Saudi Aramco Base Oil Company - Luberef (2223) Earnings Call Transcript & Summary

Hello, everyone. I'm Saleh Alghamdi from the Investor Relations Department at Luberef. It is my pleasure to welcome you in today's audio webcast where we will be discussing our performance for the year 2025. I'm also pleased to be joined today by our President and CEO, Mr. Samer Al-Hokail; and our Chief Financial Officer, Mr. Saud Kamakhi. Our session will begin with a presentation, highlighting Luberef's performance for the year 2025, followed by a Q&A session. Please note, this webcast is being recorded for future reference. Before we dive into the presentation, I would like to draw your attention to our cautionary statement. During today's presentation, we may make forward-looking statements that refer to estimates, plans and expectations. Actual results and outcomes may differ materially due to factors stated in the slide. With that out of the way, I will now hand over the call to our CEO, Mr. Samer Al-Hokail.

Thank you, Saleh, and good day to everyone. Welcome to Luberef's annual earnings call. Thank you for joining us. We value your participation today and look forward to sharing an overview of our financial results and strategic progress. As we enter 2026, we take great pride in our 2025 performance. During the year, Luberef successfully and safely completed the largest turnaround in its history, an intensive 45-day program of continuous enhancements delivered through a dedication of approximately 7,000 personnel and encompassing equipment inspections across 900 assets. The milestone reflects our commitment to ensuring Luberef's facility meet and exceed global safety and reliability standard and remain well positioned for sustainable, high-quality operations in the years ahead. For the sixth consecutive year, we sustained a total recordable incident rate of 0 and surpassed 43 million man hours without a lost time injury, while achieving an exceptional mechanical availability of 99%. These results, combined with the successful execution of the largest scheduled turnaround in Luberef's history, underscore the strength of our safety-first culture and the disciplined execution of our operating model. In recognition of our continued commitment to safety and responsible operations, Luberef achieved 2 important distinctions during the year. The company was awarded the ISO certification of the occupational health and safety management system, another testament of our core focus on safety, effective risk management. In addition, Luberef received the Silver award of Corporate Social Responsibility from the Ministry of Human Resources and Social Development for the second consecutive year, reaffirming our sustained contribution to the communities where we operate. Another significant milestone was achieved in support of the continued operations of Jeddah facility. With the feedstock allocation secured by the Ministry of Energy, in parallel, we continue constructive collaboration discussions with our major shareholders to ensure the long-term sustainable of Jeddah operations. The extension of Jeddah facility reinforces Luberef's position in the Group 1 base oil market and continue to strengthen the resilience and competitiveness of our product portfolio. In line with our long-term growth and diversification strategy, Luberef has signed a memorandum of understanding to explore the development of a base oil production facility within the Aramco Jazan complex, targeting the manufacturing of Group 3 plus base oils. This initiative reflects Luberef's ambition to offer a comprehensive range of base oil groups, reassuring its ability to address evolving requirements through a future-ready product portfolio that serves different markets. Turning to another key area of strategic progress, Luberef's transformation initiatives delivered more than SAR 100 million in value to the business, driven by the successful implementation of 11 new initiatives across the organization. These initiatives enhance performance across production, logistics and cost optimization, including the execution of 3 long-term freight agreements and maximizing of bright stock sales among a broad range of initiatives spanning the value chain. Collectively, these efforts improved cost visibility, reduced exposure to market volatility and strengthened overall profitability, reinforcing our competitive position and supporting sustainable margin performance. Building on this strong operational foundation and asset continuity, we continue to advance our long-term growth and diversification agenda. Growth too represents the cornerstone of the next phase of our journey with delivery targeted in the second half of 2026. In line with the guidance communicated in the prior quarter, we successfully completed selective Growth 2 activity during Q4 of 2025, demonstrating our continued commitment to disciplined execution of the project. Overall, the project reached 68% completion by year-end and capital expenditure for the year stood at SAR 147 million. Despite of the challenges encountered primarily related to the procurement of major equipment, the project is expected to remain within the approved budget. These challenges were addressed through timely and decisive actions, restoring momentum and maintaining a strong focus on execution. The remaining project tie-ins and other activities are scheduled in the second half of 2026 and have been carefully coordinated with our feedstock supplier and other internal stakeholders. This alignment is aimed to enhance operational efficiency and overall profitability during the fiscal year. Turning to market performance in 2025. The crack margin exceeded the 10-year historical average by nearly 7% and increased by 12% compared to 2024. This improvement was driven by strong market fundamentals and favorable pricing dynamics, and it partially offset the impact of lower production during the turnaround period. In closing, Luberef enters the next phase with a solid operational foundation, a clear strategic direction and a strong commitment to long-term value creation. The progress we have achieved, combined with our disciplined execution and focus on safety, efficiency and growth positions the company very well to navigate market dynamics and deliver sustainable returns to our shareholders. Thank you for your continued trust and support. With that, I would like to hand it over to our CFO, Mr. Saud Kamakhi, to walk you through the financial performance. Thank you.

Thank you, Mr. Samer. It's a pleasure to welcome you all today. I am pleased to present our annual financial results for 2025 and to highlight Luberef's key operational priorities for 2026. As our CEO previously mentioned, in 2025, Luberef's financial performance remained resilient despite a temporary decline in base oil sales volumes by 15% compared to 2024 volumes, which was largely driven by the planned turnaround. The decrease in sales volume had an impact on both revenue and net income. Consequently, revenue reached SAR 8.1 billion and net income totaled SAR 855 million. While volumes were impacted, the turnaround was critical to strengthening asset integrity, operational reliability and comply with global safety standards. The sales drop was partially mitigated by a strong improvement in base oil crack margins with 2025 crack margins reached SAR 1,911 per metric ton, exceeding last year level of SAR 1,703 per metric ton, supported by favorable feedstock costs and effective commercial optimization, underscoring Luberef ability to perceive value and adapt to evolving market conditions. Free cash flow moderated during the period, reflecting a year of elevated investments. This was largely driven by higher capital spending and working capital changes. With growth capital expenditure increasing to nearly 3x last year's level from SAR 53 million to SAR 147 million this year. In addition to that, spending on turnaround increased materially with the largest turnaround activity occurred in Q4. These investments were aligned with strengthening Luberef operational foundation and supporting future growth. The company continued to generate strong cash flows in 2025 with cash conversion reaching 93%, reflecting effective cash discipline across operations. This cash strength, combined with a carefully managed capital structure, allowed Luberef to end the year in a net cash position of Luberef 1,373 million with a gearing ratio of negative 10%. As a result, the company remains well positioned to continue pursuing growth opportunities while maintaining financial resilience and strategic flexibility. Looking at our performance in 2025, we closed the year with a net income of SAR 855 million, representing a 12% decline from SAR 972 million in 2024. The decrease was mainly driven by lower base oil sales volumes and softer byproduct crack margins. These impacts were partially offset by an improvement in base oil crack margins, supported by our freight cost saving initiative, which brought down the average export freight cost per metric ton by around 25% compared to last year. Furthermore, the positive impact of our ongoing transformation efforts is reflected in a SAR 33 million reduction in operating expenses, underscoring our continued focus on cost discipline and operational excellence. At the start of the year, Luberef held a cash balance of SAR 1,187 million. Over the year, Luberef generated SAR 1,518 million from operating activities, demonstrating the company's continued ability to generate cash from its core operations. In addition, SAR 444 million were allocated to capital expenditures, supporting asset integrity, facility enhancements and growth initiatives. In parallel, total cash outflows of SAR 887 million were recorded, primarily related to dividends, debt repayments and financing costs. After reflecting all cash movements, the company ended the year with a cash balance of SAR 1,373 million, representing an increase of SAR 186 million compared to the beginning of the year and remaining fully aligned with our capital deployment and financial management objectives. Moving on to the guidance. Our production target for 2026 stands at 1.25 million metric tons for base oil, accounting for 30 days shutdown in Yanbu during August to address the remaining growth 2 projects activities in addition to a planned inspection of 12 days in Jeddah, which occurred in January. HVGO intake for the year is expected at 7,500 metric tons per month, subject to availability of compatible feedstock. The stream will be utilized to maximize base oil production. Remaining turnaround expenses to be paid this year are expected to be between SAR 120 million to SAR 140 million and growth CapEx during the year is expected to be between SAR 300 million and SAR 350 million, in line with the original project budget. At conclusion, as we bring 2025 to a close, Luberef reflects on a year marked by resilience and meaningful progress across our strategic priorities. Despite a year that included significant operational milestones, the company continued to deliver steady performance and advance initiatives that strengthen our base for the future. Looking ahead to 2026, we do so with confidence and clarity of purpose, building on the foundations laid over the past year. We remain focused on executing our strategy with rigor, reinforcing Luberef's position as a leading player in the global base oil and specialty lubricants markets and creating sustainable long-term value. With that, we will now move on to the Q&A session, which will be moderated by Saleh.

Thank you, Saud. We will now begin the Q&A session. As usual, please state your name, the entity you represent and your question and also mind that we have 2 options, either available or by typing. We will begin with Mr. [indiscernible]. Could you come forward, please?

I have 2 questions. One about the -- how do you think -- how should we think about the crack margin in 2026? 2025, yes, I think crack margin benefited a lot from better feedstock prices. But we understand that 2026 will see a massive increase in global base oil products. So -- and most likely, there will be some stability in feedstock. So how should we think about crack margin in 2026? And I just want -- one question about -- to clarify about the -- how much is the remaining CapEx related to Yanbu facility? So in total, not in 2026 only. Is there anything else that will be paid in 2027?

Okay [indiscernible] Just to repeat your questions in summary and make sure we are aligned with you and with the rest of the ladies and gentlemen online. Question number one about the market outlook for base oil in the year 2026. Question number two, about the remaining CapEx of growth 2 projects. Am I getting you right?

Yes. And a comment on the crack margin outlook.

First of all, I want to thank you for these questions. If we look at 2026 outlook, we see a high demand is expected in the first half of 2026 with the prices usually for base oil to peak in the summer. Typical base oil demand peaks in summer due to a general increase in consumptions and also building inventory prior to seasons like monsoon in India. Fee increase will, as you mentioned, there are certain adding capacity as we noticed that this capacity usually nameplate as the integrated oil company in India is planning to add around 200,000 of Group 2 and Group 3 during this year, which as we know these are the nameplate capacity, but we need to ensure after the news that had been added how that would be as an actual production and how this will impact supply-demand mechanism. We have -- we saw the reports in the market. We have those concern of oversupply in the next 2 years, but the demand is also projected to increase. We can see that from a supply perspective, fuel oil supply increases in the beginning of this year and especially in our region as a result of weak seasonal demand. As you know, also plans for Jafurah will help in aiming replacing the internal fuel consumptions by gas, while that would allow fuel to be exported. So from that perspective, we continue to see that also the HSFO prices will be pressurized in the next -- during 2026. So with those 2 factors playing a role, we are expected to have maybe some changes in the crack margin, but maybe not big ones during the next year. We'll continue monitoring that. Once we have any insight more, we'll keep the market updated on that. For your second question, Mr. [indiscernible], is that we currently spent on the project -- the project budget is around SAR 750 million. We spent around SAR 280 million so far on the projects. So the remaining is around SAR 470 million remaining in next during 2026 and 2027. Hope this answer your question.

Moving forward to Mr. Tomar -- Aakarsh Tomar, I hope I get your name correctly. Could you please step in?

This is Aakarsh Tomar from SICO Investment Bank Bahrain. Congratulations on a good set of results. My question -- thank you, first of all, for giving us the color on the volumes for 2026. My question is you have announced a lot of additional feedstocks since you got listed. So in 2024, you had Samref announcement and then recently also in December, you said that Yanbu will have additional 15,000 barrels per day till November 2026. So can you give us an idea as of today, how much is your recurring clean volumes capacity, total capacity, not like the volumes that you expect to produce because of the shutdowns. So what is the current recurring volumes for base oil? And with the new project, what will that reach to? So that is the first question. Second question is, in October, you announced that you have received a contract from Aramco to sell ULSD for 20 years. So what kind of impact will that have on your revenues or net profit? Any color on that will be helpful. These 2 questions.

Mr. Tomar, I will have to repeat your question just to make sure I'm aligned with you. So your question number one, about the nameplate capacity of the company as a total. And your second question was about the ULSD, the ultra-low sulfur diesel. Am I getting you correctly?

Yes, yes.

Okay. So regarding the total capacity of Luberef, the nameplate capacity of the company with the 2 facilities combined is 1.45 million metric tons annually. That's approximately 910,000 of Group 2 today and the remaining around 535,000 metric ton that is Group 1 from Yanbu and Jeddah combined. That's the nameplate capacity. The actual production in a typical year ranges somewhere around 1.35 million metric tons, with the shortage being from Group 1 and Yanbu because we are prioritizing Group 2. Regarding your second question, both -- so the new agreement with Aramco to sell them the ultra-low sulfur diesel is aimed to link it with a better pricing index that is diesel 10 ppm. It's linked to the Arab Gulf fuel oil index. It will depend at the end of the day at which ranges or which prices are being traded. But in theory, the 10 ppm is expected to have a better -- 10 ppm, I'm citing the better or cleaner diesel that would be sold at a better price compared to the other indices of diesel.

As we mentioned in the announcement, that would be up to 6,500 barrel per day, and that might adding around 300,000 metric ton of diesel to Aramco.

Great question actually from both [indiscernible] I just want to refer to the nameplate versus utilization. Usually, the nameplate is something and the utilization of that is something else. It's normal. It is the dynamic of the market. such industries that the utilizations are low. But for Luberef, in fact, it is at the high side. So we are trying to sweat the assets, be it with intermediate streams or from the feed itself.

I hope that addresses your questions, Mr. Tomar.

Yes, it does. If I may ask just a follow-up on that. What kind of impact are you -- do you have in mind or in your budgeting from the extension of Jeddah facility? So the volumes, what were the previous volume that you were expecting from this 1.25 million, which now may be higher because of Jeddah being able to continue until 2030?

So if I understand your question correctly, the production of a will remain the same. It will stand at 275,000 metric tons per year of Group 1. The general market outlook does not incentivize any growth in that area. We are happy where we are standing. Any expenditure that might be allocated will be in the form of maintaining the refinery. As you know, it's approximately a 50-year-old facility. So it requires sustaining CapEx. It requires watching for the assets and the other general expenditures. Moving to Mr. Giuseppe Villari from Morgan Stanley. Could you step forward?

The first question is related to the strong crack margins you achieved for base oil during the quarter. Of course, prices are down quarter-on-quarter. So the reason for the strong margins is the feedstock that is going down, feedstock price. And could you shed more color on what's the driver behind the lower feedstock? And then secondly, also related to the strong margins. I think if you look at margins and you look at volumes, both of them were really strong and maybe EBITDA could have been higher. What explains the delta? Is it byproduct margins? Is it OpEx?

Okay. Giuseppe, I will repeat your questions, and please stop me if I missed something. So you're asking about the reason behind the lower prices for the -- our feedstock, which is linked to the high sulfur fuel oil, Singapore. Am I getting you correctly?

Yes. Yes, the drivers behind the strong...

Have you asked something else? Apologies. Could you repeat if there is anything else I missed? Or this is just it.

Yes. And the second question is why EBITDA is at this level despite very strong volumes and margins considering the turnaround?

Okay. So for question number one, I'm handing to our CEO, Mr. Samuel again.

Giuseppe, great question. Thanks for participating and asking the question on the feedstock and its prices, high sulfur fuel oil is linked to -- correlated to crude oil prices and crude oil prices have shown lower in the market, and there is a lag on that sense. Therefore, hence, the crack margins are at a higher area. But also, I want to highlight that crack margins not only because of crude oil, but also because the company took some actions, be it in freight and OpEx reduction, but also selling in markets that are having high netback when we saw this in Q1. Therefore, the crack margins is attributed to, yes, market dynamics, but also actions from the company itself in exploring markets with high netback, be it in the Kingdom or outside the Kingdom. I'll hand it over for the EBITDA question to CFO, Saud.

For your second question, I think our EBITDA still show a strong results in 2025. As you know, and as we have mentioned during our presentation, that during 2025, we have a scheduled turnaround activity which has impacted our production and number of base oil volumes by around 15% during the year. So that has a major connection to the reduction in our revenue, in our EBITDA and also impacted our net income. So this 15%, if we compare it to last year reduction in volumes have been comparing to the EBITDA reduction of around 9% to 10% only. So that has been mitigated by the strong also crack margin that we had during 2025. So despite that decrease, still we think and we believe as a management, this is a very good number for a year where we had a major turnaround activity of 45 days.

And if I may add one thing related to the first question, another reason why we believe or we have confidence that the pressure on the feed prices will continue is the fact that in 2025, some bills and some regulations were passed in Europe, pushing fuel oil away from the continent. For instance, I'm referring to the emission control area, or ECA, that's a Mediterranean regulation that is passed to partially replace the fuel oil, even the low sulfur fuel oil with marine gas oil, which is of better pollution characteristic. All of this is putting pressure on the continent of Asia, but it is beneficial in our case because it helps to widen the spread between the feedstock price and the base oil price. I hope this addressed all your questions.

Yes, that's very helpful. Can I just ask a quick follow-up on the byproduct margins for this quarter, if you can provide otherwise.

So in quarter 4 2025, we have a negative crack margin for the byproduct of SAR 51. However, if you look at the whole year, there is an improvement compared to the quarter by around SAR 43 per metric ton. And that is coming from all the byproducts environments and market dynamics. So we have negative SAR 43 for the whole year.

Moving on to Mr. Ildar Khaziev from HSBC. Mr. Ildar, could you please step forward?

I have a few questions. First, can you tell us how much inventory you used during the Q4, maybe 2025? Because it seems like surprisingly strong free cash flow generation was partly funded by the working capital inflow. And my question would be also whether you expect to rebuild the stocks if this was coming from inventory. That's on inventories first. And secondly, could you tell us what kind of level of sustaining CapEx you expect for 2026?

Okay. So if I repeat your questions, you have -- number one, you are inquiring about the inventories. How did we sustain above guidance sales in the last quarter? And the second one is related to the sustaining CapEx in 2026. Is that all, Mr. Ildar?

Yes. And also my question was whether you expect to rebuild the inventories in 2026? And how much would that be?

Thank you for this great question, Mr. Ildar. If we look at our inventory levels, and that would be more obvious and clear for you once all financials are released. In general, comparing to last year balance, we do not have that much difference in inventory because already a company also started to build the inventory by -- at the end of the last few days of Decembers. So the impact, however, if we look at it from working capital level, we have a positive around SAR 26 million comparing to a negative of SAR 44 million last year in 2024. So that had some impact, but the majority of the impact also came from the account receivable working capital movements there by also strong collection during the 2025. This is for the first question. For the second question, for your sustaining CapEx, we usually we have -- we can say around between $30 million to $35 million. That is a continuous sustaining level of Luberef. Maybe we do not have it in the guidance, but this is the normal numbers that we have not changed over the -- across the years. I hope these answered your questions.

Yes Definitely. And maybe one last question on the Jeddah facility. It's likely that you will have to do a turnaround as well at some point of time. When do you expect this to happen given that, that facility is now going to be operational for longer?

So Mr. Ildar, the last turnaround in Jeddah facility happened in early 2023. Usually, as I'm sure you are familiar, the span of such activities happen every 5 to 6 years. So if everything is in motion, theoretically, the next turnaround would be in 2028. Moving to Mr. [Mohammed Al-Thunayan]. Could you please step forward?

I have a couple of questions. The first one is related to the significant divergence between fourth quarter EBITDA of SAR 180 million and cash flow from operations of SAR 632 million, which was up year-on-year despite EBITDA declining due to the shutdown. And this is notable given that fourth quarter accounted for around 42% of the full year cash flow. Was there a material working capital release during the fourth quarter of 2025 that turned the full year working capital positive in cash flow terms compared to 9 months 2025? I mean you mentioned receivables collection, but is working capital release in total is higher than 2024.

There is -- thank for your question, but there is nothing major. But for the collection, as I mentioned and also for during that shutdown period, sales also delivering lower sales volume also impacted the receivable items at the stage of, we can say around SAR 300 million. So all of those -- both have contributed to the change in working capital movements.

Okay. Okay. That's clear. And the second question relates to the proportion of fourth quarter 2025 volumes that were sold in the local market and whether this contributed to the spread during the quarter given lower sold volumes in general.

In general, we -- during this period of time, we try always to prioritize our local market. That helps in general in our higher netback market, and we want to ensure that we supply our local customers. So during those periods and especially like Q4, we tend to prioritize our local market.

Is it possible to quantify, I mean, the percentage during the fourth quarter?

So in the last quarter, Mr. Mohammed, it approximately jumped a bit to 35% of the total sales. So the typical guidance remains still that is 30% local 70% export. But due to the event Mr. Kamakhi referred to, we saw local sales jumped to 35% in total percentage. It was more concentrated in the last quarter. Moving to Mr. Oliver Connor from Citigroup. Could you please step forward?

Just coming back to the Yanbu growth. So you mentioned obviously ramping from second half this year. Can you perhaps give us a little bit of color around how quickly that ramp takes place and sort of when we can expect the plant to be fully operational and up and running?

Very well, thank you, Oliver, for the question. Of course, Growth 2 project is one of the pillars of the growth story of the company in addition to the continuation of Jeddah refinery and hopefully, the signing of the Group 3+ that is planned to be in Jazan. So it's a sequence of that. So we are putting all efforts tremendously, basically taking over on many of the scope of the contractor. It was a poor performance of the contractor, especially on the procurement side. So once that's taken over and it has been, we remain confident that in the second half of 2026, we will start ramping up. The nameplate is 65. I don't expect to go from 50 to 65 right away. The nature of the operation is to go slowly, but surely on that. And then we would have the -- depending on the market needs, we have the option to swing between Group 3 and Group 2, but we will be able to produce Group 3 hopefully in the second half of 2026. I can't give you an exact date or perhaps I would hope it will be in Q3, but I will get more guidance hopefully in the next few weeks or even a month from now. I'll have a clearer picture. But many of the equipment has arrived. I would say more than 50% of the equipment now is at site. There are a few long lead items. I just came from Milan, Italy on the vendors and hopefully, they'll be here earlier than what they expected. So these are probably the best guidance I would probably give on Group -- Growth 2.

Does this address your question, Oliver? Moving on to Mr. [Fawad Khan]. Could you please step forward?

Can you hear me?

Yes. Just a bit if you can increase your voice and please...

I have 2 quick questions. Number one, you mentioned about the Yanbu shutdown sometime in August. I need to ask if both the train Group 1 and Group 2 train would go under shutdown during that period? Or we should expect only the Group 2 train to be shut down?

So the guidance is a shutdown for all required items. We did some evaluation internally to decide the best possible approach to address this shutdown. One of the decisions or one of the factors that will address is as you suspected that we separate them together. But at the end of the day, we decided to tackle them all at once and hopefully complete everything together.

Fawad, yes, it's Group 1 can be produced as well from -- part of it from Jeddah. So we're able to swing. That's the beauty of having 2 different facilities. So we can take Yanbu down for, let's say, either a project or T&I or turnaround, but Jeddah can continue producing Group 1, especially bright stock. At some time, bright stock are sold at a premium over Group 3 in some markets, and we benefited from that.

So the base case is that the whole plant in Yanbu would be shut down and some part which is producing the bright stock in Yanbu would be produced in Jeddah.

Yes.

Okay. My second question relates to the Jeddah facility. I mean we have heard this -- in fact, we have come across this announcement on the signing of the contract. So I need to know when exactly we should expect further clarity in terms of the costing or the pricing of the feedstock or if there would be any changes in the costing for the feedstock or any other terms that underpin this agreement?

So Mr. [Fawad Khan], if I understand your second question correctly, you are inquiring about the nature of the new contract. Is it going to change any pricing or any details? Am I correct?

That's right, relative to your existing contract?

So we are actually near completion -- the negotiation. This contract, by the way, it's a 50-year-old contract. You can imagine [Fawad], this is a great question. There is a lot to go through and changing in dots and teeing the Ts as well. So the lawyers are working diligently to secure that supply contract. The costs, of course, it will be updated to the current market conditions. There is not -- we don't expect a huge change in terms of this cost at all. But we will give guidance going forward. But you would imagine and appreciate going through these contracts and updating it to its current. But it's a goal, both supplier and us producers are in agreement to make sure that this is worked out when it becomes a win-win situation for both.

One last question, if I may ask at this stage regarding Group 3 plus project, when we should expect some clarity in terms of CapEx timing and everything or whether it would be linked with the commissioning of the Group 2 project?

So Group 3 project, as we signed an MOU, of course. And the clarity is currently, it has passed the aggressive testing of the licensor. And that's a good news. It's going to be -- and the location is in Jazan. I think as we go further to do the pre-FEED and some of the FEED, which I am shooting that we would do this year, we will get a much, much clearer idea in terms of CapEx or even the volume, which we expect maybe more than 500,000 tonnes per annum. But in terms of the CapEx, I mean if I give you a number now, it's 40% -- plus 40% or minus 40%. So it's -- I will refrain from giving a CapEx now until it's clear then we would go through the engineering, the value engineering. But you will get something hopefully by Q2 2026.

Moving to Mr. Eranjan from Derayah Financial. Mr. Eranjan, could you please step forward? Mr. Eranjan, do you hear us? I will come back to you in a minute. Mr. Ildar, again.

One more question, please, on the potential investment in Jazan. Could you please comment on the scope of this potential project, what's being discussed at the moment with Aramco? And lastly, one more small question. You said that you might be utilizing 7,500 tonnes of HVGO per month next year. If you use all of that volume, how much of base oil would you produce from that feedstock?

So Ildar, the question number one about what kind of expected scope to be at Jazan. And question number two about what will be the equivalent for this stream? Like if we process the HVGO on Yanbu, how much it will yield in terms of base oil. Am I correct?

Yes.

Okay. So for Jazan, the aim is to utilize UCO. As you know, that UCO has always been an endeavor for Luberef. We try to source it in Yanbu. We try to find better streams, and we were also evaluating other potential sources in the market. Our search for high-value streams has led us to Jazan. And from there came this idea that to have a third facility there. Going from this perspective, the estimated scope to begin with is to have an is [iso-dewaxing] unit, which is the last unit to produce base oil. That would be -- that would receive the unconverted oil or the UCO from the complex in Jazan to process it directly and process base oil. A typical yield in that case would be almost as high as possible because all of the cracking has already been completed in the upstream. And by upstream, I'm referring to the hydrocracker in this case. That's related to Jazan. Back to Yanbu, if we process the HVGO in a Group 2 production train, a typical yield in terms of volume is approximately 70% to 75% of base oil. So you can run the figures on 7,500 or 7,500 metric ton of HVGO injection in that case. I hope this answered your questions. I have typed question from Mr. Eranjan. The guidance of 1.25 production for 2025, does it include potential volume from the Yanbu expansion? Yes, it does. I hope this answers your question. Mr. [Mohammed Al-Thunayan] again. Mr. [Mohammed Al-Thunayan], could you please forward?

Sorry, I forgot -- all my questions were answered.

Thank you. Now we have another type of question from Mr. Tomar. Can you please confirm the sustaining CapEx was USD 35 million to USD 40 million or Saudi Riyal that was in U.S. dollar. A typical value in Saudi Riyal is between SAR 100 million to SAR 140 million per year. Thank you. I think this answers your question, Mr. Eranjan. Back to Mr. [Fawad Khan]. Step forward, please.

Again. I need to ask if you can please quantify the saving from your initiative on freight, especially with Bahri and if there are any other saving to be made going forward in 2026 or in future?

So for the freight, we signed -- during 2025, we managed to sign 3 agreements with 3 different companies. I can give you that the reduction that happens during 2025 in general for per exported per metric ton during 2025 is around 25% comparing to last year. If you -- looking at certain quantity with a certain company, we do not have these numbers to be shared. But that is the most important thing is the efforts that have been made by the company in order to ensure to have a reduction in the freight, and that helped us also in achieving a better crack margin during 2025. And hopefully, that will continue also in 2026 with the better rates.

So the 3 agreements that you mentioned, does it cover all the export volume or you have to sign more agreements to cover rest of the export volume? I mean is there any further agreement...

No, it's not all, but most of it.

Thank you, Mr. [Fawad Khan]. I believe that by now, we have answered all of the available questions. We will give it another run. If no questions are received either typed or verbal, we can conclude the call. We have Mr. [indiscernible] Khan. Could you please step forward, Mr. [indiscernible]. Mr. [indiscernible], please come forward. You could try type Mr. [indiscernible]. Otherwise, if you have -- you are facing a technical issue, we could always have a call another time. Mr. [indiscernible], do you hear us?

Can you hear me?

Yes, yes. Mr. [indiscernible] we hear you..

Just if you just repeat on the byproduct margins, I think you mentioned fourth quarter was negative by how much, if you can repeat? And overall, the year was positive, right?

Could you please repeat the question? You're asking about the byproducts margin?

Yes.

If you're inquiring about the margins themselves, they stood at minus SAR 11 or minus SAR 43 throughout the whole year. Does this answer your question?

Minus SAR 43, okay. And for the fourth quarter?

For the quarter itself is minus $13.6 or minus SAR 51 for the last quarter.

Any outlook on this going forward for '26?

We don't usually give guidance in -- it's...

[indiscernible], let me explain something on -- I've seen some focus here on the byproduct. Of course, the byproduct margin really -- maybe it happened only last year where it really took a dive and then affected the company's financials. But in reality, it is not -- the company is a base oil company. I think the best guidance for you and an analyst would really focus on the base oil crack margins. These are the ones that really move the needle. Yes, it happened last year, but that's pretty much what it is like a dot in a sea. But for the many, many years past, it really doesn't really move the needle.

Thank you, Mr. Samer, and thank you all, gentlemen and ladies for your attendance. If you have following questions, please feel free to approach Investor Relations at any given moment. We are happy to have a separate call with you following this earnings call. We appreciate your presence and wish you a lovely day ahead. Thank you.