidity for the future performances. The strong demand keeps as well our utilization at quite good levels of 24%. And these levels also bring very good operational efficiencies. Now I hand it to Bahaa for more financial highlights. Thank you.

Thank you, Borjan. Good afternoon, everybody. Looking at our gross profits and EBITDA, we have [indiscernible] in healthy improvements. Quarter 1 2026 gross profits increased by 3% over the last quarter of SAR 25 million to SAR 431 million. Over similar levels of sales. Again, this was achieved in spite of the conflict of the region and the uncertainty created by war. EBITDA has grown by 14% over the same period this year. It was driven mainly by higher revenues and to a lesser extent by less [indiscernible] sale provisions for the same period compared to 2025. And when we compare EBITDA quarter 4, 2025, there was an increase or a slight growth of 2% in spite that we had similar revenues. Looking at the cash flow, the group achieved operating cash flow of SAR 62 million, free cash flow was slightly negative at SAR 19 million compared to SAR 55 million in 2025. Mostly, as mentioned earlier by Borjan, this was a result of higher working capital requirements in the form of [indiscernible] of inventory, which were prompted by the recent differential in the region and higher receivables arising from higher sales in the quarter, which were up by 11% compared to the first quarter of 2025. This was offset by the higher levels of trade payables from suppliers and suppliers credits and profits. Going forward, management continues to be focused on optimizing cash conversion cycle through controlling receivable levels where we have already seen improvements in the beginning of quarter 2 of this year. As for inventory, our goal is to ensure that we have adequate levels adequate levels during this volatile period, all of which will improve our cash flow. The group continues its policy of paying out dividends, which were declared in 2025 for a total amount of SAR 636 million. Looking at our profitability per ton. Gross profit per ton was pretty much in line with quarter 1 2025, which was around SAR 6,328. Again, we said in spite of the uncertainty and the events in the region. And compared with full year of 2025, again, it was in line which was SAR 6,330. This was achieved through product mix, sales selection process among other vantage. We continue to achieve steady consistent profitability per ton in spite of volatility and metal prices fluctuations, which we saw an increase of 17% in quarter 1, 2026 compared to the full year of 2024. With that, I complete my segment, and I'll turn it over to Mouaaz.

Thank you, Bahaa. As mentioned by Borjan earlier, during Q1 '26, the company continued to demonstrate resilient operational performance despite the ongoing geopolitical volatility and supply chain challenges affecting several markets across the region. Total sales volumes increased by approximately 4% compared to the corresponding period of last year, supported by continued demand across the company's core markets. The Saudi market, which continues to represent the company's primary market, recorded healthy overall demand during the quarter, supported by ongoing investments in power, renewable energy, infrastructure, industrial development and broader economical activity within the Kingdom. While certain sales channels experienced normal fluctuations in execution timing, overall domestic demand remained healthy and continued to support volume growth and operational stability. Utility-related volumes remained broadly stable compared to the corresponding period of last year, reflecting the continuity of infrastructure and power sector demand within the Kingdom. From a regional standpoint, Export markets continue to operate under a more challenging environment due to the ongoing geopolitical developments. In addition to logistical constraints, shipping route disruptions, higher freight and insurance costs and project execution timing differences across certain regional markets. Nevertheless, the company maintained stable export activities overall supported by its diversified customer base and regional presence. Management continues to proactively implement mitigation measures amid or aimed at maintaining operational continuity and minimizing the impact of external disruptions. These measures include supplier diversification, strategic inventory planning, alternative logistics routing where feasible and close coordination with customers and suppliers across the company's operating markets. To date, the company has not experienced any material cancellations to its existing contracts or projects. However, management continues to closely monitor regional developments and recognizes that continued volatility may affect project time lines, procurement lead times logistics efficiency and operating costs going forward. The company believes its diversified market presence, strong customer relationships, operational flexibility and healthy financial position will continue to provide a solid foundation to navigate the current environment while maintaining focus on long-term growth opportunities across its core and regional markets. Over to you, Borjan.

Thank you, Mouaaz. So 2026 outlook. With this last slide, we are providing our year-end guidance, increasing approximately up to 10% the net profit of previous year. which will take us to the level of almost SAR 1.2 billion for 2026 net profit. To avoid [indiscernible] this is assuming no material escalation or supply chain disruption beyond the current market condition. Our position on the guidance is that at this moment, let's say, quite realistic, probably slightly conservative. Q1 was quite good. Q2 started well as well. But in order to outperform this guidance, excellent performance is needed in the next quarter 3 and quarter 4, which is very supported by the forecasted backlog, but let me say that it is surely not supported by the regional uncertainties. In other words, difficult today to predict at this moment, the second half. We also confirmed the CapEx to be in the range of approximately SAR 250 million and considering further investment in capacity and in more efficient machineries and efficiencies overall. In conclusion, ladies and gentlemen, we hold a very solid backlog with a very good mix in pricing. Moreover, in the Kingdom in the region, the macro trends are still very strong. We don't see any slowdown or any changing of the macro trends. The growth, we are doing very good growth as well in export in additional geographical expansions that you have mentioned in the beginning, which surely will help us to have a solid 2026 results. Excluding, once again, any impact from geopolitical situation. This is the end of our presentation. I believe we can now start the Q&A session. Thank you.

[Operator Instructions] So let's take our first question from [ Khalid Alauddin ].

I have 2 quick questions. So firstly, this is the second consecutive quarter with a decline in the utilization. So could you just clarify what's exactly happening in the utilization, especially given that we have in case of our backlog significantly to this quarter? And my next question is regarding the CS situation. So you noted that you've increased your backlog, your bottom line year-over-year by 10%. However, if we take a normalized level with the ECL charges, there is barely any increase in the bottom line. Could you clarify what's exactly happening in the ECL situation? And what's up into the utilization this quarter?

Thank you, Khalid. I will answer the first question, and Bahaa will answer the second one about the ECL. We always mentioned highly that utilization above 90% is a great achievement because utilization depends as well on not only on metal weight but as well on the lengths of the high-voltage cables or extra voltage cables or overhead lines, which are different from a material point of view. But in general, we summarized the utilization in 1 number. But within this number, there are many other effects of the mix. of the volume produced, which depends as well on high voltage extra-high voltage or building wires or low-voltage cables. But let me just summarize in conclusion that 94%, 95%, 96%, it is not any -- giving any impact on our profitability or volume increase or volume decrease because behind it, there is a very important mix effect, and this is very important that we are highlighting since few quarters now because also in the backlog, we are seeing more and more increased transmission mix, which maybe from tons point of view, even maybe less effect. But from the profit point of view, it is much better effect compared to the standard, let's say, low voltage wires. So just to conclude, 94%, 95%, 96%. These are more or less all the same level of the numbers that will be surely foreseeing as well to increase in the future. And let's not forget that year-over-year, we are increasing our capacity that we summarize, let's say, up to 10% of increase. So even if the saturation is not at 100%, but a similar level and average of 25 -- 95%, with an increased capacity, the volumes are increasing. So you can see that quarter-over-quarter or general year-over-year, let's take it or half-after-half our sold volume is significantly increasing, given as well additional capacity that we have invested in. For the ECL, I leave it to Bahaa. Thank you.

Thank you, Khalid...

Just before we go in to ECL, could you just clarify one thing? So we raise the capacity by 10%. However, gross profit was mainly flat that increased only about 9%. Could you just elaborate what exactly happened there? It seems that the volumes haven't experienced the same interest as the capacities. Was there any delay in delivering [indiscernible]?

Capacity increase of 10% doesn't give you that our gross profit per ton will be increasing 10%. It just says that we are increasing the sold volume. And in absolute value, our net profit is increasing even at a higher rate than additional capacity that we are installing. The gross profit per ton is just to explain, I say, the mix of the cable that we are providing, which is at a very healthy level, one of the highest levels means that the pricing is good and the mix that we are having in our backlog and investment in efficiencies that we have done as well is giving us a very big -- very much, let's say, and solid financial performance. I hope my explanation is clear.

We'll take our next question from Nooruddin.

[indiscernible]...

We just need to give -- to provide the second part to the question about the ECLs.

Yes. The increase in the impairment here for the ECL is not really a reflection of deterioration in the quality of the receivable. But it's really not of the fact that of this situation in the region. And that has contributed to the factors that go into the calculation of the ECL. So there were higher ratings that were given, which resulted in the fact that we're seeing an additional requirement for an additional ECL. But again, the quality of the receivable maintains to be agile quality as it was in the past.

Noor, please go ahead and ask your question after you unmute.

Can you hear me?

Yes.

Yes. Congrats on the strong set of results. Just a couple of questions for me. My first one is on the volumes. So can you give us some color on the drivers for the volume growth for Q1, and should we expect this volume growth to be sustained during the rest of the year? My second question on the balance sheet. So we've seen strong outflows from receivables? Are you seeing some delays in collections in Saudi? Should we expect it to revert Q2? Or that's more or less to be sustained during the rest of the thing.

Thank you. Thank you very much, Noor. So on the volumes I mean, very good and healthy level, slight increase in average of the previous year. All the segments sectors performed quite well. So this is important to highlight. We have as well increased our export a few percentage of export increase, which is very healthy. This was our strategy as well to diversify let's say, the single country or single market or dominant market. But overall, if I have to tell you between renewable projects, transmissions, underground high and extra high-voltage cables and export in general, all these performed quite well. And how do we see it in the future? Let's say, normal circumstances, that would be very positive because the excellent backlog of outstanding orders, which are commitment with our customers. It is an excellent let's say, guidance for the, let's say, our future solidity of the performance. So we are seeing that much very, very good mix of the backlog, very good mix in towards transmission and, let's say, overhead lines and the high and extra high-voltage cables. So this is very healthy for the future. And we are seeing that this backlog will be realized in the next, let's say, within 12 to 14 months in January. For the second part of the question, I'll leave it to Bahaa.

Thank you, Borjan. No, the increase in receivables is not really a reflection of the fact that it's not equal to the increase in sales. But I mean again, the market dictates certain actions, and you have to go with the flow of the markets and with the overall condition of the advances we're going through. But again, as I mentioned earlier, we are seeing a reduction or an improvement in the receivable leverage as we go into quarter 2, and we expect this to continue onward to bring it back to the levels that we are seeing with this [indiscernible]. If help that covers your questions.

That's very clear.

We'll take our next question from [indiscernible]

Quick question for me. I have 2 questions. One is just a follow-up on the utilization rate that I mentioned just now. with the additional capacity in mind for this year, what seems to be an estimated utilization rate for the whole year? That's my first question. And second, how is the business momentum in particular month, particularly for March, April and maybe May to date, just to gauge on the momentum of the business. Just 2 questions for me.

Thank you. Utilization levels. I mean we expect it to be in line with previous years. I mean between definitely above 90%, and then it's going to fluctuate between 94%, 96% depending on what comes at us towards the end of the year. But as we see it now and based on the backlog, it seems like it's going to oscillate around 94%, 95%. As far as the other part of the question -- that's another part of the question. Can you repeat the other part of the question, please?

Yes. Just to give you on the momentum of the business, in particular on particularly on the month of March, April and May, whether there's any like fluctuations or if there is any like we can in the recovery or this kind of things just to get the business momentum?

Right. I can tell you generally speaking, that we have seen good numbers in April relative to March. Keeping in mind that in March, we had Ramadan and the Eid holiday, which typically has some seasonality effect to it. But in general, it seems like the order intake is high and the deliveries rate is high in line with what we had planned for and what we expected. So as mentioned earlier on the call, I mean, we don't see any major cancellations, any major disruptions. Obviously, there are challenges that we have to overcome, but it's being medicated in the market.

We have a question that came in to the Q&A box, and it says, have you secured the raw material requirements for the rest of 2026, production needs.

So this is a good question. 85% of our materials are copper and aluminum and that it will be quite painful to secure it all in our warehouses for the rest of the year. But contractually, and from deliveries point of view, most of the material has been secured, and we are as well holding some kind of a safety stock. So in case of we have any delays with the safety stock, we are able to catch up. Most of our metals materials are coming either from the local like aluminum or the region and as well from Africa that we have declared most of the copper is coming from Africa and [indiscernible] Board is quite operative and we are managing it without any major issues. So for time being, I believe that quite hectic 3, 4 months, where -- is behind us, and we have managed with no any significant or minimum impact. So we hope as well that this will be the case for the future holding as well, the CFT stock, as we mentioned, thus as well the negative free cash flow as a consequence of it.

Perfect. We have another question in the Q&A box that says, how much are you selling to the government in percentage? Has there been any impact on collections.

I mean, we -- our exposure to direct sales to the government is minimal. However, I mean, if you mean by government sales, anything that's related to semi government companies or utilities, typically, utilities is around 25% to 30% of our business. Keeping in mind that most of the work that we do with the utilities is through contractors. The other part of the question is there and the impact on collection. I mean, nothing abnormal. We have the usual delays of a specific project. for permits, sites, things like this. But I mean, we haven't seen anything that's abnormal or alarming from that sector specifically.

Okay. So far, we don't have any more questions. However, we'll give it a few minutes. [Operator Instructions] We have a question coming in from [indiscernible].

I just had one question regarding the insurance and the freight costs. So since the start of the regional tensions, so they impacted just in March only. Are you expecting a further impact EBIT on your gross margin or your EBIT margin? If yes, would you quantify it?

So a very good question. And One of the strengths of our company since its inception is the pricing strategy. We are very conservative when we speak about the pricing. Pricing means that since beginning of this geopolitical situation. We were very much proactive to increase our cost income, even in a conservative way. because we were expecting always an increase week-after-week, which in the end, happened a little bit delayed than what we forecasted, but it happened. So even if we have, let's say, seen increases in logistics, in some material in insurance of the freight, et cetera, this has already fully covered in our costing in a conservative way. Now, it is not only the issuance of the freight or the freight by itself, but also other materials, which are increasing. So -- and this, I repeat again on a daily basis. We are monitoring it. We have an excellent ERP system, which allows us immediately to increase and to cascade to all our people, salespeople, increased costing. So any risk or any potential increase, we always accounting in our costing. Thus, we as well transmitted to our customers to the market with relevant pricing, keeping always the profitability as much as possible at the same level.

Great. Would I just follow up on that, just to trying to understand more, as the escalations on the pricing or and the cost, does it happen immediately or like a lag of a couple of months on the client side that seem that is reflected on the top line.

Usually, we try to reflect even in advance, expecting that we will be facing these increases in the near future. So this is the first part of the answer. Second part is that what we have with our, let's say, suppliers, we try to defend it because we have contracts with them and they need as well to absorb part of the cost. And for every new tenders or offers that we are issuing, most of the -- not most, all of the cost and in a conservative way has been as well increase in our system, so fully covered for the near term. On the longer term, of course, nobody can foresee, but having it in our costing system, a conservative approach, always gives us that period of time to readjust and to have the minimum impact or no impact on our profitability.

Good luck.

Our next question comes from [indiscernible]

I have a couple of questions. The first is in terms of your aluminum, where do you source it from? That's the first question. And the second is in terms of your backlog, could you give us some color in terms of the mix of your backlog compared to last year in terms of high-voltage, extra high voltage and low voltage? And the third, in terms of your gross profit -- if we look at it from your year-on-year basis, I mean, it's flat at the moment. And what could it given the mix of your products and your backlog, do you think you've reached, is there any more -- can you improve that to gross profit per ton even further?

All right. So for the first part of the question, where do we buy aluminum from? It's typically sourced locally from [indiscernible] for the most part...

And regionally as well on the neighboring country.

For the most part, it's local and then if we have any shortages from the local sources, then we source it regionally. So the other part...

So the other -- and to finalize here since years and our strategy, we have multiple suppliers. So for every kind of material matters, aluminum, copper, lead or any other materials. So we have qualified with our customers multiple suppliers in order not to suffer or to limit any, let's say, potential supply chain issues. So for the second part of your question is gross profit per ton. Gross profit per ton, which is -- you mentioned, is flat. But for us, it's excellent flat. The level that we are keeping and we are achieving in this period of time, if you want, as well to highlight is excellent. So gross profit per ton at this level is something that we will try to keep, of course, with some efficiencies and the good mix that we are forecasting, especially in the second part of the year, it could be as well some kind of improvement. We will do our best to achieve it. But our strategy as well is to increase the capacity surely to increase the capacity that -- with our investment and with out0 acquisitions. Now Uzbekistan acquisition still does not have -- has a great opportunity for the next year to increase the mix towards high-voltage cables and extra high-voltage overhead lines. But the mix as of today, it is on the lower end. So we have as well this kind of effect of the countries because some countries could have a lower gross profit per ton, okay, it's not relevant, but we are still keeping the full group gross profit per ton is excellent level. How is our backlog mix is even healthier than previous year. So we have increased, as we mentioned, around SAR 500 million in -- from the December to today, our backlog. And it is pretty much above 60% of this backlog is high and extra high end and lower headlines. So high end, let's say, of our product mix that we are supplying. So surely, we have a good pricing, good mix for the backlog to be realized within the next, I'd say, from 4 to 12, 14 months.

We'll take our next question from [ Saud Bin Battual ].

Thank you, management, for today's presentation. I have 3 questions. My first question is regarding the slowdown in the utility sector. You mentioned in the previous quarter that you witnessed a slight slowdown in the utility sector. So can you shed some light or update us on the smelter?

Yes. Last quarter, we mentioned, let's say, a slowdown on some of the utility sector, not all, of course. Utilities has, let's say, couple of categories, transmission category, which is excellent. And then distribution category, which is with the frame agreements. Now the frame agreements are finishing. So we are expecting new frame agreements to come in the next months. But overall, what we really want to -- the message is that we are passing is that even if the utility sector reduced in some quarter we were always able to divert any free capacity to other customers with similar as well prices and profitability in order to close any gap that we may have plus our strategy is not to have a dominant customer. So we are -- I believe that in these years, we have shown very much a resilient position even if the utilities goes up and down because this happens in -- especially in the KSA that utilities expenditure goes up and down in cables at least because maybe some quarters they buy other products. Some other quarters, they buy more cable or less cables. And this is -- our strategy was always to find other ways to close any gap and to be always saturating our lines despite local or nonlocal utilities.

Okay, clear. And my second question is regarding the current geopolitical situation. So how is the current situation affecting the company's operation in terms of order delivery and also the company's profitability in terms of costs?

Good question, excellent question. So in terms of general costs, S&D G&A, this is still below our 3% of our revenue. okay? So very well under control. And you can see it as well as the net profit, let's say, as well as a percentage of the net profit or EBITDA percentage that we are delivering, I believe, very healthy margins. and in absolute value as well, would increase compared to previous periods. We have been able not to slow down, not even in 1 day, our operations because we really prepared ourselves in advance with the safety stock. We worked all our factories that did not stop in a new way and basically, which is one of the most affected and very good -- actually, we have very good production, Saudi as well. So overall, we performed well. Our turnkey business as well, if you want -- we have, let's say, a few projects in both the UAE, Abu Dhabi, Dubai and in KSA, continued working with the full support of our customers. And moreover, we had a few important customers who had some acceleration in urgencies. So we were able to help in a matter of days, these customers because they had some, let's say, urgent maintenance to make. So overall, we performed well. This is a short-term period. Now on the long-term period, how this will be affecting if this situation continues, this is something that it is unpredictable and nobody can guess. But what I want to say in the end that in these 4 months, 3 months, with all this geopolitical situation, I believe our performance was very solid. And you mentioned as well about profitability did we suffer. If you see that the gross profit per ton was even better, a few points better, let's say, slightly better compared to the quarter 4, 2025. So we have even been able to keep with the same profitability level and better even from the previous quarter with this kind of situation.

Very clear. And my last question is regarding capacity. If you can shed some light or update us on the expansion plan beyond 2027?

Well, I mean, currently, and as we have mentioned in the past that we do have a capacity expansion plan that started back in 2022, and it should end by 2027, where else we pay -- we're spending about SAR 150 million, SAR 200 million to increase the pace 6% to 8% as far as volumes. Beyond 2027, obviously, the dynamics of the markets are changing. The growth rate of the markets are changing. As we come closer to that time, then we would release a new strategy. for capacity expansions. As you have noticed that we have moved into the acquisition part, I mean, where we have [indiscernible] now in our Uzbekistan facility and the Syrian facility. So that we built in our next cycle of strategy.

Very clear. Thank you, management, and I wish you all the best.

We have a question in our Q&A box that says, can you provide some guidance on 2Q?

Well, look, on Q2 specifically, we wouldn't guide on it. We have grown our investors accustomed to guiding on an annual basis. So I mean, we're saying up to 10% for the full year on net profit.

Perfect. And one more question that says in 2025, annual earnings grew by around 32% while in the first quarter of 2026, growth was only 10%. What are the key factors that affect this comparison?

Is -- so I mean, you cannot compare -- I believe it's very difficult to compare on a quarter-on-quarter or the growth, the mix, the expected mix, et cetera. So we should compound this in a CAGR growth, let's say, in the period of the year. We'll be growing every year 50%, 40%, 30%. I mean, it's quite, I hope so, what we are doing our best to do it. The guidance that we are giving today for the full year is up to 10%. We hope second half, if the situation will be improving. We hope as well, we have all the tools that we need to improve as well our results on the second half, we have been growing so fast as well in the previous years. And today, still, we are overperforming the previous periods. Second quarter last year was quite strong. this is as well something important to remind us. So this second quarter as well, we must work hard to overachieve, let's say, first half against first half 2026 against 2025, and then bringing up to SAR 1.2 billion of net profit full year. If you see the growth in the last 5 years, it is from the level of SAR 200 million to SAR 1.2 billion. I believe that you should take the 5 years average, the growth has been more than significant.

Perfect. It seems that we have no further questions. So I'll hand the call over back to management for any closing remarks. It seems we have a follow-up question actually before closing remarks from Saud Bin [indiscernible]

I just have one last follow-up question. You mentioned earlier that you are expecting or anticipating a new framework agreement under the distribution category within the utility sector. Is there any, let's say, color on the expected size of such framework? Is it similar to the previous one? Or if you can shed some light on this?

We expect very much similar to the previous one.

Okay, very clear.

Management, please go ahead with closing remarks.

Okay. Thank you. Thank you all for attending Riyadh Cables Group quarter 1 2026 earnings call. I believe that we have reflected in today's results, our ability of the group to be resilient and as well operationally very solid despite the current geopolitical and macroeconomic environment. We are also be pleased to see the continued growth of our international business. I want to remind that also this quarter, we have grown in export. So this is also very important to highlight. I mean the visibility of the region developments are quite difficult to forecast now, but I really remain confident that with our strong backlog and operational capabilities all our fundamentals are strong as well to have a very good 2026 as well. So once again, thank you very much for your time and for your support and your continued interest. Have a pleasant. Thank you.

Thank you, management, for your time, and thank you, everyone, for joining today's call. This concludes the call. You may now disconnect.