Tanmiah Food Company (2281) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to first quarter 2025 earnings call of Tanmiah. Today, we have with us senior management of the company led by the CEO, Mr. Zulfiqar Hamadani. [Operator Instructions] And without any further delay, I would hand over the mic to the management for the presentation. Over to the management.

Thank you very much, Saad, [Foreign Language] everyone, and welcome to Tanmiah Food Company's First Quarter 2025 Earnings Call. I would like to thank Al Rajhi Capital for hosting us once again today. My name is Zulfiqar Hamadani, and I'm the CEO of Tanmiah Foods. I'm joined today by our CFO, Irfan Nagi; CEO of our Agricultural Development Company, Marcos Delorenzo; Jamal Al Saadoun, who is Chief of our Corporate Affairs and Relations; and Anas Alansari, who's General Manager of our Finance and Treasury. Also joining us is our wonderful Investor Relations team, [indiscernible] and Naveed Majeed. We published our Q1 2025 financial results last Thursday, and they are available on Tadawul as well as our Investor Relations website. If you have not yet accessed the full presentation, please feel free to reach out to our IR team, who will be happy to provide you with a copy. I would like to remind you that as a listed company, we are bound by regulatory requirements regarding forward-looking statements, and therefore, we won't be able to give forecast for future financial performance. Please refer to our disclaimer statement on Slide 2. Following the presentation, the management team will be available to answer any questions you may have about our performance, strategy or outlook. Let me now take you through the key highlights of the first quarter of 2025. We are pleased to report another quarter of resilient growth. Let me walk you a few key highlights of our performance during Q1 of 2025. We delivered revenues of SAR 677 million in Q1, marking a 16.5% year-on-year increase, driven by higher volumes across core segments, enhanced distribution, product mix optimization and strategic marketing supported top line momentum. Fresh poultry remained the primary driver, accounting for 74% of total revenues with sales of up to 4% to SAR 499.7 million. Growth was supported by production expansion to 560,000 average birds per day and broader market reach. Demand remains solid despite temporary headwinds during the quarter. Animal Feed and health products revenues grew to SAR 133.9 million, growing 85% year-on-year. Momentum was driven by rising demand, a better product mix and the scaling of our MHP joint venture. Restaurants revenues rose 52.9% year-on-year to SAR 43.5 million, reflecting network expansion with 4 new Popeyes outlets, including 2 in Kuwait. This marks a significant EBIT -- a significant growth. EBITDA grew 20.5% to SAR 94 million with margin improvement to 13.9%. Growth was supported by strong revenue expansion and disciplined cost control, operational leverage and higher volumes also contributed to EBITDA uplift. Net profit was down 9.8% to SAR 18.9 million, mainly due to higher finance costs linked to capacity investments. We are pleased to announce our financial year 2024 dividend of SAR 2.24 per share, underscoring our commitment to creating shareholder value. I'm also proud to highlight our Taste Secrets fresh marinated chicken breast line shortlisted among the top 3 best meat and poultry products at the February 2025 Gulf Food Innovation Awards has been crowned as product of the year for 2025 throughout GCC. This marks Tanmiah's fourth consecutive Product of the Year award, demonstrating our unwavering commitment to quality and innovation. Sustainability remains at the center of Tanmiah's strategy aligned with Saudi Arabia's Vision 2030 and global best practices. We have planted 500,000 trees since 2021 across KSA sequestring 114,000 metric tonnes of CO2. We are also advancing significantly on Moringa innovation, trialing Moringa cultivation to replace soybean meal and feed, enhancing both sustainability and carbon capture. We recently signed a major solar partnership with Emerge to cover 35% of our processing facility electricity. This agreement marks a key step towards integrating renewable energy into our operations and reducing our environmental footprint. Through AI, Tanmiah Khairat, we ran a donation drive supporting deserving families throughout Riyadh. Last but not least, we have made great advancements on gender equality. Our Board is now 40% female, the highest among KSA-listed companies exceeding MSCI's 30% recommendation. With that, I would like to hand over to our CFO, Irfan Nagi, to take you through our financial performance during the period.

Thank you, Zulfiqar. Let me now walk you through our top line performance for the quarter -- first quarter of 2025. We have recorded revenues of SAR 677.1 million, representing a 16.5% year-on-year increase driven by strong volume growth across all 3 of our 4 operating segments. This reflects the strength of our diversified business model and our ability to capture market opportunities even against a backdrop of temporary market headwinds. Fresh poultry remained primary revenue contributor, accounting for approximately 74% of total revenue. Sales in this segment rose 4% year-on-year to SAR 499.7 million, supported by the expansion of our distribution network and increase in production capacity to 560,000 birds per day during the quarter over last year. Despite the market headwinds in the poultry segment, our market-leading position and operational resilience allowed us to maintain volume momentum. Our Feed & Animal Health segment delivered outstanding performance with growing to SAR 133.9 million, a growth of 84.8% year-on-year. This strong uplift was fueled by rising demand, enhanced product and customer mix and the continued successful ramp-up of our joint venture with MHP, which has strengthened our supply chain integration. Meanwhile, food franchise operations maintained their strong growth trajectory with revenues rising 52.9% year-on-year to SAR 43.5 million, the addition of 4 new Popeyes outlets during the quarter, including 2 stores marking our first entry into Kuwait. Overall, the strong top line growth across all segments underscores Tanmiah's ability to adapt to market dynamics, while delivering consistent volume and expanding our market presence across the regions. Turning to our profitability metrics for the quarter. Gross profit grew 16.5% year-on-year to SAR 168.4 million, with margins holding steady at 24.9%. This reflects our ability to maintain financial discipline and strong cost control across the business segments despite higher fuel costs and temporary market pressures. EBITDA increased by 20.5% year-on-year to SAR 94 million with EBITDA margin improving to 13.9%. Margin expansion was driven by strong top line growth and operating efficiencies. EBIT increased by 10.5% year-on-year, reaching SAR 44 million, maintaining a strong 6.8% margin. Net profit attributable to shareholders declined 9.8% year-on-year to SAR 18.9 million, mainly due to higher finance costs linked to our ongoing capacity expansion. Overall, our profitability profile remains healthy, well positioning us for sustained earnings and growth as we scale up further. Turning to our strategic expansion agenda. Capital expenditure additions reached SAR 204 million in first quarter 2025, supporting our key growth priorities across poultry, feed and restaurant operations. Our committed CapEx pipeline remained strong at SAR 210 million, reflecting investments in new outlets, facility upgrades and expansion of production capacity. We continue to grow on a hybrid model where our lease assets have also increased to support our volume growth. We continue to scale operations with investment in feed mills, processing plants, hatcheries, capacities and waste water management systems is expected to come on board in the financial year 2025. Overall, our disciplined capital deployment supports Tanmiah's long-term strategy of driving volume growth, margin enhancement and regional footprint expansion. Turning to our balance sheet performance. Our total assets increased to SAR 3.1 billion as of March 2025, reflecting ongoing investments in capacity expansion. Shareholders equity also grew to SAR 802 million, maintaining a healthy capital base to support future growth. Return on equity remained solid at 14.4%, while return on invested capital stood at 8.3%, slightly softer due to the timing of new asset deployments. Our working capital cycle remained well managed with a current ratio of 1.3x and net working capital to sales holding at 28.2%. On the liability side, our net debt-to-EBITDA ratio increased to 3.99%, primarily driven by CapEx linked financing, while overall leverage stood at 66.1%. We expect gradual deleveraging as new capacities ramp up and start contributing to earnings and cash flows. Our balance sheet remains resilient even during our high CapEx growth and expansion phase, supporting both operational flexibility and our disciplined strategic expansion plans. I will now hand over to Marcos on some more details on Fresh Poultry segment.

Thank you, Irfan. Let's now turn to the performance of our Fresh Poultry segment. Sales volumes increased by 10% year-on-year to 39.8 million birds, supported by expanded production capacity and strong market demand. We successfully ramped up daily processing to 560,000 birds per day, up from 500,000 a year ago. Our distribution network also expanded by 22%, growing from 368 to 449 routes, ensuring wider product availability across the kingdom. This quarter, we also have spent our fresh distribution to the Kuwait market. At the same time, we enhanced our marketing efforts with spending levels rising to SAR 5.9 million during the quarter to support new products introduction, drive brand visibility and customer engagement. We faced a challenging first quarter with competitors pressure in prices mainly in the frozen whole chicken category, but our results continue to validate the strategic decisions we have made in our go-to-market plan, along with focused and disciplined execution by our teams. I will now make some highlights of the quarter that drove our results. A disciplined focus on operational excellence with coordinated cost-cutting initiatives, capturing value through product mix optimization and strong focus on innovation with the launch of new products such as the Tanmiah Taste Secrets, as mentioned by Zulfiqar, an exclusive line of marinated chicken breasts products such as chicken breast shish tawook and chicken tandoori, which as mentioned, has won the Product of the Year Award, which is voted by consumers and the surveys conducted independently by Nielsen and shows Tanmiah's commitment to product differentiation. On this topic, Tanmiah continues to strengthen its portfolio of value-added offerings, supported by marketing campaigns. I will list the main campaigns which happened in the first quarter. Sponsorship of Top Chef program, where Tanmiah is the official chicken sponsor of the program, which was aired until February and is the most viewed TV program in the region. Omega-3 new packaging launching, highlighting the product health benefits to consumers supported by an out-of-home communication using digital and store activations in the first quarter. Here, I also would like to mention about the study conducted in Saudi Arabia and led by the King Abdulaziz University, and RCSI University of Medical and Health Science in Ireland. This study explored how Omega-3 DHA enriched foods such as Tanmiah Omega-3 fortified chicken made with sustainable fresh free sources can play a vital role in addressing omega-3 deficiencies essential to the heart, brain and eye and overall health in Saudi Arabia. Also in March, Tanmiah has launched its new chicken breast fillet, product with new specifications in line with consumer surveys, supported with a new packaging. This new product has delivered our historical record sales under the category, which is the second biggest category after whole chicken and the highest value of the fresh chicken category. This launch is further supported by ongoing 360 campaign, marketing campaign, which started in April and it's at the media right now. And lastly, our continued geographic expansion has helped us to improve our sales options across channels, and across GCC where we are launching new products and opening new routes. Just concluding my report, all those actions I mentioned, combined with the disciplined execution and powered by the passion, high-performance culture of our teams have mitigated and defended our results in the challenging quarter while delivering constant growth. We remain confident in our short and long-term duty and strategy, operational excellence, distribution diversification, innovation, value-added new products and in our strong brand. I will now hand back to Zulfiqar for some concluding remarks.

Thank you very much, Marcos, and Irfan. As we approach the end of our presentation, I would like to summarize the most significant milestones that Tanmiah achieved during quarter 1 of 2025. Let me close with a few key takeaways from the quarter. We delivered strong top line growth of over 16% year-on-year driven by a resilient consumer demand and the successful ramp-up of our MHP joint venture. This reflects the strength of our diversified growth engine across poultry, feed and restaurant operations. Our capacity expansion program remains firmly on track, with daily poultry processing volumes reaching 560,000 birds on average, and we expect it to further increase as we commission the new plants in 2025. Net profit was down 9.8% year-on-year, primarily due to fuel cost hike, pricing pressure on fresh local chicken due to higher level of imported frozen chicken and higher finance costs. Our Popeyes network continues to scale with 4 new outlets opened this quarter, including our first stores in Kuwait, bringing our total footprint to 85 operational locations. Looking ahead, we maintain a resilient outlook for 2025. Tanmiah is well positioned to navigate potential sector headwinds and back by extensive scale, strong and well integrated operations and upcoming capacity expansions. Thank you very much. Now we are open for any questions.

[Operator Instructions] You have a question from [indiscernible].

I have a question on the gross margin. I have noticed that you've been able to maintain the gross margin on a year-over-year basis despite the lower revenue per bird on a year-over-year basis by around 5% and lower utilization on a year-over-year basis, of course, due to higher capacity which should result to higher costs. And in addition to higher contribution from animal feed, which is based on my understanding, it's having lower gross margin compared to the fresh poultry. So the blended gross margin should go down due to higher contribution from the animal feed. If you can explain to me what's the main driver of the gross margin slightly expansion? And is it fully attributed to the raw material cost? Or it is something else? And on the seasonality of the gross margin, I've noted that the gross margin usually in the first quarter, disregard of the main KPIs, which is the revenue per bird, et cetera. Usually, you're having the highest gross margin in the fourth quarter. If you can explain the seasonality factor, I would appreciate.

I'll take the last question, and then I'll ask Irfan to explain the mechanics of gross margin. Yes, seasonality is there. First quarter is a good quarter because there are no vacations. Now from next year, of course, we'll start to having Eid in first quarter. So that will be dented a bit. But you are absolutely right. First quarter is the best quarter and -- one of the best quarters, not the best quarter. And second and third would be a little bit down because of summer vacations and less eating out. As far as the mechanics of gross margin are concerned, Irfan, if you could shed some light on that.

So a couple of points on that part is that when you compare the gross margin and specifically in the light of the fourth quarter comment, the seasonality part is yes, they are. These are -- obviously, these are more periods where the animal health indicators are much better, which results in better efficiency, better costing. So that is one of the element which comes in January also as we saw that the winters were slightly prolonged. So we had that benefit. The second part is that we -- there is no, as of now, extra cost from the new capacity, right? So the new capacities have still not been commissioned. So we are still, I think, working on the finalization and commissioning is yet to happen. So there is no additional cost, which has added -- been added to the gross profit. So probably that is one of the questions you may have in your mind. So that is still not there. And obviously, the major change has been the pricing part, right. So there has been an effect on the gross margin versus the pricing. What has ensured that we remained within the ballpark of the margin guidance which we have given is primarily the cost control measures, which we have taken, the cost optimization measures and the efficiency improvements across all the manufacturing portfolios, right? So either be it the primary processing, either be the hatchery part, either be it the farming part. So all the production elements have been consistently making sure that those efficient measures -- efficiency measures are achieved, and we are able to mitigate the external pressures such as the high diesel cost and the pricing pressures effectively. I hope that answers your question. The second part, the last part which you asked is the animal feed, yes, so though they carry a lower margin, but then it's a consistent margin, right? I think that's where it provides a certain base. So in the overall mix of things, they are -- they remain consistent, and they will provide us the necessary balance to mitigate anything, which the external measures are putting on us, the diesel and the pricing on the poultry part.

Our next question comes from Usman Siddiqui.

So my question is basically on the fact that you have mentioned that there was a temporary pricing pressure. So if you could clarify, I mean, why do you say this is temporary? And what will change in the next coming quarters? Because what we see the other players are also ramping up their production facilities. So as far as the market is concerned, there is more supply coming in into the market in the next 2, 3 quarters. So if you could clarify on the temporary bit of the pricing pressure?

Okay. So the pressure is because of the ramp-up of local producers. So the way it works is that the government imports the difference between local production and local consumption. And of course, for a good number to be imported depends hugely on the consistency of local production, the correct number of imports. The problem has been in the past that the local production was highly inconsistent during -- because of several reasons, let's not go into that. But the local production was very, very inconsistent. Over the last few months that we have seen that local production is consistent and is ramping up consistently also, which is a good news for the industry. This time had to come where there would be an over import by -- allowed by the government just to make sure that this stable source of food is not in shortage in the country. So as the consistency of local production is -- becomes more reliable for the government, the imports will go down, and the industry will stabilize. So that's why we believe that the local product -- these pricing pressures are temporary. Secondly, during Haj time because there's a lot of influx, as you know, of tourists or the Pilgrim's, that also results in huge imports. So we do expect these headwinds to recede after Haj as the visitors have started to leave and the chicken imported has been consumed. And then the government will stabilize the market by reducing the imports because that is the volume, which is there to bridge the gap between local consumption and local production.

And my second question is basically on the Feed segment. We see a strong growth this quarter as well. What do you see, I mean, a normalized revenue level that this company can achieve? I mean, what has been the drivers of growth in this segment?

Yes, consistent production of local producers is the main driver. Earlier, they would buy every now and then. Now that they are consistently producing and they -- and as the costs are rising, they do now value more and more good efficient feed, which we are supplying to them. So we are making inroads even in those customers who have their own feed milling capabilities and capacities, but they do appreciate a good formula manufactured well into good pellet feed. So that's what is growing it, and we remain bullish on this sector.

So, this is all poultry feed or also include livestock?

Majority is poultry feed. Vast majority is poultry feed, yes, there is some ruminant, which is there, but it's not a big number.

There are a few questions in the chat. There's a question with regards to the capacity expansion of -- they're asking, I believe, by when will this capacity expansion come online -- updated time line, if you can share?

So we are expecting the additional capacity to come online by July, August period.

Okay. Very clear. And also about the capacity expansion, there's another question. Will you reach 1 million birds by 2027 or by 2028?

2027.

Okay. And -- there are few questions that you've already answered, so I'm not going to ask them. There's a question, what is the expected future trend in average selling price of bird? If you would like to answer this question.

I'm looking at our compliance people. Can we answer this question. Okay. I mean, I'll answer generally because the question has been asked, I just don't want to walk away from that. There are turbulent times ahead. But as Marcos mentioned, with our innovation, market expansion and our ramp-up, we do believe that we are better geared to weather these wins than most of the competition that we know of. But we do expect a couple of quarters, interesting ones.

I see another hand is raised. I believe you have a follow-up question. If not, can you please lower your hand. I'm going to allow you to ask a follow-up question.

I have a question on Popeyes revenue per store on the annualized level. So in the first quarter of 2025, the revenue per store went down by only 3% despite having Ramadan on a year-over-year basis. In addition to that, adding the 31 number of stores, reaching around 85 total number of stores, which is impressive. If you can explain what is the situation on Popeyes overall? How you've been able to maintain the number of stores? And I'm assuming that Popeyes is profitable on the gross level. Am I right?

Okay. Let's take your questions one by one. In Ramadan, actually, the sales don't necessarily drop. We just stay open throughout the night. So last time we did not stay open throughout the night. So that resulted in reduction. We also had some promotions. So that helped keep the turnover up. We have been now actively into promoting and advertising and marketing of the brand, which we were not last year because of several reasons. So that has also helped. We are -- I mean, generally speaking, at a store level, we are EBITDA positive. But of course, there is a life cycle which has involved new stores, which come in are -- take some time to get into black from red, which we are trying to shorten the time period, but it's normal and natural. And as we are opening more and more new stores that pressure remains, but that's a good pressure to have.

There's a question from Jawahar.

I just have a question on the market dynamic. So you mentioned observing some, let's say, consistency in the local production. Can you please elaborate on that a bit more? From what I understand is that some major players like Watania have been operating well below their capacity, almost utilizing only 40% of that. So can you please clarify which producers are currently driving this consistent output?

Okay. I cannot comment on competition, especially when we are talking about private companies which do not make their numbers public. What I'm saying here is that, let's say, if the Watania is utilizing 40%, now they've started to utilize it 40% consistently. So that's what is happening here. But everybody is ramping up. And -- not -- I mean, of course, there are some outliers, but generally speaking, all the major established players are ramping up and are consistently increasing the utilization of their capacities. I cannot comment on their exact numbers, unfortunately.

There is a question. Can you state the number of subsidy received this quarter, the amount of subsidy, I believe, they are asking for?

The overall amount, it's SAR 10.8 million. It's in the financials, which should be up and running, I think, by tomorrow on the website.

Very clear. And then there's a question, can you give us the contribution of sales of Popeyes through aggregators?

I don't have an exact number on that, but we are about, I'd say in the ZIP code of 40%, 45% of our total turnover is through aggregators.

Very clear. There is a question from [indiscernible].

So I understand that corn prices are up by around more than 10%. So this is my first question. And my second question is about the margins. Do you expect the margins to continue within the same level in the coming quarters?

So your first question was that corn prices are going up. That's the part I heard. What was the question?

Yes. Could you give us an update about the feed cost in general, the stocking period, how much inventory do you have in order to estimate the margins in the coming quarters?

Okay. So this margin, what you are talking about is only with reference to the corn prices or generally speaking, other things included also?

Generally speaking, corn, soybean, other additives.

Okay. So yes, the prices are going up, which we are -- we were kind of prepared for because as we have mentioned before, we are buying with Tyson now, so we get a better insight into the market, a better option. And, of course, improved quality as well. So again, it is going up. The good news is it is going up for everyone, and we are better prepared for that because we are buying with Tyson. So that's an advantage we have over competition. Overall margins, I would be very happy if we maintain the margins that we have had in the next 2 quarters. I would be super happy.

Okay. And do you expect the new value-added products like the chicken fillet or chicken -- yes, the chicken fillet and the marinated chicken, do they have higher margins compared to the whole chicken?

Yes.

We have few questions from the chat. I will be taking them now. Do you classify amortization of right of use for Popeyes in the OpEx or COGS? A very specific question.

It's in the -- it's in the OpEx, not in the COGS.

And what is the gross margins for Popeyes, if we are disclosing that number?

No, we are not disclosing that. But they are -- I can generally say that they are at par with the better companies in the industry.

Okay. And there's a question asking for bifurcation of animal feed revenue with [Technical Difficulty] if we are disclosing that?

No, no. Can you repeat that again? We lost you for a moment.

There's a question asking for bifurcation between animal feed revenue and veterinary revenue, basically, they're asking for subsegment -- revenue of the subsegments of this overall segment?

We consider it for...

Yes, we do not have it at hand, but we would encourage the questioning party to please get in touch with our IR team, and we'll be more than happy to share the numbers. We do not have them off hand for this meeting.

Okay. Okay. Very clear. And then there's a question in the Animal Feed segment, what were the primary end market or customer segments contributing towards the revenue growth?

Mainly, it was poultry related. And as I mentioned that we have now made inroads into integrators, those who have their own manufacturing facilities. So now they are relying on our feed more and more, which is good to see. So that's where the growth is primarily coming from. And as the industry is ramping up, of course, this market is expanding, and we would like to maintain our market share, if not increase it.

Saad, just one correction. On the Popeyes RUA discussion, it's in the COGS, not in the OpEx, sorry.

Okay. Okay. There is a question. Are there any specific high-margin products or strategic customer segments that drove the growth in Animal Feed?

I'm not sure if I get the question. So are there any SKUs within Animal Feed, which are higher margin than others? That's the question?

Yes.

Yes of course, there are. Within -- I mean, just for the general information of the people, within the broiler feed, there are 4 different diets and then -- which are given at various stages of broilers life. And similarly in breeders and layers, there are several, several diets, which are given based on what age they are in and what concern is being addressed, what -- whether we have outside the temperatures. So yes, there are certain SKUs, which are more profitable than others. But then it's the whole basket you have to sell. You don't want them to buy lower margin from somewhere else and higher margin from you because we are promising a certain performance in terms of weight gain and immunity boost with our feeds. So we would like them to take all SKUs from us. We can't cherrypick basically.

Very clear. There's a question, what was the reason behind the increase in OpEx, and should we expect it to remain at these levels?

So they are mostly volume driven. And so they remain in line with the volume increase as of now. And as the volume will grow, you'll see them moving in line with them.

Very clear. There's a question from the line of BSF.

I just wanted to ask that, can you confirm that the earlier time period you mentioned of around July to August, do you expect the capacity to reach 750,000 birds by then? And given that you're currently seeing some pricing pressure in the market due to local players ramping up, what would be your near-term strategy with respect to these capacities? Should we expect you to increase your discounts? Or are you expecting imports to decline sharply, which would allow you to ramp-up these capacities relatively fast?

Okay. So yes, that's the general range that we are expecting, not necessarily 750,000, but somewhere around there. We would also risk or do the refurbishment of some of our plants. So the capacity ramp-up would not be that sharp and not that step. Secondly, when we talk about the strategy around the additional volumes, that strategy is -- volumes play a major role in cost control. So higher the volumes, better the cost. We will continue on our journey on cost controls and efficiency improvements. We do not expect a sudden decline in imports because, of course, there are certain -- all the producers, chicken is a long, long term in radius. So it is going to go down slowly. And we would like to maintain our -- or in fact, increase our space in the -- shelf space in the market and maintain our #1 retail position that we have as of now.

So are you expecting to increase your discounts for the higher production? Or do you not expect them to ramp-up as quickly this year?

Sorry, can you repeat the question? It's not a decision between ramp-up and discount or no ramp-up and don't discount. We would like to utilize our capacity as much as we can and sell it at the highest possible revenue. Now the technical decisions of promotions or discounts will be taken when we get there.

There is a question in the chat, given that animal feed grew massively on a year-on-year basis, yet your gross margins were stable on a year-on-year, which suggests what drove this margin expansion?

So why our margin is stable despite an increase in feed cost -- feed sales? That's the question?

Yes, Yes.

That's a good question. That is a result of our new product lines that -- the value-added products that have gone in, as Marcos mentioned, and then the channel mix and sales mix improvements have also improved the margins. So that is a continuous thing which will remain there. And maybe, I'm not sure if that was the reason within the feed segment. But maybe last quarter, we were underutilizing the feed facility. Now we are fully utilizing it. So that margin may have improved as well. But within the poultries segment, the margins have improved because of our better product and channel mix.

Very clear. There's a question, what kind of leverage do you expect going forward? Can we have a target? I believe they're asking for your capital structure target?

Yes. So I think we had already mentioned to you earlier that we are expecting a higher level of leverage in this year and part of next year, right? So we will definitely see some hike in that. This should start to basically improve as we see the new capacities coming online and also generating earnings to us, right?

Okay. There's a question how much -- can you please quantify how much was the growth noted in poultry segment in KSA and exports? I believe they -- I don't understand the question, maybe they are asking about imports, what was the growth in [Technical Difficulty] that's what I understand.

So main growth was in Saudi Arabia because Saudi market is so big that any growth in GCC is not going to move the needle significantly. We improved our business in UAE. We started Kuwait during the quarter. But those numbers are not going to significantly change the overall life for us. But I'll let Marcos give us more color on this one.

I think on the imports, there was an increase in 2024, and that increase continue in the first quarter. That increase is around 5% to 7%. So there were more imported chicken coming to the country. This put a pressure on the frozen segment. And in that segment, we have improved a lot our mix of clients and services, which mitigated our prices as well in the channel. But we really had a better diversification to cope with that situation. But there was an increase in the imports in 2024 and continue in the first quarter.

Very clear. There's a question from Dua.

A question on poultry prices. Can you just comment on Q2? How much are prices down so far or whether they stabilized? Because we're seeing lots of promotions happening?

Yes. I think the promotions, if you see the RSPs, the prices, they didn't change the regular prices. Of course, the promotions were more aggressive. I think that promotions were due to the promotions done by the frozen players that pushed a little bit down. So we saw a decrease in prices on the frozen in retail, but the fresh chicken decreased less, so which shows the consumers value the fresh chicken by its convenience, flavor, performance and experience with spices and so on and so forth. So the fresh segment didn't suffer as much as the frozen. Frozen was impacted very much by the decrease in prices. I think one point I would like to make as well is that I think you have seen the news that Brazil had the first case of avian flu, and that might impact the supply to the country as well. We are already seeing some movements in price due to that situation. It is still unclear how this will evolve, but this is another point that put challenges on the continuation of imports. But overall, I think our mix and new products help us to defend. I think this movement we have done on the chicken breast, which is the highest value added -- let's say, highest value of the chicken category, and we increased very strongly our -- it was our historically high number in sales and the new product is looking fantastic, the specification. So we are confident that doing this smart strategic moves, this has helped us. It's helping us and will help us going forward to mitigate these fluctuations. We saw this before, these prices fluctuations, we -- we're seeing, maybe the frozen is suffering a little bit more. So the players that they are more exposed to frozen, they might impact more, but we have been strongly working to mitigate and anticipate the market moves.

Okay. Very clear. Another question that might be hard to answer. But just to get a sense, where does it bottom out in terms of pricing?

If we knew that, we would be very rich.

So it might go even lower?

Of course, of course. It's -- it could go lower. It could go not so low because, as Marcos mentioned, the AI in Brazil may affect in fact poultry prices throughout the world. So we can't really predict where it would be. We are working very closely with the government, we -- which is very closely monitoring the situation, and we expect things to become better than worse.

We will be taking our last question from Usman Siddiqui.

Just I wanted to confirm on the finance cost. Can we assume the current run rate we have seen this quarter to be the run rate for the next 2, 3 quarters? Or you are expecting the finance cost to increase? Because you said that leverage will further increase in the coming quarters, right?

Yes. So yes. So there will be an increase in the finance cost primarily because of two factors, right? So one factor is that we are looking to basically deliver the capacity and as per IFRS, there is a portion of the financing, which currently we can capitalize as part of the construction, but once the construction is done and over with, then the -- that part of the cost will be then transferred to the P&L part. So that's one part. And the other is that the RUA-related finance costs will also be there because we are looking at expiry renewals plus addition of new farms, et cetera, to support the ramp-up in preparation for the new capacities to come in. So that's why I said that both of these elements go into our leverage situation.

Thank you, management. I believe we are at the end of our presentation. So if Mr. Zulfiqar would like to make any concluding remarks.

Well, thank you very much, everyone, and thanks a lot to my team. Thank you, Al Rajhi, and we hope to see you all again in the next quarterly meeting.

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