Shell Oman Marketing Company SAOG ($SOMS)

Good morning, everyone -- can you hear us. So I would like to thank you for joining and participating. [Operator Instructions] can you hear me, everyone? So good morning, everyone. Again, thank you for joining. Thank you for participating in our first Investor Relations session for 2026. Just a quick reminder on safety wherever you are, whether you are at home or at work, make sure actually you are in a safe place while dialing in the school. Otherwise, if you are not, you can exit your code. So this is the agenda of today's session. We will actually go through business highlights for 2025 by each respective GM. That will take us around 20 to 30 minutes. And we will have another 30 minutes for Q&A [Operator Instructions] So let me start with the HSSE, health, safety, security, environment. The company has successfully ended 2025 with exceptional HSSE performance. In terms of strategic focus, the company's strategy was actually based on 3 pillars: number one, performance and risk management. We drove operational excellence while mitigating critical risk such as delivering an outstanding zero incidents record in road transport and safety commissioning the dosing process within mobility operation. The second strategic pillar was around assurance and discipline in terms of strengthening compliance through different audits reviews and robust implementation such as delivering annual insurance program focused on risk based, including the first assurances on site traffic, contractor safety, food safety, road safety process safety as well as environment. Strategic #3 was on the simplification and standardization streamlining the process through risk based approaches for efficiency and sustainability, digitizing the assurances and training programs for mobility operations to enhance competency and [indiscernible] assurances. Additional and interested in digital tool that support tracking and monitoring emissions are [indiscernible]. Overall the achievement was driven by a series of initiatives and programs focused on health, worker welfare, contractor safety, effective incident planning, emergency prepared assurances, compliances and security. So that was more of key highlights of 2025. The focus and the plan for 2026 remains on zero harm for people safety, zero late for process safety as well as in terms of contractor such as fee assurances and safe fuel deliveries. With this quickly, I'll move to our CFO, Lamees Al-Lawati to go through the financial summary.

And good morning, everyone. Thank you for joining us today, and Ramadan [Foreign Language] for whatever is remaining of the Holy month. Part of the agenda today, like Al Shidi has mentioned, is an overview of the financial performance for the year ended 2025, followed by business highlights and an overview of the business achievements in the individual business lines. The financial overview that will be presented to you has already been audited by our external auditors has been -- the detailed financials have been disclosed and published in the Muscat Stock Exchange around mid-February, and the financials were also endorsed by our shareholders in the AGM that took place yesterday. As the numbers show in front of you, the 2025 year has been an excellent year for us. We continue to deliver on our growth strategy, and we continue delivering on our promise to the shareholders. Like I mentioned, my colleagues separately will be sharing the business highlights, but in a high-level overview. During the year, we have opened 4 service stations. We have introduced different products and offerings, whether in the nonfuel retail segment of our business or whether it's in the product line with several differentiated fuels offered and introduced in the market. We have expanded our presence in Oman through new contracts that we won in the B2B space, but we've also expanded our presence in the external market as well through our lubricants export business. Our revenue remained stable at around OMR 490 million level, broadly in line with the same value that we have delivered in 2024. But most importantly, our gross margin grew by 4%. That's straight OMR 1.3 million growth that we have delivered, supported by the strong product mix we have and margin optimization, which reflects the quality of the products that we offer and we sell and the value that we continue to deliver to our shareholders. Our gross margin percentage, as you can see, has grown. So steady growth over the last 3 years from the 6.8% level, and we have reached and crossed the 7% range in the year 2025. From a cost efficiency perspective, aligned with the previous discussions we had with investors and researchers, previously, we've outlined our cost optimization strategy. OpEx management continued to be a focus area for us in the year and a priority for 2025. It yielded the benefits that we were determined to achieve in this space of challenging and optimizing and streamlining costs. We have identified certain areas for us to be more competitive, ranging from remodeling certain contracts that we have, optimizing road transport costs and other technical costs. Now obviously, all the cost efficiencies and optimization that we have done were in fact changed with the principle that we didn't want to touch anything. We didn't want to create any sort of impact on our business continuity, on our operational excellence, on our employee well-being and obviously, on our HSSE performance. The number that you see in front of you might not actually give a clear indication of the full cost overview. Obviously, the details are included in the financial statements. The selling, distribution and administrative expenses line here is combined with depreciation. But if we exclude that and if we normalize the numbers, you would see that the underlying cost performance has actually been even lower than 2024 despite the inflation pressure that companies usually would see the escalation indexes and the merit increases in manpower, but we managed to keep the cost contained within the same level of 2024 despite the business growth as well. Financing and taxation, again, great performance in the financing and the borrowing cost space. Taxation, obviously was higher, driven by the higher profitability, higher margins in the year. But if we look at financing costs in isolation, we managed to deliver 12% reduction in financing and borrowing costs. It was a clear indication that Shell Oman Marketing still has access to funding and to liquidity at very competitive cost in the market. But then on top of that, it was also a reflection of all the work that we have done in the working capital management space. So like margin optimization and cost management, working capital optimization has been a focus area for Shell Oman Marketing in the year 2025. So we continued our focus on collections of receivables. We continued optimizing the inventory level that we have. And obviously, we manage our accounts payable level. So we have actually released cash, which has allowed us to reduce the dependency on external borrowing, coupled with the more attractive and more competitive interest rate that we get from the market, the overall financing and borrowing costs actually reflected a 12% reduction in the year 2025 versus 2024. All in all, the profit and comprehensive income showed an outstanding growth of 42% in comparison to the year prior to that. Our ROACE, so the return on average capital employed is another reflection of the improved profitability, but also the disciplined deployment of investments and the growth -- the selective growth strategy that we have deployed. So our ROACE for the year ended at close to 10%, reflecting a growth from the 7.9% 2 years ago and then the 8.2% number that we closed 2024. So all in all, an excellent year for Shell Oman Marketing when it comes to financial performance, growth and delivering our promise to shareholders.

Thank you, Lamees. Now let me move to Ali Lawati. Ali our acting GM Lubricants.

Good morning, everyone. So when we talk about the integrated lubricants highlights, our lubricant business continue to demonstrate strong performance in 2025, maintaining leading presence in Oman and delivering steady performance across the domestic market and the export segment as well. Our lubricant blending plant as well did focus on HSSE -- strong focus on HSSE, reliability and operational discipline has resulted into enhanced operational delivery supported by production performance and strength plant ability to meet evolving market demands and requirements. We have expanded into new markets. Further, we strengthen our regional footprint and maximize capabilities in Oman blending plant with initiatives that has aimed to protect our product authenticity and reinforce customer confidence. In consumer operations, we have also progressed through improvements in our service deliveries and our operational coordination within the departments both internally and externally. We have enhanced our workflows. We have increased our data -- we have increased our workloads using our backup driven insights supported with the great responsiveness across the stakeholders. Our plans for this year, we continue to focus on HSSE and achieve excellence and operational resilience. We will strength our premium product growth and deepen the engagements internally and externally. We will leverage our digital tools and market insights to enhance our customer experience and operational effectiveness. We will build also on our operational capabilities and innovations to support the sustainable growth and reinforce Shell Oman's leadership in lubricant externally and within our export markets as well. That's all in our integrated lubricants. We are covering both land -- lubricant supply chain and customer operation as well, and we will move to low carbon solutions with Khalid.

Thank you, Ali. So Khalid Al Awaisi, our GM, Low Carbon solutions.

Good morning, everybody. Low Carbon Solutions actually basically we are talking about 3 main sectors here. We are talking about aviation, marine and commercial fuel. As highlight for 2025 performance, we continue to position ourselves as a key player in the market across all these 3 sectors. And starting with aviation, we continue also to position ourselves as a key player in both airports, Muscat Airport and Salalah Airport. And where we managed to secure a 2-year contract with Oman Air, which is the key national carriers in Oman. Also, we secured -- and we managed to renew the contracts with international listing airlines that's maximizing through our partnership with the global Shell Aviation. When it come to the marine, while we also continue growing our fuel business and expanding our footprint, we managed to secure multiple government contracts, in particular for the marine lubricants. For commercial fuel, also will continue to expand the business and we signed multiple agreements with key B2B customer in the country. Also part of our initiatives to support local SMEs, we signed actually a reseller, which is a model we are looking to really improve our penetration to the market and also part of our empowerment to these local SMEs. When it comes to HSSE and operational excellence, our operational location in aviation, in particular, I'm talking here about the Muscat Airport, Salalah Airport and Marmul Airport will continue to register the top-notch operational excellence and the 3 locations have achieved Global Goal Zero Award from Shell Global Aviation. Looking forward, our focus area definitely will continue to drive efficiency and simplification. And our focus will remain on optimizing our profitable core by growing our footprint and expand our market share. And we'll continue also exploring new operations and financial opportunities and also grow our market share by signing new and securing new customers.

Thank you, Khalid. Let me now move to Suresh, our Mobility GM.

Yes. Thank you. Good morning. [Foreign Language] The key highlights for the mobility business in the year 2025 was anchored around a solid HSSE performance for the year. We also inaugurated a total of 4 stations, but a special highlight for last year was the hydrogen fueling station, which is fast becoming a popular destination site within Oman. This was part of the gift to the nation project, and it's a pilot and it's first of its kind, not only in the Middle East, but globally where we are fueling 15 hydrogen vehicles which fly within the Muscat region, and it serves as a pilot in terms of both realizing Vision 2040 for this alternate, but also an experiment into alternate fuels for the country in both lower and zero carbon solutions. We sustained a very strong performance of differentiated offers within the mobility business. This is around differentiated fuels, power -- the Shell V-Power Fuels continues to be a preferred brand of fuel for our customers who want better performance for their vehicles. But we more importantly introduced very recently the Shell V-Power racing as well. Stay tuned to hear more on that soon. We also introduced the FuelSave 91. This is a first of its kind fuel where it gives customers up to 15 kilometers per tank on a full fill for the regular 91 fuel. And this for our cost-conscious customers help them get better mileage for each liter of fuel. This is a differentiated grade. It is not available at any other service stations other than Shell selected service stations across the Sultanate. We are also seeing a continued build in our loyalty application. We have more customers registering on the Shell GO+ Asia app, more customers buying more, spending more time at our retail stations. And we have added on partnerships which our customers can utilize on the platform. These partnerships will allow our customers to better get offers outside of Shell service stations, and this can range from vehicle care to shopping outlets to medical facilities and so on. And we intend to grow the current partnerships to more than the 20 which we currently have on the platform. In the coming year, we plan to further expand the footprint of our Shell stations across the Sultanate. We're aiming to add between 2 to 3 stations this year, along with vehicle care centers, Shell Select, Shell Cafe and other new and exciting offerings. We also plan to bring the best fuel we have, which is Shell V-Power and Shell V-Power Racing to more service stations across the country so that the customer can experience the fuel and we also have in the pipeline value-added services for our fleet customers in the B2B segment as well. With that, I pass back the floor to the organizer.

Thank you, Suresh. Finally, let me take you through the corporate social responsibility. In terms of key initiatives and programs, the company worked with different multiple partners and associations for example the EV program [indiscernible] and the annual initiatives of supporting our many charitable organizations. We also work with Ministry of Social Development to help multiple NGOs. Also 2025, we support national level training programs done by the Ministry of Health and other implementation partners. A big focus was also placed on providing job opportunities for you as well as new strategic partnership like the memorandum of cooperation we signed with Oman Vision 2040 unit. From the country value perspective, the company maintained a high organization level of about 94% as well as working with different SMEs across different value chains, creating business opportunities for Omanis entrepreneurs and job through structure programs like the mobility operations. In terms of our plans, we will continue to focus on sustainable and long-term social impact across different regions of Oman. We will also focus on creating business value for the company through alignment our CSR and activity with the business plans and priorities. We will also maximize partnerships, different partnerships and sources through collaboration with JVs and other partners. And we will align our CSR activities with the company ESG and sustainability goals and prepare reporting in this area. And finally, further incorporation in terms of value agenda with all the CSR activities and across the company supply chain through different strategic long-term steps and plans. I think with this, we come to the end of our presentations. Now we will allow few more lines to ask questions. [Operator Instructions]

I have couple of questions. My first question is that what is the total consumption of like MS and HSD Oman and if some portion of HSD or MS is imported, so what part of -- what percentage of MS and HSD imported as tools to cater the local demand?

So probably let me highlight in terms of volume or total fuels, we don't give that split in terms of motor spirit or diesel. But just as a general proxy, I can say that for Shell, it's about 50-50, but it's circumstantial depending on season, customers and sectors which we service. The second, I'm not sure if I heard the question correctly in terms of whether we import or source it locally. But for Shell at the moment, all our fuels is sourced locally at the government refineries.

I think it's worth mentioning. So the voice was sitting honestly. I couldn't hear the question properly. But then the question was about the specific fuel grade, like Suresh has mentioned, majority of our fuel consumption and fuel supplies is sourced from the local refinery. Now if this question was driven by the company's readiness for any sort of response in case of crisis and crisis management, we'd like to assure you that the -- there are plans in place. Obviously, there are no concerns at this stage. There is no risk that we are worried about. But then in case of which the company also has license to import products from outside of the country. So that license is there. Our value and our preference is not to use it at the moment because of our focus on the integrated value chain and the in-country value. But in case of crisis, in case of emergency and in case of any viable business opportunities, we can activate that license and we can use it for import services.

Can you also tell me what are the total number of Oman's operating ones and if you also can tell how many are the company on a company operated terms.

On the station specifically?

You mean the service stations, right? Petrol station.

Yes, for petrol station.

And what was that -- what was the second question? Sorry? Your voice was breaking up a little.

Sorry, second question was out of 216, how much pumps company is operating.

So when you say company operating, we operate the stations via operators depending on the contractual relationship. But we have a segment of these stations, which are dealer owned. I mean the asset is owned by the dealer, which at the moment is a very small percentage.

So mostly pumps are company owned and company operated?

Correct.

My second question is that what is the share of lubricant in the total company sales? And if you can also tell what are the gross margins on the lubricant portion.

So I think this is a repeated question that we get usually on the segmental profitability. And because of the competitive nature of our business, because of the limited scale and size of the operators, we usually refrain from sharing competitive sensitive information apart from what's already provided and shared in the annual report. Lubricants, however, continues to be a very strong segment for Shell Oman Marketing. In terms of volume scale, it is significantly lower than fuel. So just to give you an overall feel of the size of operations, around 2 billion liters that are sold by the company annually, Lubricants is much, much lower than that from a volume perspective. However, from a profitability perspective, and given the nature of the regulated market for fuels, you can imagine that lubricants profitability and margin scale is significantly higher. So from a volume perspective, very small percentage. But from a margin perspective, it's a very strong contributor to the bottom line.

So we have 3 questions on teams. Let me read the questions. So the first question is the industry, including your peers, witnessed margin improvement in 2025. Was there any change in the industry that caused this expansion?

What caused, what sorry?

Expansion in margins in 2025. So our peers have witnessed increase in margins. So can we model...

So from an industry perspective, yes, indeed, the industry has growth, a modest growth, I would say, at top line and a 28% overall growth in the bottom line, out of which Shell Oman Marketing share was 42% growth. So in fact, we have overtaken and we were ahead of the overall industry growth. And has there been any specific change? No. So the margin scale remains as is. The market continues to be subsidized by the government, regulated by the government as well for the majority of the businesses that we operate in. So the bottom line improvements that you would see usually wouldn't come from the top line growth, 2 factors would contribute to that is other revenue and cost containment. So like we have seen across the industry, there has been a lot of initiatives to improve the competitiveness of the operations, and we have demonstrated that in our numbers as well.

Yes. So the second question, would you be able to elaborate on market scenario? Are we seeing demand saturation?

Okay. So I presume this question is around the fuels which we service via the service station. So of the B2B business. In short, we are seeing that fuel growth is growing at the pace of about 1.8% to 2% on average for the year. The full split by segment will be known and the government publishes the data. But from the monthly data which we see, it's ranging between 1.8% to 2%. And for Shell specifically, we are growing in pace with the industry.

We will continue with the last question from Vivek. Can you provide guidance on additional fuel stations over the next 5 years?

Okay. So for this year, I've mentioned that we plan to add at least 3 to 4 service stations over the course of 2026. The growth plans for the coming 5 years rolling up into 2030 will be done in line with industry pace of growth, which I've mentioned just now. So you can sort of reverse calculate and see what would be a sensible amount to add. But let me qualify that. The -- although the industry is growing nationwide at about 1.8% to 2%, we are focusing our efforts on highly developed or potential prospect areas as well. And we are focusing our investments also on high-value, high-yield, high-return locations, yes. So some different sort of placements of investments will be done in steered by government investments and projects for development, but we'll also be making investments, for example, in vehicle care, stand-alone Shell Cafe' where it makes sense and not necessarily only to a few service station.

Thank you, for the good question. I think Rauf Amir, do you want me to read your question or you want to go unmute?

I have a couple of questions more. Sorry I'm taking more time. In case of rising prices that we have witnessed in last week. So my question is how the price in Oman is calculated, the price is fixed in price, either the price is fixed for the customer, but in case of rising prices, the subsidy portion will increase. So will this flag the cash flow issue like you have to collect the subsidy from the government?

Not that we are anticipating in the short-term future. Our prices are also tapped to the government. If at all, I think the impact of this would be a nationwide impact and probably it will be discussed at the country level. So we're not in a position to make any sort of statements on behalf of the government. But at this stage, we don't foresee any risk factor impacting the company.

Okay. What is the subsidy like in price today? If you can tell us the product wise, what is the total subsidy price in Oman per liter, if you can tell.

Subsidies -- so maybe for simplistic sake, yes. The Oman context is very different from even some regulated oil companies in other countries. Quite simply put, we are not involved in the subsidy buildup or neither do we make projections of what is the subsidy basis on a cost-plus basis. Quite simply put, the oil companies or the oil marketers, et cetera, are paid a fixed regulate -- to regulate the margin. So I won't be able to comment. I can hypothesize based on $80, $100, $120 barrel, what is the level of subsidies the government is incurring, but I can't comment on behalf of the government. Why? Because -- so it's not a subsidy recovery model which we are getting. We are getting a regulated margin being paid.

My next question was for the margin actually. Was it the...

No issue, please.

What is the margins? If you can tell on different product lines HSD and petrol, what is the margin?.

Yes. So to keep it simple at high level, the regulated margin in the retail segment is 13.5 in total, which is distributed between the oil marketing companies and the operators themselves, yes.

Any more questions team. So far no more questions. Is there any final question from anyone. So if there is no more questions, I think we can close the session. And again, thank you for joining. Thank you for participating.