Saudi Aramco Base Oil Company - Luberef ($2223)

[Foreign Language] Hello, everyone. I'm Saleh Alghamdi, Investor Relations Manager at Luberef. It is my pleasure to welcome you to today's audio webcast where we will be discussing our performance for the first quarter of 2026. I'm also pleased to be joined today by our President and Chief Executive Officer, Mr. Samer Al-Hokall; and our Chief Financial Officer, Mr. Saud Kamakhi. Our session will begin with a presentation highlighting Luberef's performance for Q1 2026 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 this 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 on the slide. With that out of the way, I will now hand over the call to our CEO, Mr. Samer Al-Hokall.

Thank you, Sal, and good day, everyone. Welcome to Lubi's first earnings call for 2026, and thank you for joining. We value your participation today and look forward to sharing an overview of our financial results and strategic progress. This quarter delivered strong performance for Luberef and marked a key milestone in our strategic expansion into high-value GCC markets, which offer attractive netbacks and reinforce our regional positioning. Amid a challenging geopolitical environment that disrupted base oil supply chains -- we demonstrated agility by working closely with our regional partners to bridge supply gaps across India, Asia and Africa. Our ability to respond effectively was further supported by our contracts of affreightment, which provided a shelter against elevated shipping costs and ensured reliable delivery to our customers. Building on this performance, we continue to uphold the high standard of operational excellence and safety. We maintained a total recordable incident rate of 0 and surpassed 43.9 million man hours without a lost time engine. These outcomes reflected the strength of our safety first culture -- we remain steadfast in our commitment to safeguarding our people and protecting our critical assets, ensuring the continuity and resilience of our operations in these challenging times. Turning to our strategic initiatives. We continue to make meaningful progress across key priorities that support our long-term growth and positioning. Discussions around the feedstock supply agreement for Jeddah facility are progressing well and are now in their final stages. This remains an important development as the role of the Group 1 production continues to play a major role with supply tightening at a faster pace than demand, reinforcing the strategic relevance of the facility. In parallel, the slating program of Group II is advancing positively and is also approaching its final stages. We are encouraged by the progress achieved to date, and we are currently in advanced discussions with the leading additive companies to secure the necessary OEM approvals which are critical to the commercial readiness of our Group II base oils. Turning to Growth II projects. This project remains a cornerstone of our long-term strategy, strengthening our position in high-value segments and supporting our future growth ambitions. During the first quarter, we incurred a capital expenditure of SAR 77 million, reflecting continued progress across key work streams in line with project budget. Major equipment deliveries remain on schedule with arrival expected throughout the second quarter of 2026, construction activities are advancing steadily, bringing overall project completion to approximately 71%. We remain on track commissioning in the second half of 2026, and we are confident in the project's ability to deliver attractive value upon completion. During the quarter, rising feedstock costs driven by the geopolitical environment combined with more gradual adjustment in product prices resulted in a temporary pressure on our margins. Despite this pressure, Luberef was able to deliver strong performance, supported by favorable byproduct crack margins. This underscores the resilience and flexibility of our business model across volatile market conditions. Our priority is clear to maintain strong operational momentum, respond decisively to market shifts and continue building a business that is more competitive, efficient and future ready. 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. Sander. It's a pleasure to welcome you all today. I'm pleased to present our financial results for Q1 2026 and to highlight Luberef's financial results this quarter. Starting with our financial performance. Luberef delivered a strong set of results for the quarter with net income of SAR 258 million, reflecting an increase of 16% year-on-year despite a 12% decline in sales volumes. During the period, base oil crack margins experienced a temporary compression of approximately 14% as a result of an increase in feedstock prices, reflecting the impact of evolving geopolitical conditions. This was effectively offset by a significant improvement in byproduct margins, especially diesel, driven by the ongoing dynamic in global energy markets. Overall, these results highlight the strength and resilience of our portfolio as well as our ability to adapt to changing market conditions and sustained profitability. Turning to cash flow. Free cash flow saw some compression during the quarter, primarily driven by higher capital expenditures associated with increased growth-related spending. -- as well as remaining costs linked to the recently completed turnaround. This was further impacted by working capital buildup after start-up of Humber refinery. Looking ahead, we expect cash flow generation to improve in the upcoming quarter, supported by a more favorable crack margin environment and normalization of the capital cycle. Overall, we continue to maintain a strong financial position with a return on average capital employed of 23%, reflecting the efficiency of our asset base and generating returns and a negative gearing of 12%, underscoring our disciplined capital structure and financial flexibility. Comparing our year-on-year performance, net income increased from SAR 222 million in Q1, 2025 to SAR 258 million in Q1 2026, despite a 12% decline in base oil sales volume, highlighting the flexibility of our operating model and navigating changing market conditions. This performance was driven by a strong improvement in byproduct margins -- and this was further supported by our contract of affretments, which contributed SAR 21 million in freight cost savings and reinforce our cost efficiency. OpEx and other expenses saw an increase primarily due to higher depreciation of approximately SAR 11 million, in line with the continued expansion of our asset base under our growth strategy. Turning to our cash position. We began the year with a robust cash balance of SAR 1,373 million providing a strong foundation to support our strategic priorities. During the quarter, Capital expenditures amounted to SAR 153 million, in line with our guidance and aligned with our growth ambitions, of which 50% was growth related. We closed the period with a cash balance of SAR 1,397 million, reflecting strong cash generation. Moving to the guidance. We have revised our full year sales targets to approximately 1.15 million metric tons, reflecting the impact of the current geopolitical environment and market dynamics and trade flows in the first quarter. Remaining turnaround expenses to be paid this year are expected to be around SAR 90 billion to SAR 100 million. All other guidance remains unchanged. In summary, the quarter reflects the strength of our financial position and the disciplined execution of our strategy. Despite a dynamic market environment, we have delivered solid profitability, maintained a robust balance sheet and continue to invest in our growth priorities. We remain focused on operational efficiency, capital discipline and value creation. And we are confident in our ability to navigate near-term uncertainties, while positioning the company for sustainable long-term performance. We will now move on to the Q&A session, which will be moderated by Saleh.

Thank you, Mr. Saud. Now we will begin our session for today. As usual, please state your name, your company and your questions. Hello, Mr. I will temporarily move to Ms. Silvia Richards from Morgan Stanley. Then coming back to you Baha. Sylvia, please step forward.

Can you hear me? This is Silvia Richards from Morgan Stanley. I have 2 questions. The first being, given that base oil crack margins were a little weaker than expected this quarter, can you please confirm whether this was because of a lag in the increase of base oil prices versus your feedstock costs? And if so, how do you see this evolving in Q2? Should we expect base oil prices to catch up and margins to be much stronger next quarter? And my second question is on byproduct margins given that they were the key driver for performance this quarter. Can you please just elaborate on what they were for Q1 -- and if you have the breakdown to hand what they were quarter-to-date?

Okay, Silvia. So let me just repeat your question to make sure I asked the idea correctly. The first 1 was related to the base oil crack margins, the performance in Q1 and the forecast in Q2. The second question was about the dynamics or the behavior of the byproduct crack margin. Do I get you correctly?

Yes, that's correct.

Thank you. So Mr. Saud.

Thank you, Sylvia, for this great question. I think this is yes. We noticed that lower crack margin. However, as you mentioned, the lag time between the increase in the feedstock and the time that the base oil mark the price is captured. That is that months lag period between these 2 changes in the prices. And -- as we know units maybe in our wood side, we posted our prices in April where we show that also average prices are higher than previous quarter. which indicates that in the upcoming quarter that there will be improvement in the crack margin. That is for the first question. And for the forecast for the or the next quarter. And for the second part of your question is the crack margin of by product, yes, we have saw an improvement on that. especially on products such as diesel, that impacted positively on our market, our quarter 1 results. And we can see that -- we can say around $70 a metric ton for our byproducts this front.

If I may quickly add Sylvia, this is CEO, Samer Al-Hokail, track margins of byproducts such as diesel, others are not heavily correlated with highly correlated with crude oil prices and the feed itself, which is highly correlated with the fuel oil. So it moves faster on a sudden movement and volatility of the markets when it comes to byproducts, whereas base oil is different. It takes longer time, because it's a different market. It has a different dynamics. In fact -- and the customers are very different on that. So the lag is there that as a forecast, the forecast, of course, is going to be only a forecast for both byproducts and then base oil. It depends on all the geopolitical situation and the supply/demand within the region.

Thanks to our President and our CFO. Moving now to Asset Management from Delia. Could you please step forward.

I have several questions. The first 1 is with regards to your volumes. So this quarter, you have done around 240,000 tonnes. Still, it's sort of below your tile of around because in some quarters, you do close to 300, 325,000 tonnes. So I just wanted to know what the reason is because if I'm not mistaken, there were no shutdowns in the first quarter. So why this -- the volumes were a little bit lower than the optimum level? And also, since this crisis started, how has your markets that is the geographical areas in which you sell most of your products. How has that changed? Are you selling to new markets? And the third 1 is, I mean, with regards to the prices, I mean, are at very high levels currently, the base oil prices. So are you getting any pushback from your clients that they are not willing to let's just at these prices.

If I may repeat your question. So the first 1 was related to the capacity. That is we walk you on -- the second 1 was related to any new markets or what is the change in our rate at the moment -- and the third one, if there is any pushback related to the prices. Am I correct?

Yes, correct.

Let me tackle -- try to tackle a few of those good questions. On the first, in terms of sales and production, that's related to production we have just came from a huge, the longest turnaround in [ LubraFistoty ] in December, and we started around end of December. -- usually any -- the nature of the business itself and the kits, be it a refinery auto-based oil. It does take time for it to produce on spec product because our operations are in batches. So you would probably lose from the quarter 2 weeks to 20 days, roughly 2 weeks of production, real production. So that's probably the answer of that. And this will answer, of course, the free cash flow, of course, a question that is probably anticipated because the tanks are not full on that area. So that drops off. On the prices, no, we haven't had any pushbacks from customers at all on the recent changes in prices. It's all accepted because I'm not sure why not, but the customers will probably pass through these increases to the market itself. And the last question or at least the mid 1 was related to the market itself. We were able to deploy some of the tonnes to different markets same markets we operate in, but India, Pakistan and some in Africa as well and also utilize our storages across 4 corners of the world, be it in South Africa or in Antwerp or in the U.S. as well to deploy that base oil to customers.

Also, if I may add something related to the operation, further highlighting what Mr. President mentioned. By batch operation, we mean that we are producing for different products from the same production train. It takes some time to change conditions back and forth, given also that some of the catalysts have been changed for the first time since 2019. So all of this was taken into consideration and stabilizing the refinery following the turnaround. Moving next to Mr. Aakarsh Tomar. Could you please step forward?

Thank you very much. This is Aakarsh Tomar from [indiscernible] Investment Bank. Congratulations on a good set of results. So my question is a follow-up to the previous question. So I mean, I understand you gave a fairly good idea for us to why the volumes were low in the first quarter. But the reason for the revision, it's kind of a confirmation -- if the reason for revision revising down the guidance, earlier, it was 1.25 million tonnes and now it's 1.15 million tonnes. So is that purely have to do with the first quarter? Or do you expect some kind of volumes lost in the next 3 quarters?

You're absolutely correct, Mr. Tamar. This is the main reason. We do not anticipate any change in the production going forward. The change in guidance was mainly driven by the events of the first quarter.

Second question. In terms of your operations, are you pacing because you are based on the west coast, so I'm assuming you're not facing any issues with the logistics. But I just wanted to get an idea, is there any kind of disruption that you are facing from the current ongoing geopolitical situation? Anyway, it is impacting our business.

So I think -- thanks for the question. On the geopolitical situation, from a sales perspective, we are increasing our local sales a bit our UAE tankage mainly are at low level, but we're utilizing [ Ilfojera ] were able to sell from there. quantitative amount as well. And then as well from the West region of Saudi Arabia, where we're selling to markets in Africa and in Europe alongside more of local sales, a bit not something that is very significant, but it does help.

And if I may add to that, especially in the subject, I think all the plans and preparations and things that Libre was done in previous period in order to have any mitigation plan to Vanover doing any situation like this, that helped us by achieving new markets previously now that we can utilize different outlet for our products. So that was the time where we can test the agility of the company and that help us during these conditions.

Thank you Mr. Tamar. Moving forward to Mr. Ilder Khaziev from HSBC. Could you step forward?

This is Ilder from HSBC. I have a few questions, please. First, -- on the export strategy. I know that in the past, a big chunk of your volumes used to be -- used to go to UAE. Obviously, these have to be -- had to be rerouted. -- did you have to find vessels for this? And was there any impact from the roach and the freight costs, especially as we go into the second quarter? Do you expect any cost inflation because of that? Secondly, was there any impact on the domestic premium due to the disruption in the first quarter? And lastly, my question is about quality of the feedstock because there have been some profound changes in terms of how around is moving its crude now from west to east. Was there any impact on the quality of the feedstock you're receiving at the moment?

Okay. Ilders, I will repeat your questions for the sake of clarity. #1 is related to the selling -- sorry, exporting base oils to different markets, how well we did with others? And the third question was related to the feedstock quality. Could you repeat the second 1 again, sorry?

Yes. Did you observe any changes in the domestic premium during the quarter? Was it kind of moving in line with the previous periods. And by the way, on my first question, it was rather about the impact of very high freight costs because you obviously did not have enough of vessels to target other locations. Did you have to search for vessels? And did you -- were you exposed or are you exposed at the moment to the very strong freight rates.

Ilder, thanks for the questions, as usual. For the vessels, Luberef was able to reduce spot shipping through securing 3 long-term contracts, shipping agreements with Singapore shipping company, UniTanko and Bahri, that kind of become -- became like a hedge to what happened during that -- we've secured that long before the war has started. As a result of these agreements, freight costs have been reduced by approximately 25% in terms of dollar per metric ton around Q1 and 2026 compared to the same period in 2025 following signing these freight area. Of course, the UAE was an important market for us. But as I mentioned, we now go through [ Fugro ] as well, utilizing some of our partners. We've also trucked to Oman in a way accordingly.

And of course, we shipped from Bimbo and Jedda globally. The spot market, of course, the shipping spot market has increased. Therefore, our freight agreements will serve as a shield, honestly to what has taken place. On the local premiums, I will have the CFO to shed light on that. So for the premium, but we are sharing for in the guidance it's stabilized in the premium prospective side. However, the prices usually moves. We do review gradually -- from time to time to the prices. So we need to look at that with moving also of the prices on the export side for our extended customers. So with that, we are moving on the same guidance of from premium perspective. However, we will make sure that also we cover all the feed cost...

Would, of course, with the mindset of customers. I know the hike took place in a parabolic fashion and we're not going to move that fast as well. At the end, this is a relationship in a market that we value this. We're not going to move prices swiftly on customers, but rather in a very agreed fashion. Because when the tide is short, things can move differently. And I'm sure we will ask them for their assistance going when this time comes, maybe in 5, 6, 7 years as well. So it's a moderate move, honestly, striking a balance.

So the last question other was related to the feedstock quality, the RCO that we are currently receiving. Generally speaking and historically also -- there were times where fixed quality changed temporarily for some time, either for technical reasons or change in composition in the past. It does not upset or completely restrict the production of base oils, but certain changes could be observed over some time, both from operational -- mainly operational changes. And may I ask 1 more question, please about pricing of exports. I know that the spot trade has nearly disappeared in Asia since March, just because of the way prices reacted -- how do you price your cargo these days? What kind of benchmarks are you using? I mean I know it's different between the contracts, but have there been any sort of difficulties in terms of setting the prices and agreeing on prices with the customers.

If I may take that question, Ilder, our prices are already contracted to those customers. So we already signed supplier agreements with those customers where they allocated where it depends on the index that we are using. So difficulty in pricing those products to the customers, I can say that there is none from that perspective. However, we have already agreed with our customer with the formula that depends on the prices of those indices. And that is important for us at Luberef, where we secured these agreements beginning of each year, so we can have that already take care of without having any difficulty in pricing during these changes of circumstances. That's great to hear.

And lastly, is there any interest from customers maybe to engage in sort of longer-term agreements whereby the price is set like for the next few quarters rather than being linked to spot and China. So far, we -- we are working with the supply agreement with the spot prices. I think it's usually better for us and for customers.

Those base oil are market and the quantity is very smaller comparing to other fuel and other products where hedging is being done here and there. So I think its current operational requirements for those products and this market is important to have that flexibility and to be indexed on the spot market and instead of fixing it for any reason.

So next, Mr. Abdulelah Luhabe, Could you step forward, please Yes, you are.

This is Abdulelah Luhabe from [ Eve ] Capital. I just have 2 questions on my side. You mentioned that base oil price -- base oil volume has declined by 12%. I just want to know what was the volume of by product this quarter? Was it -- has it declined by the same amount. And second, regarding the base oil prices, we see quite a hike in -- are prices I just want to hear your thoughts about the prices going forward? And how is it as of May now?

Abdulelah, thanks for the question. Let me answer the second question and give maybe a framework on the way we think this through. Given the high crack margins of diesel, kerosene and fuels, and given the fact that base oil producers are mainly predominantly linked to refiners, there are only a few. In fact, maybe I could only think of Luberef a pure play, and the rest are all refiners. So refineries will probably pivot to higher crack margins and fuel -- there's much liquid market. Their collection will be faster and quicker. Therefore, on the expense of base oil volumes. And therefore, base oil becomes supply base oil becomes less globally as a result of that. Therefore, you would have a hike in the prices. That's the definition of the lag that takes place. So some people say it's a month, some people, 2 months, 3, it depends how you model it in your models on that. So that's the thinking on that. So therefore, the prices are dependent on the refiners that are shifting from base oil to fuels these a little more. So -- and your view on the geopolitical situation, if this is going to continue, then yes, track margins will be higher and diesel and U.S. gasoline as well, and therefore, base oils will follow suit in a lagging fashion.

For the first question, if I may answer your questions, yes, we have noticed a decline, as you mentioned, in our base oil during the first quarter. Typically, that is like our byproduct quantities comes in almost double of what our base oil quantities and specific production period. So to be clear, our base oil production declined during that period, that would have the same impact of decline in by-product. However, that is -- the ratio is still there. The ratio has not been changed. We have noticed any unusual change in our by-product production, comparing it to base oil. As we are focused on base oil production, we -- our production is based for both base oil and byproducts are healthy during the first quarter.

So it's fair to assume that by products also declined by 12% this quarter?

We can have the same assumptions. And maybe we can give more details about...

The ratio is different Abdulelah, not 12% peso is 12% the byproduct will be something else. So the ratio is maintained by both.

Abdulelah, if I may add, like Mr. Samer Al-Hokall mentioned and also Mr. President, usually a by-product production during the quarter is twice as much base oil. So in this quarter, we have 240,000 mito of base oil production. It is safe to assume that twice as much was 480 or 500 on that's a typical byproduct production during the quarter.

Okay. That's good.

And this assumption could be carried on moving forward. There could be some minor changes or some specific changes on a quarterly basis, but it's give or take twice as much base oil production. That's the byproduct assumption. I will temporarily go to Mr. Para Javed because he has been waiting for some time now. Mr. Para.

Can you hear me?

Yes.

So I think just picking up from the last question, you mentioned that it's -- the bar products are roughly double the base oil production. So roughly, just to understand if byproducts were roughly around 400,000, 500,000. So like what would be the constituents of the byproducts like, I think, diesel, asphalt, like how much in terms of percentage of bipos,how will you quantify the volumes?

So in a typical production year, almost 50 or 60 -- from 50% to 60% of the byproduct pool mainly is represented by asphalt and marine heavy fuel oil. If you are focusing on the currently lucrative byproducts that are the diesel and naphtha, they represent close to 15% to 20%. So this is a good assumption to look at it this way. And you can also verify the figures by the annual production reported in the 2025 annual report as well.

Okay. But diesel and naphtha combined 15% to 20% or each 15% to 20%?

Combined, combined.

So will be like 60% is asphalt and marine heavy fuel oil, so 60 and 20, let's say, disease. So what is the remaining 20%?

There are many consist of other byproducts such as WAX, extract and aromatic stream we produce from Mumbra facility there is also sulfur both solid and liquid. Yes. So have already mentioned a -- so these are the typical byproducts produced from Luberef -- from both facilities of Luberef.

Okay. Got it. SP1 And obviously, as you mentioned, the ones that obviously carried this quarter, mainly higher pricing from bips would be, I guess, diesel less right? Not much change in asphalt and marine heavy.

Yes. So diesel, naphtha and drilling oil, which we refer to them in our annual reports as the white products. Those are the ones to answer your questions that you put it in a good way, carried the quarter.

And if I if I may to that Javed, you mentioned it very right in a way that were Luberef's operations that also benefits from from that perspective. So in case, we slight hedge also our byproducts that help us sometimes and the time were difficulty, for example, reduction in crack margin and vice versa. So we are protected by our business operation model is good from that perspective.

Certainly, certainly. Just my second question was around -- like I think I felt that there was a bit of contradiction that you mentioned that there was no pushback from clients on the higher prices, but then there was a certain statement that because of the Propolis will pass on the pricing gradually. So I just wanted to confirm how do you think on those things?

Correction correction. I'm saying that let me be clear. perceiving that the customers in the market are passing through the high prices to the consumer themselves, which is a typical levy. But I don't know that for sure. I'm just perceiving that that's why there isn't a pushback hide. And also the -- there isn't a huge push because we are approaching this -- from a balance perspective, we're not hiking the prices suddenly and a porobalicfashion on an accelerated fashion. No, we're doing it -- actually, we're putting a cap on some of them. So therefore, just for continuing that relationship and the lifting. At the end, we don't want to have a demand destruction of course.

But yes, I think partially, but like in a way that, again, in terms of your ability to produce, do you think you'll be able to sell this year, even with the higher pricing?

Can you clarify the question.

Okay. So like right now, you're obviously expecting 1.15 million base oil production. So roughly you think you'll be able to sell whatever you produce despite the higher pricing in a way?

Of course, yes, we're going to be able to...

Like there is no demand destruction that you see that you'll have to give some discounts to make the sales.

No, no discounts to make the sales. There are areas to explore markets. There are agreements and the contracts that it gives in a way people to would lift even more depending on the price. That isn't yet we don't foresee that. That 1.1 , depending on Honestly, I don't think the crack margins also will sustain until Q2, Q3, Q4. They will change. They'll need to stabilize.

Yes, definitely, if things normalize then from Marcia.

You'll have just a noise of a spike in 1 quarter or maybe 1.5 quarters, then it should normal us.

Thank you, Mr. Para. Moving to Mr. Fawad Khan. Please step forward, Mr. Fawad.

I have 4 questions. One is basically the question that I have carried on the kind of follow-up, a question that I have is basically shutdown was primarily planned for August 3rd quarter. And this even happening in first quarter and the second quarter, are you expecting any change in time line for the shutdown for the linkup of the got facility?

Okay. So your first question is related to the shutdown in August, which we communicated in the guidance of the annual production. So far, there is no change in plans. We expect it to take place as is, and we are monitoring the situation closely with our growth projects team.

So I mean, given the margins where they are looking to kind of delay the shutdown and benefit from the higher-margin environment currently? Or you take decision once you reach the and could decide on the shutdown?

Okay. Mr. For. Just let me maybe carry on from what Mr. President said a couple of minutes ago. So what is currently taking place in the market is quite the opposite. There is a shortage of supply that Luberef was able to benefit that little bit of was able to benefit from due to being a pure play basal producer. However, if we look at the forecast because it is the best judgment that we have on the table currently. Mr. Present also highlighted this. It's not it's being updated as we go, but the current forecast is expecting some sort of normalization after Q2. So that's another factor that we take into picture and maintaining our current plans for [indiscernible].

But of course, if the crack margins continue and we're not going to be married to this date. But at least, we will be agile and flexible to create and capture value during these volatile market dynamics. So we will make that decision very -- and then maybe coming a month or 2 to really have a better understanding if it's August is go time, which is per the plan or that --

From -- if the company decided to basically delay the shutdown, so in terms of the coordination with your parent company for the feedstock would be obviously the angle to look at would be the decision factor. Or the company can decide on to just tell the shutdown and the con take care of the whatever feed stock would be available to...

If that's going to be the case, we'll update our guidance accordingly. -- on that or give out more of a clarification on the shutdown date going forward. In terms of the feed supply agreement with the parent company -- parent company is very flexible and as well has a lot of redundancy as well in their system. So it shouldn't be an issue for us.

The latest citation suggest that the progress on the go-to projects. So is it possible to complete remaining 30% -- 29% of the project in the next 4 months or so, assuming that the guideline is based on from March 31.

So if you're asking about the project completion percentage, I would say the project nature and acceleration of the percentage as the project nature requires a shutdown. For example, we were able to execute during the past shutdown, major project equipment, major components of the project and very high percentages in a month, which is unusual for a project's progress, but the nature of it is you require a shutdown for it to progress. So you will probably find us maybe 80%, and then we're seeing a shutdown to do the remaining the 20%, something like that. But you would need a shutdown for it to progress heavily or the framework of the scheduling we have.

Okay. Second to explore is basically the volume. The guidance was 1.25 million tonne in the start of the year. No, we have 1.15 million tonne as a guidance. I'm just curious whether the cutdown in the production guidance just based on the performance of the really you or the overall facility post turnaround time or also there are some more component like supply of the you call it VDU or some other component feedstock, which has impacted the overall guidance for the production?

Okay. Mr. Fawad Khan, if I understand your question correctly, you're asking which unit, if possible, was the main contributor to this stabilization -- so long story short...

What has led to the drop in the production guidance for '26, whether it's just the post turnaround issues, technical issues or there are some other issues that we should be aware of?

So the main contributor was the first that you mentioned. We just came back from a turnaround, the biggest in the company's history. The first 1 since beginning of 2019, where measures core was carried to change different catalysts in different units, such as the izodaxer, sulfur recovery, hydrogen manufacturing, et cetera. That, in addition to completing other scopes in different units. Typically, it took some time to get the refinery up and running again. And usually, in such times, no 1 -- I mean from an operational perspective, can give a guarantee how long it will take to stabilize everything post the turnaround. That was the observation that we received. Coming to the second point, which is the change in quality. Like I said to Mr. Ilder from HSBC. It's not a fixed stream in the sense that it's like a crystal clear. We get some changes. We had some changes in the past due to different characteristics. The most important thing is that we have a secure stream to produce base oil. Different changes are usually overcome and compensated by changing the refinery conditions internally, such as pressure temperature, et cetera. Such changes take time depending on the change of the expected change in the feedstock quality. But the main reason is the major one, which is the coming from the turnout.

Okay. One last question is on the export prices. Just kind of a follow-up question on the previous question. You mentioned the -- on your website, the prices for the month of Upwell were updated payment before the close of the month of April was, there was 4 left before the bases were updated. So I'm curious if the average prices used for the export based on, let's say, 15 of last month, 15 of current month? Or is -- how do you actually do you price your export or versus based on some kind of average 15 days of average 30 days? So that would be my question.

Fawad, if I can take that question. So that depends on the agreement between customer to customers. But in general, it's a mean of average of 1 of the month. So it's However, maybe some customer have a different way of agreement, but this is the general idea, yes. So we take the mean of the average of certain indices as upon agreed with the customer on that. It's not like 1 day specifically, it's of the period of these.

So what -- I mean period is, I mean past 30 days out of 45 days or just last -- for the month of let say, if you are basing export cargo in 21 st of May, so the price would be based on the April average or there would be some other agreement?

Again, it depends on the agreement with customers. It's difficult to disclose that for every customer of now. But it depends on the agreements. But in general statement, it's the average of the month of the sale.

Thank you, Mr. Fawad Khan. Moving to a written question by Mr. Yasser Alnejaimi, I apologize if I must announce the name. The question goes regarding the byproducts components, which was the main reason to have a good results in Q1 2026 year-on-year, where crack margin of base oil was declining. How much contribution of your byproducts sold at market price or at cost to Aramco because the support from the byproduct was impressive.

So again, as we mentioned earlier that some of the -- we compare our byproduct during the first quarter with the previous quarter or even with a similar quarter last year or even with the total average of the byproducts last year, -- all of that, we see an incremental and increase in our byproduct. And yes, it played a major role in our posted results during Q1. We had comparing to around $70 per metric tonne during first quarter. So that has helped much in that area. Most of our products, it depends on the nature of their product, each product habits on pricing. So it is that -- the average byproduct that helped us during that quarter.

And it is a part of the guidance, yes, we look at by products, but -- and the whole thing because it was impressive because the sudden movement that took place in the oil market and the diesel and the cracks are high, very high. I mean they went quite substantial. By the way, at times, we have negative crack margins on by products, such as I think it was a Q4 in 2025. It was negative. We've announced that. 12 months of 2025 is also around negative crack margins. So -- that's why you don't rely on the byproducts tremendously. We're a base oil company, and we focus on that. That's why our guidance stick to the base oil crack margins. It's just -- I think it's just better for the forecast. Of course, we would have to factor in the sudden movement are frequent and now geopolitically, of course, yes, you'd have to factor this to your models.

So by this, we conclude the question back to asset management -- Asset management, [indiscernible].

Yes. If I may just a 1 follow-up question. This is just a further clarification on something you mentioned earlier. You have said that you do not want to cause any demand destruction and our only going to pass down the increase moderately and you even talked about putting a cap. So does it mean that perhaps you may not realize the realized prices as what is suggested by perhaps the indices against which your contracts are linked.

No, no, that's not the case. The contracts have already been signed. What I meant is this weekly thing, we have to -- when we sit down and discuss and have a judgment on the prices. We don't want to go extremely high. So when I say a cap, I say cap some of these products because we know these dynamics of that product is for that month only or for that a couple of weeks, 2 weeks only and then we would go and post a different price. As you can see and you could look at our posting prices, the role has been increasing. It could have been, yes, you could argue saying, yes, you could have increased more and more. And yes, that's true. We could have reduced less. But I don't think that's the nature of the business. It's a relationship business. Going forward, do you need to maintain these relationships plus we don't want to go and hugely increase for any demand destruction going forward.

Okay. So basically, what we see on your website is a fairly good reflection of the actual prices that you are going to realize eventually.

Oh, yes, yes, yes. What you see the website is the -- of course, that's part of the transparency. We've done. That's where a good proxy or indicator as you look at the website. And if changes do take place, you could factor them in your model.

And if I may add 1 thing here in this content. That also we have noticed that our -- whatever we are producing, we are selling. So the demands of our products are there. We -- at Luberef, especially in Q1, we didn't see any pushback. We have managed to sell our production, which means it translates that also our pricing mechanism was correct pricing mechanism that do not push the customer for other markets or other products from other suppliers. So that helps us also to continue our pricing for those projects.

There are no further questions available at the table. We thank you for your participation today, both verbally underwritten terms. Please note that Investor Relations team at Luberef is available for this week, [foreign lanaguage], we will upload all the documents to the website as usual, and we are available for any follow-up calls and meetings. Thank you.