Oman Cement Company SAOG (OCOI) Earnings Call Transcript

Where are you coming from Manav?

United Securities.

Yes, please.

So regarding the new greenfield plant in Duqm with the clinker capacity for 5,000 tonnes per day, what is the estimated total CapEx?

Yes. So first of all, let us declare lightly. This is still on our radar, but not on the fast track to move now. But on a strategic expansion, if you hear me earlier, we said if the excessive growth and big bang infrastructure demand happen, then immediately Oman Cement will go to that strategic push on the bottom. Assumed that 2023 budget, it's all around the area of QAR 100 million roughly, so in the range of $200 million to $250 million. But given that now we are also inviting the competitive tender, maybe we see it much more optimized in a better cost structure once we go to the market if we decided soon to go. Manav, any other question?

Yes. I just -- so if you're going for the same the new greenfield expansion, I just want to understand that would you be going for additional debt? So given that your current balance sheet is not debt reliant, so is that an option that you can assume?

Sorry, your voice was not coming clear. If you repeat, please?

No, I just want to understand if you wouldn't be going on external debt financing to fund the capital expenditure.

Yes. Definitely, see, to be -- by all means, we have a clean balance sheet, and that's mainly been clean for the growth and expansion. And on the safest approach for proper investment, we would definitely optimize the corporate or the capital structure of all those projects once we reach. So we'll have different debt equity structure and approval from the Board. Whatever we had approved earlier in 2023 would need to be reviewed and restudied and updated if we decided to go on a full trust for that project down.

Also regarding the associate of Mori Oman, I can see there's a massive improvement in the performance. So can you please give a light on what is driving this performance? And is this sustainable?

This is in addition to their core activity, they also usually in previous quarter, they have taken a hit of currency variations. This time, they have managed well, and this is one of the reasons they have reported well compared to the corresponding period. In the prior period, the euro was quite appreciated on the value and Mori main drive on the procurement, they are procuring the paper from Europe and divide by euro. And given that the euro being quite depreciated roughly or rightly within the close proximity of this year, that has added that positive performance as explained by Manish. Any other question.

Just one more last. What is the current utilization rate for the plant?

I think I'll allow Mr. acting, the CEO, Mr. Jiang Tao to add to that. I think we are mostly around 100% utilization, except this kind of whenever the trend happens, the utilization rate of the plant. Roughly around 100%. We currently with 98%, 99%, except those time whenever we have these and we are maintaining it right. We can run even higher capacity if demand is happening and push on the accelerator to produce to deliver. That's the commitment from the company to the country.

Any other questions from our audience? Any other questions? No, there's no questions. Raul, we come back to you. Please do raise your questions.

I have a follow-up question regarding the expansion, greenfield expansion. You mentioned that if there is excessive demand in the country, you will go for this expansion. So, what is the current market of Oman in terms of volumetric sales? And how much the volume is fulfilled by the local producer and how much is imported from the outside of Oman. And after the situation like the Middle East situation, the import for Iran has decreased? And what are the other sources of import in Oman, if you can?

Greenfield concept, you will find that the local demand would range between 8 million to 12 million tonnes per year. Local producers can suffice if I overall as a group and Madina and there's a new grinding station to come here as we go far down in the north and the south. This will range almost on the 8.5 to 9. So, the capacity is already there per se if the demand maintain that. And I'm also carving out whatever Raysut is exporting. So, I'm not calculating that in the consideration. The demand could be quite met from the local supplier if the market were to be quite locked or going for if any unforeseen circumstances happen that the government or the country gets quite much supported by further imported cement. The merit of the imported cement is mainly coming on the merit of price. So, I will not call it a bit of fierce fight, but unleveled playground. The advantage of those other players who are having maybe subsidy support from wherever their governments or is unlike that we have here. We have different factors which are still loaded on our side, and that goes tandem to the question on the revenue once you ask me whether this is purely on price, but it was partially from the volume, but significantly on the price. We cannot compete with the other people on price because we have a commitment and obligation to maintain ICB as well, the in-country value. We have urbanization standing at 75%, 76% as one cement, while the market or the industry practice is around 35% or 40% whatsoever percent. So we still maintain that kind of contribution and commitment. We have -- other than that, the contractor, the local communities that we source from them, SMEs, our kind of raw material mostly within the country, we are buying from those kind of producer of the different quarries. So we maintain that. Imported cement, if I may reflect on your further point of the question, the import cement still, by the way, even with this geopolitical tension is still coming through, not just the cement, even the clinker. In specific instance, favor or stand or preference on the price, on the commercial margin that other people can make, either retailers, wholesalers, either being quite, I would call intermediary user grinding stations who are not really stabilizing their market along the local producers once it comes to the local content per se and preferring that imported cement, imported clinker be used for maximizing the wealth and the shareholder values for their own shareholders. So, this is the perspective. And if you ask me about the volume per se circular, how much is coming from abroad? I honestly, I don't have a latest update quantity, but Jiang Tao, do you have any highlights on how much imported as of recent?

According to the information, I think last year is different. So from Iran that clinker and cement per year is around 600,000 tons to 700,000 tons like this. Even during the -- after the war during several months, just the one port that between the Muscat and Sohar, still import the clinker and cement from Iran. Like even in July, it's almost 60,000 tons from Iran. And also that after the war that maybe the cost of the cement from UAE is increasing because of the coal -- because of the coal cost increase. But their cement steel export to Sohar area continue before like last year, maybe more than 1 million tonnes, but this year, maybe less.

So even the list statement is competing on kind of inferior, I would call it, still within the standard. Oman Cement never compromise on the standard above quality specifications. Maybe in some standard, we would have 42 as a bare minimum. We have somewhere we have 50, 52 and 48 strength, while others come to the midrange or lower side. We still maintain that path to continue, and we will never compromise on quality. Any other question, Raul, audience?

One last question, if you allow me. About the alternative fuel. So what is the status of alternative fuel? And what is the potential impact in savings -- annual savings on margins, if you can?

Yes. So thank you for your interest. Mainly on this, we are moving on 2 sides. One on whatsoever could be sourced from the market and using also our kind of TDF project to keep utilizing this kind of alternative fuel than others. So that is mainly within almost a progressive growth earlier last year was into the 0.2%, 0.3%. Now we are almost moving to the 0.5% as of first half. However, we are still in some discussions ongoing on the major projects, and that is taking a bit of time because of directional move on this specific waste management philosophy in the country and the mandate split. Mandate split, which has been given earlier to the potential partner. And now it's with another, what you call, entity, which we are looking for to conclude that potential agreement. If it comes positively within the second half of this year, we'll give this announcement, but there is work behind the scenes, and we'll keep you posted whenever things comes to be quite right and disclosable. On the alternative fuel, we have been working collectively on all whatsoever possible to digest and help the environment and the country being also the oil sludge, the -- what you call it the waste from the municipalities the waste from the industries. And we are open for also studying whatever potential of other alternative materials that can come and use to be as a fuel for energy replacement. This is a work in progress. And also, we are growing the team. We have also -- we've already finished, I would call the interviews for the 2 major senior positions for this alternative fuel place. And hopefully, by next month, we would have the people on ground or the month after giving that they are saying we are not speed or transition. And we will move on to the final recruitment of maybe some other quality control on that side and juniors. That's what we want to do or commitment on the resource we are progressing. We are also putting that kind of surveying to the market aggressively, and we'll keep you posted as well. Another question? You want to add.

And also that we also strengthen the cooperation with beer. And now we are also still discussing like the municipal solid waste, like the green waste from the beer and also that we are also sourcing some alternative materials from other industrial companies because this is the advantage. I think this is the advantage of the OCC because the Group to do the eco business maybe more than until now, maybe more than 18 years. And I think in China, Group to do the eco business like alternative fuels and materials, we are the top 1 in China. So many experience can transport to OCC and also like Mr. Fatick said that I also have the plan to like to build up the separate AFR team. So the manager and also the head of section will come in OCC and to maintain the operation because now that we continuously to treat -- to coprocessing like tips and other alternative fuels.

Thank you. Any other question, audience?

Any other questions from our audience, please? Anyone would like to add any further questions? In this case, I would like to thank our distinguished participants who have attended this discussion session. And we hope that we have fulfilled all your inquiries and clarification and interest regarding Oman Cement company performance. And allow me here to thank my management team who have attended and for their great efforts and the company's performance. I shall pass the mic over to Mr. Jiang Tao and Mr. Fatick, CFO of the company to close up the discussion session on the company's unaudited financials for the 6 months period ended 30th June 2026.

I would say, first of all, thank you for your interest. Thank you for committing the time to appear and look into this kind of discussion. We remain available if you have any clarification abbilize the forefront there. And we are also standing to support our contact and communication channels are on the screen. Please feel free to reach us. We stand to be quite fairly, transparently disseminating the information across all of the interested parties and look forward with your support, recommendation and fair assessment to bring more, I would call, traction to Oman Cement as being the -- not the cement company only, but the construction material company that is to grow to come. And hopefully, next quarter, we'll announce some good positive vibe. With that, I would say handing over to Jiang Tao, to put an input before we conclude and then Mr. Abdallah to close this, please.

Okay. So thank you all that to attending the meeting. And like Mr. Fatick said that we also have many plans in the future like the integration and also to strength our AFR coprocessing because we want to -- because we also have the social responsibility about the decarbonization. So we will continue to increase our AFR coprocessing and also to increase our TSR in the future. So hopefully, that also according to your consideration, and we hope that look forward that we can have the better results in the quarter 3.

Thank you and see you next Q1 in November.