The National Detergent Company SAOG ($NDTI)

Okay. So I'll start [Foreign Language] and in advance [Foreign Language] to everyone. We would like to take you through the performance ending 31st December 2025 for The National Detergent Company. We will briefly take you through the company history for those people who are new shareholders or people who are joining after a long time into the shareholders' meeting to just give you an update, and then we'll talk about the NDC verticals currently and then the overview of the financial results of the company and the future outlook of the same. As you all know, The National Detergent Company is one of the leading FMCG companies in the Sultanate of Oman. The NDC manufacturers a wide range of products spanning laundry, home care, personal care, and also, we have recently got into oil and gas and water treatment industry through our new division, which we will let you know in a couple of moments. NDC began manufacturing and marketing soaps and detergents in the year 1981. So one of the oldest company in this part of the world. We not only cater to Oman, but we also export to the other GCC countries, and a couple of North African countries as well. NDC's strategy has always been giving value for money to the consumers, which has helped us to build a strong brand equity over these years. We also have invested quite a bit in our research and development for both the divisions, the Consumer Products division and the AquaPetro Chemicals division to ensure that we are able to develop products at the best possible way and cater to the consumer demand. NDC is one of the first companies to obtain the ISO9001 certified soap and detergent manufacturing company in the region. We are also certified with ISO9001 in 2000 and 9001 in 2008. And we are currently in the process of upgrading our registrations for the AquaPetro Chemicals division as well. In terms of verticals, as I initially mentioned, we currently have 2 vertical divisions within NDC; one is Consumer Products division, where the Consumer Products division is engaged in manufacturing and marketing of detergent powders, liquid detergents, handwash liquids, toilet soap, fabric care and personal care and hygiene products. And also, we do develop industrial cleaning products, which is handled by the institution and export business, which comes under the Consumer Products business. We have recently started AquaPetro Chemicals in 2023. This division is aimed at manufacturing and trading specialty chemicals, catering to oil and gas and water treatment industry. Moving on to the financials. Now the year has been quite a challenging year for NDC. So we registered a negative 1% in revenue. We had direct costs, which are going up by 3%, largely accounted for raw material, packing material costs, which went up. The impact of revenue dropped plus the direct cost resulted in a minus 8% in gross margins. And if you look at the other income, we had about OMR 38,000 which is very similar. So the net impact at the gross margin level is about 8% from an OMR 8.6366 million (sic) [ OMR 8.6267 million ] to roughly about OMR 8 million. So we lost close to about OMR 700,000 in the gross margins on account of drop in revenues and also the increase in the raw material and packing material costs. If you look at general administration, we've been fairly okay in controlling the cost there. So we are about 2% below 2024. However, the selling and distribution expenses increased due to higher marketing spends by the competition. If you recollect, in 2024 due to the geopolitical situation, there was a tailwind for all the local manufacturers, which we were able to do very high sales at lower cost, which was not the case in 2025, and therefore, the spends increased close to about OMR 400,000 only on sales and marketing activities. Due to higher sales and turnovers, the finance charges were also higher also due to the new division where we have invested a lot of CapEx and operational expenses to set up the whole new division. So the profit before tax stands at about OMR 500,000 as against OMR 1.6 million in 2024. So the net profit after taxes remains at about OMR 423,000 as against OMR 1.39 million in the previous period. If you look at segment-wise profitability, the Consumer Products division had a turnover of about OMR 23.67 million as against OMR 23.8 million in the previous year, which is a drop of close to about OMR 200,000. If you look at the sales spending that is where it has gone up and the overheads were from OMR 15 million to OMR 15.5 million, and the overheads moved from OMR 6.6 million to OMR 6.9 million. So this impacted the bottom line, and this cost was due to competition pressures, and we had to increase our spends to retain the top line. If you look at AquaPetro Chemicals, we registered OMR 583,000, which is quite a good performance, I would say, from a top line for completely new operation because 2025 was the first full year operation of the business. Compared to 2024, the likely figure to compare is against OMR 279,000 because we had a sulphonation business, which had OMR 356,000 which we currently exited. And therefore, the turnover comparison between last year and this year in the AquaPetro Chemicals, is almost 100% growth from OMR 279,000 to OMR 583,000. And if you look at bottom line as well, the operating profits for the Consumer Products division due to the higher cost of sales was at OMR 1.28 million, and we had a loss of OMR 381,000 in AquaPetro Chemicals, which is a new business, which is currently in the investment phase. So with net of finance cost, the profit before tax for Consumer Products division was OMR 911,874 and the AquaPetro Chemicals loss was OMR 411,000. And therefore, the net off is about OMR 500,000. Netting off with tax, the net profit was about OMR 423,000. From a financial position from assets, the noncurrent assets, our total noncurrent assets was up by 1%, largely due to the equipment addition, which we had about OMR 986,000 largely due to setting up of a warehouse facility and automation in the power plant. And then we had a disposal of about OMR 71,000. So there's an increase in terms of plant and machinery. Also, there was a change in lease asset accounting, so which also increased the cost of that. So if you look at noncurrent assets, we are at about 1% above previous year. Inventories, though we had reduced inventories by 3%, but it will continue to maintain at this high level due to the higher sales volume. Trade and other receivables are slightly higher, but -- which is in commensurate with the top line movement. The cash was OMR 221,000 as against OMR 910,000 compared to the previous period. So at a total asset level, we are at about OMR 32.416 million as against OMR 32.759 million, which is a drop of about 1%. So if you look at the financial positions on equity, by and large, the share capital, share premium, legal reserves and revaluation reserve remained the same. The retained earnings was reduced. The minus OMR 576,000 is largely account of the dividends paid out. In terms of statement of financial position of liabilities, the total noncurrent liabilities is less -- is more by about 3% and current liabilities more by 1%. So at a net level, total liabilities is about 2% above previous year. Critically, the current liabilities, the borrowings were higher. That contributed to the difference here. Otherwise, position remains almost similar to the previous year. In terms of future plan, but the key point that I would like to mention is now despite the challenges, the Consumer Products division maintained sales value compared to the previous year because if you look at previous year, we only planned a 6% growth, but we ended up growing by about 18% and the team had done a good job in maintaining that 18% level the following year as well. Despite the competition, multinationals came in a big way in 2025. And the advantage of local manufacturing ceased to exist from 2025, which also impacted us quite a bit. NDC is focusing on maintaining the revenue growth. So we are looking forward the future year, we are looking at controlling, consolidating and growing. So there will be a lot of control exercise and consolidation of brands and markets will happen. The company is working towards a great momentum and cost control, as I just mentioned. However, the geopolitical situation in the region will have significant impact, which you have already seen in the month of March. So we thought we would be gaining momentum, but this has kind of slightly put a lot of challenges into it. But we are prepared with all cost initiatives and growth initiatives to make a difference in 2026. Thank you very much. And if there are any questions, I'm happy to answer the same.

Hi. Mr. [indiscernible] Am I audible?

Yes [ Mr. Shorr ].

I just had a couple of questions, starting with, obviously, we have seen here out of the 2 divisions, the second division is not really doing very well. Your consumer products is okay. I mean we have seen a significant decline in profitability in that segment as well. But on the other segment, the company is not doing that well. What do you expect of this segment, when it should turn positive? And what sort of contribution are you looking from this segment in this year?

Okay. So if you look at the oil and gas business, the division that you're referring to is the oil and gas and water treatment industry, so which we set up in 2023. And by the time the CapEx investments are complete, it was September 2024. So last year was the first full year in terms of operation. We anticipate a breakeven from this division by 2028. So -- because it also needs further CapEx to build the infrastructure for us to manufacture the relevant products for the industry. So we anticipate 2028 would be the breakeven year. The long-term outlook, we are looking at by 2030, we should be about a 5 million business. And by 2032, 2033, we are looking at to cross about OMR 7 million business in this.

Great. Okay. And by OMR 7 million, you mean the revenue contribution would be OMR 7 million?

That's right. Yes, that's right.

Perfect. So now my second question is on your Consumer Products division, which you guys obviously have a very long history. We had seen recently that due to the boycott and everything, demand for certain products have risen, which have benefited you and a lot of the other local manufacturers in the region. With that sentiment now gradually receding, we have seen the margins come under pressure, not for just you but other companies as well. How do you see that? Do you see the compression on margins to continue? And if not, if you expect to recover out of it, how do you do that? And a connected question is how competitive are your products if we compare it to the imports, both from within the region and outside the region?

Okay. So let me address about the -- first, I'll take the impact of the boycott thing. So it was not a gradual decline. It was a dramatic shift from the boycott scenario to this. But here, I would actually attribute a lot to the retailers' dynamics because I think the shift was engineered by the retailers and the investment by the multinationals, not so much so by the consumers. So which increased the cost of selling into these outlets. For instance, we were able to get a display stand or a display for about OMR 10,000 for a quarter. It shot up to OMR 25,000 or OMR 30,000 last year due to -- because during the boycott period, most of the multinationals did not invest any money. So the cost at which we were doing the business was lower. So more than the raw material, packing material cost, it was the cost of sale at the outlet, which went up. So this was one of the key reasons why the sales and distribution expenses have shot up. And we think and we estimate it to continue at this higher level because now the market is an open market where nobody has an advantage. So everybody fights for the survival. So the cost of selling will continue to be at a higher level. Very unlikely, it will return to the level of 2024 in terms of cost of sales. If you look at in terms of margins thinning at the direct margins level, it was quite -- 2024 had everything right. The markets were open. The raw material prices were lower and the packing material prices were lower, which on the contrary, in 2024, the raw material prices shot up by 2%, which had a direct impact because ours is a very raw material-intensive product category. The margins also are thin around 35%, 36% margins. So a 2% increase in raw material did really impact us, which was kind of softening towards the end of 2025. But unfortunately, with the war situation now, the costs are going up steep, both in terms of actual material cost and also the freight cost. In fact, freight cost in most cases are almost getting increased at the level of raw material. We think this situation will probably continue until April, May. Hopefully, [Foreign Language] the war comes to an end. Otherwise, we anticipate the cost for this year also to be quite steep and challenging for direct margins.

Perfect. I'm sorry, I missed -- you mentioned that now the freight costs are up, but the raw material costs are now back to the level...

No, no, no. It was softening until December. But now with the war situation, both raw material and freight is going up, but freight is going up at an astronomical level compared to the raw material prices.

Yes, yes. And that brings me to my next question, which actually you have answered in part. My question is, obviously, if these prices are going up, they should be going up for all the players, right? So obviously, this should be a concern for your competition as well.

It's slightly a different perspective there. If you look at NDC, we are probably the only local manufacturing company. Our competitors, all of them import finished products from outside. Okay. So there will be a slight difference in the analysis that we need to look at it because most of the PNG products and Henkel products, which are the key competitors for us are manufactured in Saudi, and Saudi sources from Europe there. And Saudi is quite self-sufficient in terms of raw materials and packing material. They don't have to import. And they're all locally manufactured. So In our case, unfortunately, every single thing is imported. So the cost of manufacturing for us will technically be higher compared to PNG or Henkel or Saudi-based detergent manufacturers like SIDCO, Wafir. So these people will technically have a relatively better margin structures compared to us.

Right. And what about once the war [Foreign Language] settles, what about after that, if the freight rates come back to the normal level, would you -- would they still have a competitive edge against NDC?

See, it will not be to this extent. It will come down. Whatever existed in 2025 is what they will have. There won't be any special effects for Advantage once the war settles down and prices get proper.

Okay, okay.

But of course, we will continue to have this issue because when we export, we pay duties to Saudi and all. But when they -- when we import, we don't pay any duty. So that's another anomaly. Like for me, if I land in Saudi, I'm 6.5% costlier than their products straight away.

Okay. So we don't have any duties for the imports, while they have duties on their imports?

So yes, there should be some barrier created anyway.

Yes, to protect the local industry, of course. Yes. It makes a lot of sense. And my another question is on the land that the company has. It's OMR 13.5 million, if I'm not wrong, the value that is in the books. What is the actual market value of that land? And previously, if I remember it correctly, the company had an intention to dispose this land off for something and then that was not actually seen through. But what are the plans now with regards to the land?

Okay. With respect to valuation, this valuation what we reported is a recent valuation, which we did through third-party sources. So -- and it has also been audited. So our stand is that this is the current price in the market which gets reflected in the book. In terms of sale of land, the matter is with the shareholders. And whatever the shareholders decide, then we move forward with that.

Great. And my last question is regarding dumping. So obviously, with the regional players facing some issues with shipping outside of the region because of route blockages and port issues. Do you fear any dumping in Oman from those manufacturers if they are not able to export their inventory?

Okay. So in our industry, there are no major players locally. So it is only us, then we fight all multinationals. The multinationals are currently finding challenging to bring stocks inside. But with the green corridor channel, which has been now signed between Oman, UAE, and they will now move goods from Saudi to Oman or UAE to Oman through roads. So I don't fear any dumping activities by anybody at this moment of time because even raw materials are getting challenging. So people rather would go slow and try to kind of have products for a longer period of time to sell rather than dump.

Okay. Makes sense. On your -- the segment, the Oil and Gas division, you mentioned that there's still some capital expenditure left. It started by September 2024, but there's still some expenses left. On your balance sheet, if I'm looking at it correctly, you guys don't have a lot of cash and you're already incurring debt. How much is the amount of the CapEx, if you can give us a number remaining to be...

I think it will be about OMR 180,000.

Okay. So it's not that big, you guys can manage it.

Yes.

Perfect. And on the OMR 7 million, hopefully, by 2032, as you mentioned, could you give us a number, a ballpark number or some hint on the margins as well this division you expect to contribute to NDC's bottom line?

I give a comparison between the consumer products and the AquaPetro Chemicals. Consumer Products will be a moderate growth and a moderate margin business, but it is a volume business. So it will grow around 5%, 6% per annum and have a margin potential of 3.5% to 7% based on the year that we operate in. To the other side, the AquaPetro Chemicals, it's a high growth for us because it's a start-up. So we look 25%, 30% CAGR in the next 5 to 6 years. And it is not a very highly labor-intensive business. So people cost will be fairly lower and therefore, has a margin potential of upwards of 10% to 15%.

And 10% to 15%, that's on a net level or operating?

Net level.

Okay. Great. Now my last question from you is, could you just briefly explain what actually this division is this AquaPetro Chemicals division? How does this contribute to the industry? And if there is any competition in this segment as well?

Okay. So what we are doing in AquaPetro Chemicals is we are looking at 4 different verticals in terms of business within that. One is the blending business, which is toll blending, which they call in the industry, where basically the concentrates come from the parent companies, which are largely today European companies. and which gets diluted and then supplied to the oil and gas business here. So that's one kind of business. The next one is chemical trading business, where we actually -- because we are also into chemicals, we do trade chemicals like caustic soda or your ammonium bifluoride and these kind of things, which gets traded as -- which is one of the businesses. The third business is the laboratory business. We have currently got the second-party accreditation for a laboratory. So we'll now be able to offer services for product testing, both in oil and gas and water treatment business. The fourth and the key differentiator, which is what this business will have to bank on over a period of time is the capability of developing products locally, which augurs very well with the Oman 2040 Vision in terms of in-country valuation and in-country development of products. So here, we are focusing heavily in terms of developing products within Oman itself, and therefore, your dependency from European markets and others for the base product itself comes down. We are making decent headways with a couple of big oil and gas companies here, which we will let our shareholders know at the right time when we've kind of completed these 2 projects. So the big boost will have to come from the product development side, which is where the investments have been made in terms of lab and also in terms of people who we have recruited.

Okay. And what these products are, will that hopefully be locally developed, which are currently...

See, major products which gets developed for oil and gas are your demulsifiers, corrosion inhibitors, scavengers. So these are some of the key products, which currently now comes as concentrates gets diluted and supplied. What we are trying to do now is we will develop these products locally, and we will also be able to dilute it and supply. So it is 100% Oman-made products.

And you have no competition whatsoever in these?

The competition is all multinationals, right? So all from Schlumberger, Clariant, Halliburton; all these are our competitors when we get into that segment because we will be competing with all the European giants.

But the competition in this segment would be easier than the competition in the Consumer Products division?

No. Consumer Products division, it's a mass marketing. So there is always space for a player. This one is a B2B business. So this is far more difficult to crack compared to the consumer business.

So my question is, if the business is that competitive, how are you able to secure 10% to 15% margins on a net level?

The industry operates at 25% to 30% margins.

Okay. Makes sense. I think that's all about... That is all from me. Thank you for the explanation. It was a very interactive session.

Any other questions by any other shareholders? Okay. I guess not. So thank you all very much for your patience and [Foreign Language] once again to you all. Thank you.