Shell Oman Marketing Company SAOG (SOMS) Earnings Call Transcript & Summary

I think we can start. I think everyone is [indiscernible]. So good morning, everyone, and I hope you can also see the screen. Can you also confirm?

Yes, we can see.

Okay. Fantastic. So good morning again to everyone, and thank you for joining us today. Before we get into our discussion today, I just want to make sure that everyone takes this call in a safe place. So on behalf of Shell Oman Marketing, I would like again to extend our warm welcome to all of you. Today, we will provide an overview on our business performances, key priorities and achievements for the first 6 months of 2026. This is how the agenda will look like. So we would spend the first 20 to 30 minutes presenting to you, different business performances from different lines of businesses of Shell Oman Marketing. Sorry. And the second half of the session, we will actually allow for any Q&A. So if you have any questions, leave it to the end. [Operator Instructions] So again, thank you for joining. Despite, actually, we have been operating in a very dynamic situation, Shell Oman Marketing continue to deliver resilient results while actually still focusing on safety, operational excellence, customer value and sustainable growth. And let me start actually what really matters move to Shell Oman Marketing, which is safety, safety of our people, to our contractors, partners and the society and the environment we work at. For the first 6 months, actually, the company has scored outstanding results when it comes to safety, so 0 harm to people and 0 process and safety [ leaks ]. This, as I said, reflects the commitment and the safety culture Shell Oman Marketing is working at. Some of the key strategic focus, performance risk and management. We continue to enhance our HSSE performance through different proactive measure risks and workforce engagement as well as strengthening our operation and disciplined critical control effectiveness and a culture of continuous improvement across different line of businesses of the company. In terms of assurances and disciplines, we have completed a number of risk-based HSSE assurances across the company that actually has provided the company as well as the management with confidence in terms of the effectiveness of the control process the company has. And that has helped us to continue achieving our goal 0 in terms of safety. In terms of simplification as standardization, we also continue to enhance our HSSE efficiency and operational effectiveness through simplification and standardization of key processes as well as strengthening departments, compliance, action management and workforce engagement. Looking ahead for the next 6 months, our priority will continue to protect our people, achieve goal 0, make sure we actually maintain our process safety as well as enhance our contractor HSSE and assurances culture. As well as finally, strengthen our operational discipline, emergency preparedness risk and risk management across all the line of businesses of Shell Oman Marketing. With this, actually, I will hand over to our CFO, Lamees, to take us through the financial performance for the last 6 quarters.

Sorry. Thank you, [ Mahmoud ], and good afternoon, everyone. Thank you for joining us today. And I'm pleased to take you through the snapshot of the financial performance for the first half of 20...

I hope it's audible, team? Just to make sure you hear Lamees clearly?

Yes.

Yes, we can. Yes, yes.

So thank you for the confirmation. And I'll be -- over the next 10 minutes or so, I'll be taking you through the snapshot of the financial performance for the first half of 2026. The detailed financial reports are available in the MSX website after being endorsed by the Board and the Audit Committee through the end of July. On a quick note, if you look at the slide in front of you, you would see that we continue to deliver strong profitable results and sustainable performance, building on the promise to our shareholders to continue delivering strong results to them. Now when we look at the revenue for the first half of 2026, we delivered about OMR 259 million, and that was about 9% higher than the same period last year. The 9% growth reflects overall revenue growth and volume growth across different business segments and also a stable [indiscernible] on our strong core of customer base that we have. If we move to the gross profit, for the period, we have delivered OMR 17.6 million. It was in line with the same gross profit that we have reported in the same period last year. And if you look at the trend of the last 5 years, you would see that we have continued maintaining our promise to the -- to the shareholders and to the investors community, of maintaining despite the pressure that you might believe Mahmoud was referring to earlier in the discussion. So the competitive landscape that we operate in locally, but then obviously, coupled with the geopolitical tensions that we have seen, which has escalated to a great extent in the first half of this year. So some of our business lines are correlated with the activities that we see being impacted in logistic routes, transportation activities as well as certain grade sourcing from outside of Oman, which has squeezed the margin for certain parts of the first half of 2026. So despite that, and building on the strong revenue growth that we have reported, we have maintained our gross profit at the OMR 17 million range, and the gross profit percentage has been maintained as well at the 7% range, which is ahead of the industry. If we look at other income, for the first half of the year, we have delivered about OMR 2.3 million in other income, and other income is basically noncore fuel activities that we have across our service stations and few other business lines as well. So building on the previous discussions we had, there was interest from the shareholders and the investors to understand what is in other income. So these are the conventional or convenience retail activity, car care center activities that we have and other value propositions that we offer in the facilities that we have across the country. So 3% growth in there, reflecting on our continued focus in the segment and also proving once again that other income continues to be a very strong contributor and pillar in our overall profitability. In a bit, my colleagues will be going through the detailed activities that took place and were conducted in every line of business. So [ Suresh ], maybe you can shed light on some of the activities that happened in that space. Moving on, we continue our focus and our discipline in cost management. So in spite the 9% revenue growth that we have reported, despite serving a bigger base of [indiscernible] and despite inflation and escalation indexes that we have generally across our contracts, we have maintained our cost base almost in line with the same level we have been operating with in the first half of 2025. A lot of cost containment activities, a lot of cost optimization initiatives across our contracting activities, across our maintenance activities and across how we conduct business in general without obviously compromising on operational excellence, HSSE as our employee wellbeing, which continue to be the fundamentals that are noncompromisable for our business. If we look at financing costs for the period, we've actually delivered 10% lower financing cost managing a bigger business. So we continued optimizing the working facilities and the banking facilities that we have. We've put in a lot of effort to improve working capital elements in general, so improving and optimizing our collection from the market, which has given us a bit of a breather in financing costs. So overall, 10% reduction data, which is about 200,000 or so in terms of absolute value. Our profit for the period was OMR 3 million, so 5% growth year-on-year. Our EBITDA stands at around OMR 4.8 million, but it actually has translated in higher [indiscernible] tax for the period. Maybe on a final note, our ROACE continues to be within the range of 10%, reflecting the continued work and focus we do to deploy capital and to manage shareholders' liquidity and cash with a lot of focus. So we have been deploying cash where we think and what we believe is absolutely required for us, but then we've maintained our overall return on average capital employed in the range of 10%. So that's it in very high levels, and I'll be happy to take questions towards the end.

Thank you, Lamees. So let me now hand over to [ Suresh ] for [indiscernible]. Suresh, over to you.

Thank you. So we've had a very exciting 2 quarters in 2026, seeing mobility volumes at our retail side is not only a return, but grow actually at very exciting rates, which we have not seen over the past 4 to 5 years. This has been mainly attributed to 3 factors which we are seeing internally and 2 factors externally. Now the external factors which we are seeing contributing to this growth is the -- continues to be [ ELT ] growth in terms of vehicle population, population distribution, but also fuel consumption in general for people's mobility needs. But the second one is with the current regional climate and some of the supply chain interruptions which we saw, especially towards the end of quarter 1 and quarter 2, while inherently impacting some parts of the business, there were inorganic opportunities for us also to capitalize with the condition that to make our supply chain more effective for fuel deliveries. And through that, we were able to capitalize on immediate opportunities which we saw, especially during the March to May period. Now internally, with the business, we have taken many first steps in the first half of the year. We've introduced Shell V-Power proprietary racing fuels, and that's a 98 [ run-based ] fuel for the first time, not only in Oman, but in the Middle East. This is Shell's best grade fuel, actually recognized worldwide. And because of the introduction of this fuel, we're noticing a lot of excitement around the whole V-Power portfolio, which we have, and creating a lot of excitement around that. We married this with some strategic partnerships, especially with car clubs, notably [ Supercar Modulus, BMW, GTR Oman ], as well as a branding arrangement with the Oman Automobile Association. We would have seen the launch at the OAA, but following that for a healthy period of 3 months, we would have seen the partnership advertisements to improve brand visibility, again, to build people's trust and awareness, but also build people's love for the brand, and we are seeing that translate to a healthy growth in our V-Power and V-Power Racing portfolio. We continue to expand our retail footprint in terms of retail sites. We expect between 2 to 4 new sites this year. We're expanding our Shell Helix Oil Care at car care centers footprint this year between 6 to 8 total additional sites as compared to 2025. This includes car washes, car washes as well. We are expanding our Shell Cafe locations, now to over 50-plus locations. We're also like a plug-in model, which means it doesn't have to be a full-blown Shell Cafe, but it's actually done in pockets where it's smaller in terms of footprint, but yet able to serve our customer needs, for example, in terms of drive-thrus. Lastly, in the place of the energy transition, we launched during the Oman Sustainability Week, a first of its kind battery swapping solutions for [ eBags ]. This was a partnership with [ BYOD ], who are the suppliers of both the bikes and the batteries, as well as Talabat, who is the delivery provider. Today, you will see on the road anywhere between 20 to 30 delivery bikes, and this will be expanded over this alternate in the next year or so, up to 1,200 bikes, which ultimately ride around with the charged battery, proceed to our Shell station to where they can swap this battery out and proceed on to their delivery journey, both making their logistics more efficient, but more importantly, reducing the cost of operation, but also the carbon footprint. We are looking further to expand such partnerships in the B2B space to look for e-mobility opportunities in that segment as well as seeing inorganic growth areas we can pursue as a company in the energy transition. In the closing, we're expecting a very vibrant second half of the year with all of Oman's macroeconomic indicators pointing us in the right direction for the retail segment. We are expecting a lot of further headwinds as a result of the regional crisis which is happening. But as an organization, we've also built a stronger learning muscle in terms of not only how we withstand and grow during this difficult period, but really thrive, and that's our aim, to thrive in the second half of this year. With that, I'll pass back to Mahmoud for the next business.

Thank you, Suresh. Let me move to [indiscernible], lubes GM.

Thank you. Good morning, everyone. So for lubricants, definitely, quarter 2 was quite an exciting quarter. So lots of disruptions in terms of the logistics outlook, and that is now seen to continue. However, the good news is we've been able to show great resilience around the business from the manufacturing standpoint, but also in terms of the changes of the structure of the supply chain on the routing. So far, we've been able to entertain and fulfill most of the local brands, including the premium, which is quite constrained as well. And on top of that, we've been able to sustain our exports in the Middle East region, with some volumes also flowing to India, Saudi Arabia and the Egyptian market. On the local front, I think we've been also able to make quite improvements in the digital channel, which is the [ Shell Share ] app, which is targeting trade B2C customers around lubricants. So in the first half of the year, we have actually overachieved and we have crossed past the volume of -- the total 2025 volume that was transacted on Shell app. In terms of customer operations, we've been also able to continue the digitization journey. So we've also migrated some of our systems to Microsoft platforms, which is also driving more efficiency, cost improvements, but also enhanced customer experience. In terms of the outlook, expected outlook for lubricants supply chain has remained to be constrained, especially on the group 3 base oils, which are premium grades, with also the latest news around [ Bab El-Mandeb ] being closed, logistic routes remain to be again challenged. And I think now on probably a weekly basis, we are in exploration of new routes, whether by road or by sea or by air freight. But also this current challenge is also opening lots of opportunities in terms of potential new markets for exports, in terms of also sourcing and most importantly as well formulations of products. So I would say to sum it up, it's been quite exciting. We're showing lots of resilience. There is a lot of brainstorming and solution development on the table at the moment. Some of these have realized, and we are actually enjoying the outcomes of these in Q2 and Q3. But also, there are lots of ideas to stay tuned and look forward to. Thank you.

Thank you. Moving now to Low Carbon Solutions.

Thank you, Mahmoud. Good afternoon, everyone. Happy to take you through the Low Carbon Solution highlights. Starting with HSSE. [indiscernible] achieved exceptional HSSE performance with 0 fatality, 0 leak, 0 significant incident, demonstrating our strong commitment to HSSE and operational excellence. Moving to the aviation and marine fuel and lube businesses demonstrating higher resilience and agility despite ongoing contract on the region. For the aviation specifically, we maintain the jet fuel supply in both locations, [indiscernible] for our domestic and international airlines. In addition to securing new contracts with our international airline visiting [indiscernible] with the help of our global operations. Moving to the marine and commercial fuel segment. We retain number of contracts, here, B2B customers from both government and private sectors. In addition to that, we are sign multiple contracts with new and old as well customers from B2B as well as development and private customers. In addition to that also, we're enhancing our volume growth with our current local SMEs resellers for both commercial and marine freight. Going forward, we are continuing our focus on goal 0, the efficient [ confines ], our operation excellence. And in addition to giving a special focus on optimizing our [ profitability ] court, expanding new business opportunity for operation and finance opportunities, growing our profitability through strengthening our future pipeline and looking for new contracts, in addition to ensuring the cross business synergy within some different businesses. Last one from [indiscernible].

Thank you, [indiscernible]. And before I can conclude our business performance, let me take you through our corporate social responsibility. Our long-term success goes hand in hand with what we actually providing, supporting the local community. Our CSR certainly remain focused on 3 areas, which is environment, health and community skills and enterprise development. This is in line with the needs of the communities in Oman as well as with Oman Vision 2040. Some of the key highlights in [indiscernible] is entrepreneurs. So recently, through the program of Shell [indiscernible], we provided different skills development, business support and market access and opportunities to those young women to our some selected Shell Select stores across Oman. In terms of supporting SMEs, through our collaboration with the Oman Chamber of Commerce Industry, we offer visibility and retail growth opportunity to also some of the Oman's SMEs. In terms of supporting future talent, we actually sponsored and support student from the German University recently to urban [indiscernible] [ Doha ]. This is to spread the sustainability awareness [indiscernible] forage innovation. In terms of youth development, we just concluded at 3-year sponsorship with [indiscernible] Oman, contributing to youth development and sustainability-focused skill training with over 11,500 spend across Oman and across the last 3 years. In terms of community engagement, of [indiscernible] cancer health engagement, we actually -- business can be as -- we are working with the Ministry of Health to support the national community nursing program, again to spread the health services across Oman. In terms of community engagement, we delivered a number of safety awareness initiatives, including HSSE and first aid education also across different cities in Oman. Looking for the plans and for the second half of the year, we will continue to focus on sustainable and long-term social impact across different regions in Oman. We will strengthen and maximize our different partnerships. And we will further incorporate our [ in-country ] value through all the CSR activity across all the company's supply chain through strategic long-term steps and plans. I think with this, we have come to the end of our business performance presentation.

Now it is the time for Q&A. [Operator Instructions]

Can you hear me?

You're audible, but whoever needs to ask a question, can just go on unmute themselves.

Can you hear me?

Yes, we hear you. Can you please say your name and which company?

Yes. Yes. My name is [indiscernible], and I am research analyst at [indiscernible] Capital. So I have a couple of questions, if you allow me.

Go ahead.

So what is the total sales of MS of Shell in Oman in volumetric terms?

We talk about total MS sales? Can you elaborate?

Yes, yes. Total MS sales.

Can you elaborate more?

In volumetric terms, what is the total sales, on annual basis or on a half year basis, if you tell.