Tanmiah Food Company (2281) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome to the 4Q 2024 Earnings Call of Tanmiah. Today, we have with us the senior management of the company, led by the CEO, Zulfiqar Hamadani. We also have with us CFO, Irfan Nagi; and Chief Executive Officer of ADC, Marcos. Without any further delay, I would hand over the mic to the management. Over to the management.

Thank you very much, [Foreign Language], and good afternoon, everyone, and welcome to the 2024 earnings call of Tanmiah Food Company. Our thanks to Al Rajhi Capital for hosting this call. My name is Zulfiqar Hamadani, and I'm the CEO of Tanmiah. I'm joined today by our CFO, Irfan Nagi; CEO of ADC, Marcos Delorenzo; and our IR Executive, Michel. We published our financial results on the 16th of February, which you can view on the Saudi Exchange website or our own IR web page. You should have received a copy of this earnings presentation directly. If not, it will be published on our website soon or you can contact our Investor Relations team directly, and we would be happy to share a copy with you. I would like to remind you that as a listed company, we are bound by regulatory requirements regarding forward-looking statements and therefore, won't be able to give forecast for future financial performance. Please refer to our disclaimer statement on Slide 2. After the presentation, the management team will be available to answer any questions that you may have about Tanmiah and our financial results. I will now take you through some of the most prominent highlights for the period. We are glad to be witnessing another key milestone in our journey, which has spanned more than 60 years by achieving a robust financial and operational performance in 2024. This was the result of our continued focus on optimization, operational excellence and capacity expansion. For fourth quarter, revenues increased 19%, and we sustained our solid margins during the quarter with gross margin of 26.1% and net margin at 3.9%. For 2024, top line performance remained strong, increasing 23% due to a number of factors that have come into play. These include higher sales volumes of fresh poultry, focused marketing, product and channel mix optimization and Popeyes store expansion. It is also worth highlighting that we have continued to make good strides in terms of our strategic expansion plans with an increase in our production capacity to 550,000 birds per day by end of 2024. Our restaurant operations have sustained their growth trajectory with revenues rising 60%, and we marked the conclusion of 2024 with 81 operational outlets. We are glad to be expanding the footprint of Popeyes across the region with the opening of 2 stores in Bahrain in 2024 and the first store in Kuwait opened in January this year.

I'm sorry, Zulfiqar Saab, the slide is still on table of content right now.

Just give us a second.

Yes, sir. You can continue.

So we are good?

Yes, now I am able to see financial overview, but it's only the [indiscernible] presentation mode.

Yes, it's in presentation mode, but it's -- I cannot see any -- it's just says financial overview slide.

So are you on the key highlights now? You can see the screen?

No, I cannot see the screen.

Yes, now we are on the key highlights.

Okay, great. Excellent. My apologies to everyone for this technical glitch. We are good farmers, but probably we need some IT help but thank you, Michel, for overcoming it. So in key highlights, I was at ESG, which is at the core of everything we do and we are marking another key milestone in this regard with the publication of our 2023 sustainability report in 2024. Animal field -- Animal Feed and Health revenues grew 62% year-on-year, 16% came from [ MDP ], which is our new joint venture with MHP. Sustainability and ESG practices remain at the core of our strategy and 1 of the 3 pillars of our philosophy. Tanmiah has successfully launched its 2023 sustainability report in 2024, which is an important part of our sustainability journey. We are indeed proud to be setting the standards in the food industry for environmental, social and occupational sustainability through successfully attaining the highest ISO certifications in health and safety and environmental management. Our focus at Tanmiah is to expand the scale of our operations and generate long-term value to our stakeholders through balancing our growth ambitions with our responsibility towards the environment and our communities. We have continued to explore several avenues to enhance our ESG program and ensure that we execute our strategic growth plans in a sustainable manner. For example, we are collaborating with Saudi Green Initiative in order to plant 10 billion trees with the ultimate objective being to reduce CO2 emissions and support important initiatives under the Vision 2030 umbrella. Furthermore, we recently signed an MoU with [ Mara ] to enhance our R&D capabilities and explore opportunities to develop nutritious products for our valued consumers, including vitamin D enriched products. Tanmiah continues to focus on implementing the latest cutting-edge technologies across the supply chain. In this regard, we have launched Track and Trace system to enhance visibility on our logistics and introduce IoT in farming to improve animal welfare and efficiency of our operations. Our wide-ranging endeavors to drive our ESG agenda have been recognized by a number of reputable organization. For instance, we received the highest ISO accreditation for EMS 14001 which lays the foundation for our environmental data and targets in 2025. Additionally, Tanmiah achieved the highest BRCGS AA+ International certification in protein industry in Saudi Arabia. With that, I would like to hand over to our CFO, Irfan Nagi, to take you through our financial performance during the period. Irfan?

Thank you, Zulfiqar. Let's now discuss the financial performance of Tanmiah for this period. We are proud to be reporting our strongest financial year-to-date in 2024, supported by operational excellence, capacity increase and the expansion of our restaurant's operations. On the left, our revenues sustained a growth trajectory, increasing 19% in the fourth quarter to SAR 685 million and 23% in 2024 to SAR 2.5 billion. Our solid top line performance was underpinned by increased sales volume of fresh poultry, focused marketing, product and channel mix optimization and Popeyes store expansion. The key contributor to revenue continued to be fresh poultry, constituting 77% of the total, compared to 83% last year, as the contribution from Popeyes [indiscernible] continues to increase. Pet poultry revenues grew 14% in 2024, supported by rising volumes and capacity expansion, which reached [ 550,000 ] birds per day at the end of the year. Meanwhile, the continued strong demand for Feed Animal and Health products, equipment and hatching eggs have led to the Feed and Animal segment growing to revenues 62% and contributing 18% to the total. Our franchising operations have continued their footprint expansion with 81 outlets in operation at the end of 2024. Revenue grew 60%. The contribution has increased from 4% to 6%, in line with our value chain diversification strategy. During the year, Popeyes embarked on its regional expansion with opening of 2 stores in Bahrain and first store in Kuwait is scheduled for opening in first quarter 2025. We have continued to witness a healthy performance of our profit margins during 2024 as can be seen here. A number of factors have resulted in marked improvement in our gross profit. Our fresh poultry volumes have increased in 2024, along with improvements in channel and product mix. Additionally, Popeyes has continued its successful expansion across the region and we would also like to highlight that the strategic joint venture with MHP commenced operations during the year, which boosted feed and hatching egg production. Over and above these, our tactical focus on cost optimization and efficiencies has led to gross margin sustaining its performance. This has also resulted in EBITDA margin increasing from 13.3% to 15.2% in fourth quarter and from 12.5% to 14.1% in 2024. This performance has trickled down to the bottom line with attributable net profit increasing by 1.5% in the fourth quarter to SAR 27 million and by 26% in overall 2024 to SAR 96 million. As a result, net margin was 3.9% in the fourth quarter and 3.7% in 2024, slightly depressed due to higher financial charges. Tanmiah remains focused on the effective execution of its strategic expansion plans, supported by solid underlying fundamentals. Let me share with you some of the key indicators that are driving our ambitious expansion program. Our CapEx additions and capital commitments reached almost SAR 300 million and SAR 252 million, respectively. Meanwhile, right-to-use asset reached SAR 589 million compared to SAR 423 million in 2023. We have continued to make good progress on our expansion program during the period which includes expansion of the feed mill capacity to -- by a 250,000 metric tonne expansion of processing capacity up to 270,000 birds per day. So this is a Majma 2 facility, additional eggs at capacity of 140 million eggs. Waste management system covering wastewater at the new processing plant. Hundred broiler plants is the latest one, which we have just signed with the Chinese construction company and a newly acquired primary processing plant, [indiscernible] having a capacity of 120,000 birds per day. Tanmiah's approach to strategic expansion is focused on combining the use of leverage and internal resources, supported by the strength of our balance sheet, our profitability remains solid with a strategic focus on delivering long-term and sustainable returns to our shareholders as reflected by our robust ROE. We expect to see higher returns to shareholders as we are poised to deliver our capacity expansions in 2025. Our cash conversion cycle remains commensurate to the business growth. I will now hand over to Marcos to take you through the performance of fresh poultry segment and highlight some of the important initiatives that we have undertaken as part of our continued focus on marketing and innovation.

Thank you, Irfan. Good afternoon, [Foreign Language]. So I will talk now about the fresh poultry segment and the performance of the -- in our largest segment, fresh poultry. Sales volume increased 10% to almost 150 million birds in 2024, supported by focused marketing and product and channel mix optimization. Our market spend has increased as well by 11% in '24. Processing capacity grew by 10% reaching 515,000 (sic) [ 550,000 ] birds per day, driven by the fresh poultry sales growth and rising demand. Consequent exception in our distribution network has been essential to support our growth and we have extended our net worth by 18%, also further preparing for the future capacity expansion, while we saw our farms increased by 6%. Tanmiah continued to focus on driving innovation across its operations with the launch of new products as well as the upgrade of current ones with the portfolio to effectively cater to the rapidly grow -- evolving needs of our growing customer base. Customer experience is a key priority for us in Tanmiah, and we have introduced a new line called Taste Secrets, which is a new marinated tender breast line with authentic flavors and natural spices, and it's the first of its kind in [indiscernible]. I'm also particularly glad that this line has been shortlisted in the prestigious Gold Food Innovation Awards happening now in the category of best product, best meat, or poultry product. So this showcases our capabilities in innovation. To keep pace with the latest trends in the retail space, we have reinforced our digital offering and launched a number of campaigns to effectively engage with consumers on brand activities as well as product initiatives, including TV, outdoor, digital as well as the sponsorship of NBC Top Chef program featuring Tanmiah brand as the official chicken products of the season. We continue to achieve great strides in terms of our ambitious growth plans with the growth of our active client base, which is also supported by smarter product mix decisions. I will now hand back to Mr. Zulfiqar for concluding remarks.

Thank you, Irfan and Marcos. As we approach the end of our presentation now, I would like to summarize the most significant milestones that Tanmiah has achieved during 2024. We are very proud to be concluding another remarkable year in Tanmiah's journey and are glad to be witnessing such a solid performance across all facets of our business. The robust top and bottom line performance is a testament to the quality and innovation of our products and services, underpinned by a strong focus on operational excellence. Furthermore, our prudent approach to cost management and enhancing operational efficiencies across the Board has resulted in an improvement in our profitability during the year. We have made a number of targeted investments in production capacity, distribution network and marketing initiatives and are reaping the benefits of this strategy as evidenced by the overall improvement in our operational and financial performance. Meanwhile, our restaurant operations have continued to achieve great strides with their regional expansion shaping up well during 2024 with the opening of 2 stores in Bahrain and the first store in Kuwait, as I mentioned earlier, was opened last month. We are glad to be progressing well on our ESG journey by publishing our second sustainability report, which showcases our deep-rooted commitment to leading with purpose and creating positive change. That concludes our earnings presentation, and we would like to thank you for being with us today. I would also like to apologize for the technical glitch we had earlier. We are now available to answer your questions about Tanmiah and our financial results. Thank you.

[Operator Instructions] Our first question is from the line of Mohammad Rashid.

I have 3 questions from my side. The first 1 is regarding your gross margin. So we witnessed that there was a sequential increase in your gross margin despite the revenue per bird being down by 2.2% on a quarter-over-quarter basis. What was the driver behind this cost margin expansion? Have you received any additional government subsidy compared to last quarter? My second question is regarding your capacity expansion. So given that you have increased your capacity by 2.8% year-to-date. Do you still hold the target for the full year to close this year with a capacity of 725,000 birds per day. And my final question is regarding the estimated impact of the incremental costs from the higher diesel prices, if you can share estimated impact, that would be very helpful.

Thank you very much. So our gross margin, while we have seen some price pressures in the market, the gross margin has increased because of the efficiencies we have achieved and the cost management that we have been able to do plus the benefits of our partnership with Tyson are also trickling in. We are getting a better view of the grains pricing around the world and benefit from that. And lastly, I think our added value products is also creating -- helping us to fight off those price pressures. The second question, Irfan, was about capacity. So yes, we are confident that we should be able to achieve our targets in capacity enhancement this year and make up for the slight slowdown we had last year due to some project execution delays, but we will catch up within this year. So we are very confident about that. The last question, Irfan?

Diesel impact.

Yes, diesel impact. So Irfan, if you can -- sorry, 1 point which you raised additional subsidies, no, we have not received any additional subsidies from the government in any form or kind.

So on a gross level, we have the diesel impact for us is around SAR 60 million additional impact, right, which is there are certain tools which are available with us to mitigate that. So the intent is to mitigate it fully during the year. This includes, again, efficiency, looking at alternate use as we see Marcos working on electric vehicles on a sales lead with our sister concern Electromin. And then also, we're looking at solar energy usage at the farm, et cetera. So we are doing a pilot on some of our facilities for that. So there's a lot which is happening to mitigate this because this is something which we have taken it into consideration. Last year, we have put these mitigations in since last year, we are working on these mega initiatives. And also looking at one of the conversion is basically at the farm level is using LPG instead of diesel, but that should also have a better impact on the prices.

There are a few questions in the Q&A. So let me take them. There's a question. Can you give us some color on you expect for 2025 top line growth and bottom line growth?

Yes. So obviously, we cannot give very, very specific guidance. But then, yes, so we are looking at the capacity increase during the year, and the new [ PPL ] will be the main driving force. Now we are in the process of developing the farms around it, right? So we will not be utilizing the full capacity during this year. We expect that capacity to be available by the end -- towards the third to fourth quarter of next year when we have all the farms with us. So that's there. There will be a substantial increase in the revenue, which we are targeting driven mainly by volume this year for us, and we are also looking to maintain the current gross profit margins and if not to maintain the net profit margin, but to enhance it also slightly.

There's a question how much subsidy was received by the company during the fourth quarter? And what is the expected store expansion for 2025?

Yes, so subsidy we are receiving for the broiler and the breeder combined, we are seeing around [ 28 Halala ] overall. So that has remained stable across the 4 quarters during the year. And sorry, the last question was? Yes. The store of the profile, we are currently at 81 stores as of this fiscal year and we will -- we are continuing on that projection also for the next year. So we are looking at a similar projection for next year.

Very clear. There's a question from Usman Siddiqui.

3 questions. First one is on the follow-up on the diesel impact. You mentioned about quite a few things that can be used to mitigate the impact but will it be sufficient enough to mitigate the entire SAR 60 million impact since it's almost 2/3 of your profitability, the impact that you are talking about SAR 60 million. So will this be the initiative that you talked about will be able to maintain the margins?

Okay. Yes. That is going to be our attempt and all the efforts would be towards that. As you would understand, it is some of the projects like using alternate energy is takes a long time, and those projects started last year after the first diesel price hike and those projects are now coming close to completion. So that will help, and that includes electrical vehicles as one. But providing energy to our farms and facilities through alternative means as well is something which we are looking at, and those projects are underway. So hopefully, we will be -- we should be able to maintain our margins by several levers that we have at our disposal.

Right. And my second question is on the increase in finance cost that we have witnessed in fourth quarter. What drove that increase? Is it the interest on leases or the new loans that you have taken recently?

It is both, right? So if you're seeing that the -- our growth trajectory is also increasing and the reason is that now we are sequentially closing those assets and starting to deliver it. So we are at the end of the construction cycle. So the impact will come into the balance sheet. So that's where we are. So if you look at the numbers which are in the P&L, both have a 50%, 50% increase, right? So yes, there is an element of working capital over here also because we deliberately have increased our holding -- inventory holding period because of the Red Sea impact, which was there during the year. So now that impact is now subsiding, and we will go back to the original holding days, which we had. And also, obviously, the IFRS 16 impact is there, which is a classification change between the rental into depreciation and finance charges. So that is also now being -- so as we continue to grow both on the hybrid model, we will see that there will be a rental charge which will still be charged out in the financial cost element.

Next question comes from Indi.

I've got 2 questions. The first one is about the new capacity expansions. When can we factor it in the model? So is it in Q3 so we shall increase the capacities from 550,000 to 735,000 or 750,000 in Q3 and Q4. So that -- this means that the first half of the company will be -- will have the same capacity as last year? And my second question is about pricing. How do you see the prices of fresh poultry in 2025? And the last one is about also processing capacity. Does this mean the capacity expansion means it's hatchery expansion, slaughterhouse expansion as well?

Okay. The answer to your last question is yes. When we say that we have increased the capacity. We are not only talking about our slaughter capacity only, we are talking about the entire value chain. As Irfan mentioned, it is not going to be a step change. The incremental capacity will start to kick in, in the coming few months, we don't have to wait until Q3 or 4. But the full utilization of those capacities, the 750,000 number, will take some time. Again, I cannot unfortunately share with you when exactly. But the incremental capacity will start to come in, in the next couple of months. And slowly, we will ramp up towards full utilization of that capacity. As far as market prices are concerned, there is a pressure on fresh chicken because we are seeing a lot of frozen imported and the local producers are also producing at almost their full capacity. So there is a glut in the market, which is affecting the whole industry. But as we did in the last quarter, there are certain costs efficiency initiatives that we executed last year those will help us this year also. And we don't expect this glut to last throughout the year. We do expect the pressure to ease in the next few months. Marcos, maybe you can add some more color to that.

I think the price pressure, we saw this before. It's not the first time we've been seeing that. We passed through that during the last 2 years. And I'm very confident that the go-to-market initiatives we have implemented give us extra strength to pass through those fluctuations. We've been having a very strong market price decisions very much to defend our profitability. And we knew the market always has cycles, and this could come, and we are prepared for that.

There are a couple of questions in the chat. I'm going to read them out. There's a question, are you seeing positive impacts on cost given there has been a recent decline in feed prices?

We -- I think the most important point for us to mention in terms of grains is our partnership with Tyson that as Mr. Zulfiqar mentioned, gave us a much stronger purchasing power and understanding of best decisions to make. So actually, you might see some decreases in feed costs in [indiscernible] but not necessarily apply to the region due to the premiums that we have in the regions due to the Red Sea and accumulation of vessels but our main mitigation has been the partnership with Tyson and the strengthening of our purchasing capabilities.

There is another question. The question is what is driving prices low in the market? I believe this has been answered. And the second part is, are companies not going to try to pass on the diesel prices?

This is a difficult one to answer. We will try to solve the problem as much through internal cost management as is possible. Some portion will spill over to the consumer as well, I'm not writing off that possibility.

There's a question, what was the contribution of Popeyes to EBIT of the company?

So it will be, as of now, we are still in operating losses stage at Popeyes, this is a growing loss. As discussed earlier also that this year we will be achieving our breakeven on the cash flows. And next year, we are expecting a positive breakeven, plus a positive number on the EBIT level cost.

There's a question how much does HoReCa segment contribute towards the overall poultry sales?

I think we are very diversified in terms of our channel mix. HoReCa represents almost half of our sales. And then inside HoReCa, we have multiple segments, multiple type of stores, multiple type of clients, multiple -- different types of products we sell to certain clients, but it's a very relevant channel for us. We've been focusing a lot. We have established structured teams dedicated for the channel -- and we've been seeing marvelous results from our teams on those channels. And growing forward, we continue that strategic expansion and customization to the channel.

There's a question, can you provide guidance on both the Popeyes stores and trajectory on current and future average revenue per store?

So we already mentioned on the growth of our Popeyes store, that this is the one which we are looking at a similar trajectory for coming year 2025. On the growth part, yes, 2024 has predominantly been a year where there has been an impact on the average daily sales. Likewise, we've seen in the market with our other competitors, Americana, KFC, et cetera. So they have been under pressure, right? So we have a similar impact on our being a U.S. brand. We had that impact on us also. And we have seen that our ADS was depressed by around 20% to 25% during that period -- high period also. In Q4, we have seen that there is now a growth trend coming in. And Q1, Q2, Q3 this year, we are expecting that these trends will go into recovery mode. We have seen that in our FPP business turnaround also that the volumes of the likes of McDonald's, Burger King, they are coming back, especially in Q4 and the new forecast for Q1 are much, much, much improved from the previous quarters. So this year, we are hoping and looking for a revival in the numbers. The second part is that there will be a major marketing campaign, which is being planned to be executed during Q1, around Ramzan time et cetera. So that is to support the brand building element of our -- this new QSR venture.

There is a related question has -- with the ease of boycott, has the Popeyes business benefited from it?

We did not lose too much from it. But yes, there is [Foreign Language] the peace treaty has been signed, and we are seeing improvement. And yes, there is a general improvement across the board in QSR.

There's a question, what is the contribution on the modern and traditional channels towards the overall poultry sales?

As I mentioned before, when replying about the food services, we are half in the food service, half in retail, which is a very healthy division, which give us conditions to be very strong specialized in each of the channels, in the retail channels very strong with the brand development, product development, distribution, including all retail through channels, modern trade, traditional trade, groceries, self-service stores, chicken shops. So we have very strategic activities going on there as well as the food services. So we are very balanced in the 2 channels which gave us the best of the 2 worlds where we are able to develop products that we can either work with the 2 channels or develop in a channel and then bring to the other channel, having a lot of expertise on that. So we are half-half.

Very clear. There's a question. Can you give us more detail on the MoU announced yesterday and what should we expect in terms of production capacity?

So as also mentioned in the announcement, Vibra is -- Tyson has invested in Vibra so we know it's an associated kind of an undertaking for us. They are third biggest poultry company in Brazil. We have been in contact with them for a long time. If you remember, we also signed an MoU with them a couple of years ago, now this one is more firm and concrete, which plays out exactly what we want to do with them. We -- they will invest with us in our further processing business there whereby we want to build a further processing plant for QSR customers, the first plant of its kind in the kingdom, which will utilize 100% of the locally produced chicken for the burgers, nuggets and other QSR products. And the second one is that Tanmiah will invest with Vibra in Brazil to supply the raw material and finished products for our global Halal brand, which will be supplied in Europe, U.S. and Asia. So that has been extensively explained in the past as part of our strategy. So these are the first steps towards achieving our global footprint as per our strategy.

[Operator Instructions] There's a question from [indiscernible].

I have some questions about the feed milling capacity. Could you shed some light that there has been an increase in the last year especially with your joint venture with MHP. So I wanted to understand how much capacity increase has happened and how much we can expect during this year?

Okay. So earlier, we have been selling feed whatever was surplus to ADC. We have not had a dedicated feed capacity for external sales. Now what has happened is that we have started to develop capacity for that purpose as well. So now we are -- we have got our first feed mill for this purpose, which is about 90,000 to 95,000 metric tonnes a year depending on what kind of that diet we are running on it. And this will continue to increase as we continue to enjoy our reputation in the market and the premium of the good quality that we have. So this is the quality right now, the capacity is already right now that we have 90,000 metric tonnes, but it can increase by another 50%, 60% going forward.

So the 40 metric tonnes per hour, that is your target. Is that included in this or that is separate?

No, that is for internal use only. So we separate the 2, there's a difference. One is for internal use, which we do not now sell external feed from because of biosecurity reasons and one is for external sales only. So we are talking about external sales only, the 40 metric tonne feed milk is for exclusively internal use.

Very clear. There is a follow-up question. It's about the expected capacity for the QSR plant with Vibra. And what is the ownership structure?

So Vibra will inject cash into our business, SFPC. So the plan is that they will inject cash and of the new entity with the cash plus entity, they will have 20% share. So that's -- I mean, ownership of the entity is not changing significantly. We have got a third partner in addition to Tyson in the business. So we have -- I mean, we are very proud that we continue to attract foreign direct investment in the food security of Saudi Arabia. This is the third partner that we have invited, so that is a testament to our credibility and operational efficiency as a partner, which continues to attract the best in the world to come and partner with us and help us contribute towards the food security of the [indiscernible].

[Operator Instructions] There are a few questions with regards to store profitability and expected opening targets. I believe what can be said about Popeyes has been shared. And there's a question can you highlight the expected capacity for Q1, Q2, Q3, Q4 just roughly?

Yes. As discussed, we are -- so Q1, there will be no increase in the capacity. Q2, we'll start having the delivery of the plants, right? And we gradually will wrap up. So the expectation is that this ramp-up will be almost 50% on a YTD basis but towards the end of the year, and 100% utilization is expected in the next years.

There's a question, expected trend of feed prices in the next 12 months.

We've been seeing with some situations in Argentina and Brazil, there is a possibility for raising costs. We've been looking very close, so with the situation of imports from China might fluctuate a little bit more. Corn, we have seen possibilities for some increase towards the end of the year. But these are normal cycles of the commodities. But of course, a lot will depend on how the Chinese economy grows and purchases more as a very strong net importer, it's -- we can fluctuate the availabilities. So we are closely monitoring, but we are very capable now together with Tyson to forecast and take very strategic decisions to protect profitability here.

I think there are a couple of questions. People have raised their hand. There's a question from Usman.

So recently, we have seen that Tanmiah has announced building up around 100 broiler farms and earlier the business model of Tanmiah was to rely on lease farms. So has there been a change in business model when it comes to increase in broiler capacity currently being owning and constructing own farms versus leasing earlier? And if yes, what's the reason for that? And will it have any impact in the profitability margins? Will it increase your margins or it will remain the same with the new model?

So there is no change. We will continue to take lease farms as well. The reason why we are building these separate houses to begin with is because the availability of lease assets has kind of slowed down. I mean there are lots of existing partners who are building new houses or additional farms but they are not growing as fast as we would have wanted them to be. So we -- that's why we have decided to start building our own poultry houses as well. As far as change in profitability is concerned, yes, it should have an impact because these are much newer assets, which are going to be built using the more favorable technology, I wouldn't call it more modern technology, but technology, which is more suited for our kind of climate and circumstances. So that should have a positive impact on our overall profitability. But how much that I can't say, but it will be positive.

Just to complement 1 point here with Mr. Zulfiqar is that as we move in to become a more digitalized operation, where as we have mentioned, we have established our central monitoring room where we have sensors on the farms and we can monitor real-time valuations and take quick decisions. By building ourselves also those 100 houses, we will be able to install the best equipment in a cheaper manner as well because we are doing that from the beginning rather than installing in a farm that is already built. So this will help us to be more, let's say, efficient while investing less in those innovations and digitalizations, which brings a lot of efficiency for us.

So how much of CapEx will be required to build those 100 farms?

We're looking at SAR 150 million.

Yes. So it's a total of SAR 150 million, which we have to pay off in the next 7 plus 2, 9 years. So they will come and invest, and we just do the standard lease payment, but that would be our lease-to-own arrangement.

Very clear. There are a few other questions in the chat. There's a question, how do you see the competitive landscape and pricing dynamics, given significant capacity expansion from multiple local players?

Okay. I am never worried about capacity expansion announcements, because announcement is one thing, actual execution is the second filter which comes into play. And then the third one is how well they utilize that capacity. There are many players. In fact, majority -- a vast majority of the players in the country are unable to use their capacity to 100%. So that is not a cause of concern for me, my concern is more towards more consistent production by existing players so that the government can calculate more accurately the requirement for imported chicken. Right now, the spikes and trucks that we have in the local production because of production inefficiencies causes this occasional glut in the market, which is not good for the industry. So I'm not too worried about those announcements. Let them build them for us. We'll acquire them at some stage [Foreign Language].

There's a question about payment terms with Tyson Food.

Payment terms.

Yes.

What payment terms?

The question just reads payment terms for Tyson Food.

We do not transact anything regularly. Okay. Maybe this is related to the grains. So grains is know-how sharing and allowing us to participate in the contract directly but we make payments directly to the supplier. There is no engagement with the with Tyson in this case. So we have very little or no transactional arrangement with Tyson in anything.

Very clear. I believe our time is coming to an end, if the management would like to give any concluding remarks?

Thank you very much, everyone, for attending today's call. We remain available if you have any additional questions or queries. We have ended a great year and we expect this year despite its challenges to be similar as last year. Our expansion is on its way, and I thank my team, especially Irfan, Marcos and Michel for making this call possible. So thank you very much all.

Thank you, management. Thank you, attendees. The earnings call will now come to an end. Have a nice day. Thank you.