Widam Food Company Q.P.S.C. (WDAM) Earnings Call Transcript & Summary

Hello, and welcome to the Widam Food Conference Call. I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Fabian Macquarie to begin the conference. Fabian, over to you.

Thank you, Gavin. Good afternoon to you all and thank you for joining us for Widam Food Company's 4Q and FY 2023 Earnings Conference Call. My name is Fabian Macquarie, a senior research analyst QNB Financial Services. On today's call from Widam management, we have Amar Kulkarni, who is the Finance Director. Amar will go over the financial performance first, and then we'll have a Q&A session immediately after. I'll now turn over the call to Amar. Over to you, sir. Please go ahead.

Thank you, Fabian. I appreciate all of you for joining the call today in reviewing the FY 2023 financials and [indiscernible]. Okay. I'll go through sort of the details at a top line perspective and then go down to a little bit more in detail by different revenue segments. I'll also go through what the business is doing in regard to internal restructuring. Thereafter, I'll go through the Widam operations internationally in Sudan and Tanzania. And then thereafter, finally, the challenges and opportunities Widam sees in 2024. Welcome all again. We finished up 2023 with a revenue line of QAR 528 million, roughly around 9% better than last year. Our cost of sales are at 13% higher than 2022, although over the comparative revenue increase only around 9%. The operating loss, including one-off items ended up at a QAR 33 million loss compared to a QAR 61 million loss last year, and that's a 46% reduction in loss. The one-off items mainly related to Sudan, and I could go a little bit more in detail when I'm going through Sudan as an operation and the impacts thereof that we've taken within the financials. In regards to revenue as a comparative to 2022, international sales again are the key driver of increase in revenues. Domestic revenue has been weak in 2023. It was affected by low demand in Q1 and Q2 for the year post the World Cup and additionally due to heavy competition that the business faced. So in regards to domestic revenue, we've had a 16% reduction versus last year. But on the flip side, with international revenues, we've doubled our revenue versus last year. Just going through the revenue segments. International segment. We -- again, our focus is to continually expand our reach in regards to the countries we're selling into. We were selling into 5 countries in 2022 that increased to 7 countries in 2023. And again, even within the last couple of months, now we're seeing, again, growth in the number of countries we're selling into in 2024. So that has been a good success story for Widam. We're focusing and maintaining our margins and revenue growth in international. Like I said, we've achieved our target of achieving doubling sales compared from 2022 to 2023. In 2023, we've achieved QAR 199 million in revenues from international sales. The impact on international sales again has had a bit of a dampening effect from the perspective that we had a temporary closure of the Sudan operations. Sudan provided almost about 45% of international revenue in '22. But that dropped down to only 3% of international revenue in 2023. We worked very hard to counteract the drop of international sales from Sudan operations, and we've worked very hard to enhance revenues of products from India, Pakistan, Australia, Brazil, to continue our growth in international sales. In regards to the B2B segment. In -- we've had a revenue drop in the B2B segment of about 19% versus prior year. And there's been a couple of reasons for that. One, we've had a sluggish domestic demand in the first few quarters, in the first 3 quarters and [ Horeca ], in particular, has been affected mainly the catering section due to reduced blue-collar workforce from 2022 to 2023 comparative. We also have loss affecting amount of market share, and we believe we need to develop and have by the fourth quarter of 2023 to develop a solid team to counteract the depleting market share, and we believe we'll see the benefits fairly visibly in the 2024 numbers. In regards to B2C segment, which is made up of home delivery, which is the Widam Application and Butcheries. In regards to the B2C combined, we have achieved an 8% increase in revenue, but going down to individual levels, the home delivery of Widam application, we've got a 39% increase in revenue year-on-year versus butcheries we've got a 16% decrease in revenues year-on-year. In regards to home delivery, our Widam focus on brand image development, social media visibility has supported the home delivery of the Widam application growth. Our Widam application has seen a 14% increase in active orders year-on-year. And we expect to see the continuing trajectory going forward in 2024. The home delivery Widam application division has maintained a focus on quality and service, which has also further supported revenue increases. With regards to Widam Butcheries that has been a challenge during the first 2 quarters of 2023. We've had a leadership change in the fourth quarter of 2023. And we will see a substantial turnaround and increase in revenues coming through in the 2024 year. Butcheries forms a crucial part of our strategy in supporting product growth and product range growth that we see going forward in 2024. Now after revenues, let's focus on the margins, one of the key factors that are impacting our margins. Now during most of Q1, Q2, post World Cup of 2022, we had continuous competitive liquidation of near expiry products sold at a low margin. And annually, we always have a weak 2020 -- sorry, a weak Q3 quarter. With the impact of the first 3 weak quarters, the upswing in Q4 could not really overcome the downsides impacting our numbers in the first 3 quarters. And during 2023, beef imports was imported by the by the government impacting further competition, and therefore, reduced revenues and margins too. Now we are noticing during 2023, that there's been a fierce competition from smaller players in the marketplace, especially in the chilled lamb category, which has impacted our sales and margin. We've also seen a few clients actioning imports for themselves that is affecting our revenue lines there. In regards to costs, we are consistently monitoring costs during the year. For OpEx and G&A, we have achieved a 10% reduction versus last year. Over the past 2 years, management has been consistent in reducing these costs at an average of 10% annually. The cost reduction is a factor that has been focused on by the business, and we do see that as an ongoing factor and focus. In regards to the business focus. At this point in time, the business is looking at restructuring internally. We are -- we've set up a small team that is working on reassessment. We're revamping the business across all departments. And so we will see a substantial turnaround going ahead in 2024. Some key points just to note on assessing and realigning the business to the profitability trajectory is revenue lines are being revamped for new product range, considering opportunity in the marketplace, we are looking at products like frozen french fries, frozen vegetable, fresh fruits and vegetables, value-added options like beef patties, [indiscernible], et cetera, are being looked at and being developed. Widam is also looking at developing and improving our -- reducing our cost rather in evolving in the value chain options. So we're looking at our past to look at cost reduction in setting up a pilot program, and this has been tested with a South African partner in a sheep fattening program and that effectively we should achieve a substantial reduction in our costs and purchase price, therefore, enhancing our margins too. Now market penetration and market share should improve with the well-developed sales team that we believe have now concluded by the end of 2023. And with specialist channel management board, we do see a substantial turnaround looking towards 2024. As usual, OpEx and G&A continues its cost saving as a focus and that will not change. In regards to the Widam operations, Sudan. Now with the conflict in Sudan since April of 2023 supply has halted. And Sudan, to give you a comparative was 45% of my international sales in 2022. But we only being able to produce about 3% of my international sales for 2023. Now due to this conflict in Sudan, Widam has had to write off QAR 34 million worth of inventory that was lost during the conflict. Additionally, due to continuing uncertainty looming in Sudan, Widam has taken a provision of around QAR 31 million in the 2023 accounts to cover 100% of the remaining assets under risk. At this point, there is no indication when Sudan operation will restart. Tanzania. Widam Tanzania has been set up. It's still we believe in itself fledgling stage. We have operations personnel all comfortably set up. We are working on developing and setting up key sources of suppliers of Tanzania meat for the Qatar as well as the international clientele. This product that we believe is of very good quality, and we expect that we can see substantial revenue growth of Tanzania meat in 2024. In regards to challenges, opportunities that I see for 2024, the domestic market, we definitely have an uphill task this year to work through market competition and loss of market share. We believe that we have a strong team at this point from a sales perspective who will build and enhance and increase revenues within the domestic market. The strategic actions that we've taken so far will be seeing improvement substantially coming through in January and February itself on our revenue as well as gross margin perspective. In regards to international, our client footprint is a key driver for expansion and core growth. But we obviously take that on a cautious footing because there is risk with credit risk as well as upfront financing for suppliers to maintain the international sales market. Majority of our financing costs that you see in the 2023 numbers directly related to the international business. For 2024, we expect to see a minimum of 15% growth in revenues going forward for 2024. In regards to some exclusive agreements that we set up. We've set up an exclusive agreement with Baladna to maintain continuity of veal supply over the next 5-year period. We've also set up an exclusivity with VIBRA or supply of chicken into Qatar and that was set up in 2022. Now in regards to that particular deal, we've seen volume growth of around 175% increase between pre-agreement year 2021 versus the 2023 year. So every step that we are carrying out or agreements that we're signing up do lead to reasonably good success. We have to just keep monitoring, pushing and driving hard towards each of these steps to get us to the finish line and our target to be set for ourselves. That's it for myself at this stage. If there's any questions, I'm happy to answer any questions or any other additional information that somebody is looking for. I'm happy to answer any questions now.

[Operator Instructions] There are no questions at this time. I'd like to hand back to Fabian.

Thank you, Gavin. It looks like we don't have any questions today. It means it brings us to the end of our call. Thank you for joining us, and thanks, Amar, for going through the performance of Widam. Please join us in future calls and have a good afternoon.

That does conclude our conference for today. Thank you for participating. You may now all disconnect.