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

Hello, everyone, and welcome to the Widam Food conference call. Please note that this call is being recorded. [Operator Instructions] I'd now like to hand over to our moderator for today, Roy Thomas. Please go ahead.

Thanks, Ali. Hello, everyone. This is Roy Thomas from QNB Financial Services. I want to welcome everyone to Widam Food Company's Second Quarter and First Half 2024 Financial Results Conference Call. On this call from Widam Food Company, we have Yasin Ibrahim, the Finance Manager. We will conduct this conference call with management first reviewing the company's results, followed by Q&A. I will turn the call now over to Yasin Ibrahim. Go ahead, Yasin.

Roy, thanks very much for the introduction. Hello, everyone. Greetings to all on this Widam Half Year 2024 Conference Call. And with great pleasure, I would like to tell that our half year 2024 results are significantly better than those of the previous years, as you can see in the financial assessments published on the QSE website. The number demonstrates the realistic assessment of Widam's work. A total of QAR 391 million in revenue has been generated and Widam has achieved a gross margin of QAR 22.6 million and a net profit of QAR 3.1 million for the H1 period compared to a loss of QAR 35.7 million than previous year. Then in regards to the revenue, we have seen a 39% increase over the same period last year with our cost of sales has just grown up by 29%. Our gross margin has increased from negative 4% to positive 5.8%. Now going further in details of the revenue, we always look at 2 areas of the business: one is domestic sales and the other one is international sales. Domestic sales have increased by 50% compared to last year. And international sales, as per our expectation, has grown by 57% compared to last year. The material gross margin, in particular, has been favorably achieved and that is mainly from procurement having successfully achieved reduced purchase pricing with long-term purchase planning as well as negotiated rates because of long-term orders into place. The operational costs have been maintained similar to last year. And Widam, at this point, continues to face severe competition from the smaller players in the market, hence, impacting our margins in certain segments of the business. And with regards to revenue by segment, I'll probably go a little bit more in detail now. In the international segment, we have consistently focused on 2 areas of this business. One is obviously expanding the countries into which we sell in as well as expanding into the customer base. Now the business has really taken off more so in 2022 and we have -- and we were dealing with 5 countries, which you, of course, have heard in the past. But now in -- by this year, we have -- we are selling it to around 7 to 8 countries. So our strategic focus has been able to grow up double our sales on a consistent basis. Particularly for H1 last year to H1 this year, we have doubled up our international sales. The export -- just for the investors to be aware, the export is based on a direct drop shipment from suppliers to the customer destination, so it does not route through Qatar but has a direct drop ship to our client locations. In regard to B2B section, which is business-to-business, which is HORECA industry, the traders, retailers and wholesalers, we have had a very strong demand come through from the HORECA sector due to Asia Cup earlier this year and Ramadan, in particular, for quarter 1 this year and in Q2 Eid-al-Adha, [ Mubarak ] program that we have. The additional dedicated sales team members who have come on board in the last 9 months in this particular sector has helped achieve market penetration and an increase in our customer base for us, which is supporting an increase in growth in our sales. In the B2C segment, which is home delivery and butcheries, has seen an overall 40% increase in revenues. Home delivery has seen a 27% increase in revenue over the same period last year and butcheries has seen a 59% increase in revenue versus the same period last year. With specific to home delivery, we have seen positive outcomes with the Widam's home delivery application, including an increase in sales and brand awareness. The base foundation of our HD, home delivery, is not only having an increase in the client base and home delivery app, but it's more quality product focus, service focus and also consistency of supply being available has been a key factor or the pillars of the growth foundation that we see there. And then in butcheries, there's a change of leadership, has seen, again, growth coming through in H1 2024 versus H1 2023, one of which I have mentioned earlier, 59% growth in butchery sales. And one of the key factors we need to be aware of this is that in H1 2023, we had 7 butcheries, and as we informed you earlier, that by December we had closed down 1 butchery, which was not running profitably. So we are not leaving, we keep assessing the performance of the butchery, and where it is required, we do not keep it open. But at the same time, we are monitoring it and looking for the future opportunity like in June 2024, we have opened up a new butchery in Al-Wakrah after the calculated study of the area. And we are still opening up a new opportunity in the second half of 2024, and we are strategically focused on each area of the business as decisions are made towards profitability and making sure that the growth is happening at the top line revenue as well as the margin line. So this was a summary of the revenue line. And the next is the other income that you have seen in the financials, which has totaled QAR 27.1 million. Out of that, QAR 19.2 million relates to the reimbursement of cost by the State of Qatar for the services we provided to date and QAR 2.6 million dividend income on investment in Baladna shares. And there is a favorable movement in operating profit, about 37.7%, compared to last year. With cost of sales, Widam has been collaborating with suppliers, and as we previously told investors, we are expanding our collaboration with foreign suppliers in order to obtain a steady supply of high-quality products at competitive prices. We are working on it consistently, so future increase to our margin and lower procurement cost should result from that. Then in regards to the operating cost and G&A versus last year as a combined, we have a 33% increase in overall cost. However, if you compare it with the percentage of revenue, it has been improved by 1%, which is supported by a 39% increase in revenue. If you strip out the impact of ECL provision, our overall margin has been improved by 3%, and definitely, that has been a good achievement. We are continuously working on managing our costs. And for the past 2 years, it has been consistently maintained reasonably at the same levels or reduced in areas that we can possibly manage to reduce. Further profitability focuses are like the business has always looked at that and it has always put into place strategic plans for different lines of the businesses. The top line strategies, in particular, revenue we have benefited with. Particularly for H1, we benefited with external market condition with Ramadan, Adha and the Asia Cup have been a strong factor in the demand coming through from the market. The additional factor being market penetration has been achieved because of an increase in the sales team who have been able to obtain additional market share by increasing the customer base for us. And now the key top line strategy of getting new product ranges into place via our B2C channel, which is our butcheries and home delivery. In regards to opportunities, challenges for 2024, now our domestic market has always been a challenge for us in the last 2 years. However, Widam has put strategies in place during 2023, have seen a bit of a turnaround in revenue as well as margins in this year. Like frozen chicken was one of the agreements we signed about 1.5 years ago with Vibra, which is our brand of Nat chicken, and that has seen a consistent improvement of substantial growth on a year-on-year basis. So just in regards to frozen chicken, we have gone from QAR 19 million revenue in H1 '23 to QAR 50 million, QAR 51 million in sales in H1 '24. We have also seen margin improvement. So we have not only seen revenue go up by [ 1.61% ], but also margin improvements happening consistently and we see that benefit coming through at bottom line. So that's what was there for -- from the P&L side, very like -- and also on the balance sheet like -- and if you see on the balance sheet side on the asset, we have capitalized 2 projects, which is mobile app for home delivery and ERP. With the implementation of ERP, Widam will be having the clear and timely visibility of performance and making informed decisions, which will again result in increase in sales with better margins. In the next part, there's a significant drop in cash in bank, as you can see, however, it is used to repay the Islamic borrowings and investment in working capital. All right. At this point, that's all I have for yourselves. Please feel free to ask any questions you may have. Thank you.

[Operator Instructions] As of right now, we don't have any raised hands or questions. I'd now like to hand back over to the moderator for the final remarks.

If there are no questions, we'd like to thank Yasin Ibrahim for the results update, and we look forward to speaking to you all for the third quarter results. Thank you.

Thank you very much, Roy. Thank you, everyone.

Thank you for attending today's call. You may now disconnect. Have a wonderful day.