Gulf Mushroom Products Co. SAOG (GMPI) Earnings Call Transcript
August 13, 2026
Earnings Call Speaker Segments
Hello, everybody. Welcome to this eighth session of investor discussion. I'm Deepak Agrawal, CFO. With me is Mr. Abdullah Nasser Al-Hadhrami, the CEO; and our colleagues. So we are here today, meeting today to discuss the half year results for the current year 2026. And the accounts have been all uploaded. And this small presentation I have opened before you just to quick start the discussion. So I welcome you all for any questions, please feel free. [Technical Difficulty]
Congrats on the results and some questions from my side. The first is regarding your margins. So the revenue basically grew around 16% in H1, while operating profit grew like around 38%. What drove this strong margin improvement? And do you see it sustainable in H2?
Yes, we feel we can sustain the same thing going forward in the next 6 months. But we are depending some quantity of -- we are importing some quantity of compost as our compost capacity is fully utilized. So the supply chain is still affecting. So subject to that, we will achieve the same results hopefully for the next half.
And regarding your operating cash flow, what caused the pressure on the cash conversion? And do you expect some improvement to be in H2?
Yes, we have distributed dividends this time, 25% cash. And we have some loan installments, which we have serviced. So that's the reason.
And speaking about the dividends, given the company's CapEx and funding requirements, do you expect that the current dividend level to remain sustainable going forward?
Yes. So far, we feel we can sustain it.
And regarding the utilization, you mentioned in Q1's call that in worst-case scenario, your utilization level is 80%. And in Q1, it was around 85%, if I'm not mistaken. So can we know more about the utilization rate in Q2 and going forward?
Okay. Our new capacity now -- one second, give me a moment. As you can see here, can you see this?
Yes.
So this is our capacity, the new capacity with the addition of new growing rooms is 25 tonnes per day. And against that, we are -- we have done 81% in the half -- current half. Last year, when we hadn't had the new rooms, our capacity was almost fully utilized at 96%.
So the Q1 utilization, assuming it was 85% and the Q2 was around 75%?
It is similar across the 2 quarters. Yes. Go ahead, please.
I just joined a little bit late right now. I don't know whether you have discussed it, but just wanted to know how the market for mushrooms has been last year and this year, particularly after all these events has happened, you might be seeing a lower competition from imported mushrooms in the region, but -- and you are one of the major suppliers from the region. So how do you see the market developments? And how do you see the market evolving, assuming the things are getting -- after things are getting back to normal?
Yes. In this half year, as you have rightly said, the market was affected because a lot of mushroom was coming from Iran, which stopped. So from supply side, that was a plus for us. But from demand side, the hotels were affected in the region. The occupancy was single digit. So on the demand side, also we were affected. So more or less, it was in our favor as of now. Now going forward, we don't know how things will change and how the hotel occupancy will improve. But if everything remains the same, then it is a plus for us.
When you say there is the imports competition from imports were not there. But at the same time, there is a demand destruction. What's the quantum of demand destruction that you are seeing there in the market currently?
Rough estimate would be about 3 tons per day.
Three tons per day we can you provide a context to that probably what's the total market size?
Sorry, for competitive reasons, I can't give you that kind of detail.
No. You said 3 tons per day for Gulf Mushrooms or for the entire market?
For the market.
And what's the total market size that we are talking about when we say --
I'm sorry, Joyce, I can't go into that.
And what are you doing, Gulf Mushroom is doing to retain the clients when you say there's a decline in demand? How are we generating more revenue from that? And what's your strategy going forward when things get back to normal? Will it be -- do you think you will be able to gain the confidence of the existing customers and the new customers probably you have done business during this time?
Well, our customer base is very dedicated for the last 2 decades. And the main customers have been with us for a long time. And our strategy is to make sure that the mushrooms of good quality is available all the time. And we are taking advantage of the economies of scale -- so to give -- to match the competition as and when it arises. So if competition from overseas comes up, we will be in a position to face the price competition as well due to our advantages of economies of scale.
So this one, are you talking about Oman or for the entire GCC market?
The imports are mostly affecting the GCC only. I'm talking about the GCC. Oman is a small market.
And how are the prices behaving during this time compared to end of last year? How are your average prices for mushroom products behaving in that?
Prices for different products for different customers for different countries, they are different. And prices were under pressure because raw material costs went up, supply chain costs went up significantly. So we had to also increase our prices a few times in this period to match the increase in costs. And our customers have been very cooperative.
So, were you able to gain any new customers from the competition, from the import competition during this period?
See, all the customers are the same. I mean some of them used to import from overseas as well. So that share got decreased, but customers are more or less the same.
And what's the average realization that you were able to obtain during the second half of the year and last year and during first half of this year?
I can say that whatever we have published, you can see GP is 52% in this year and which is above last year by 2%. EBITDA was 35% this year against 31% of last year and 24% PAT against 20% last year.
Can you give us what is your volume -- sales volume during the second half and first half of this year?
You can see the profile here, 3,658 346 tonnes.
So, what's your take on the general price environment for the remaining part of this year? How do you see the prices behaving? Do you see -- will there be further increase, decrease? Or are you expecting the prices to remain stable?
The procurement costs, I think will not change much. I mean they are already high, significantly higher. And the geopolitical situation also doesn't seem to be improving anytime soon. So we think the cost profile will be more or less the same. And so our selling price profile also will have to maintain the same. So, we don't expect much of a change there.
Can you show me the volume numbers again, please? And generally, for second half of the year, winter is considered a major consumption season for mushrooms, isn't it?
Yes, the tourist season, yes, of course. The summers are slightly down.
And this summer, despite the seasonal decline in demand, still you were able to push more volumes. What were the major reasons for that?
No. The summers are always -- we have to work harder to sell the same volumes. So we have to do a lot of promotions.
And could you talk about your expansion plans? Now you're coming up with a compost facility plant expansion in. And is it because for the mushroom cultivation expansion, probably you need more capacity for your compost.
Yes, exactly. Because we have increased the number of growing rooms. So we have a lot of area to cultivate mushrooms, but to cultivate the mushrooms, we need compost. So that capacity also we have now decided to increase so that we can -- we don't have to import, which we are temporarily doing as of now because that will take some time.
And if you are to further increase your cultivation capacity, mushroom capacity, will you be able to do that? And will you be ready to increase your capacity by importing compost during the -- to bridge the time gap?
No, no. We are importing compost because compost is the shortage. Growing capacity we have plenty. So we want to use our growing capacity fully. So that is why we are having to import compost to meet the shortage.
So what's your comp capacity, 7,000 metric tons?
It is almost about 20,000 tonnes per year.
And 20,000 right now and where are you increasing it to?
50%.
And when is it expected to start operation?
We have given a tentative date of end of '29, 3 years.
And what's the envisage CapEx for this?
Sorry, we haven't disclosed that. I can't comment on that now. Yes, please.
I have one more question from my side. When do you think you'll reach a utilization level of more than 90%?
Which capacity are not growing or composting.
Composting.
That will depend on the construction of new growing rooms. So the existing growing rooms, we use about 86% by the end of '29 -- I mean, by the end of '30 actually. Yes, please.
I just wanted to know what's your dependency on the HoReCa segment overall?
Actually, we don't sell directly to the retail. We are selling through distributors. But we have an estimate an idea of about 50-50 retail and HoReCa.
So is it fair to assume that first half, the 50% of the business was impacted?
It was impacted, yes, the HoReCa was impacted. The exact volumes can't be commented upon because we don't sell directly.
And one more thing, Deepak, is all the hotels, all the restaurants don't use fresh mushrooms. So that also has to be seen.
But I want to correct myself that the estimate of 50-50, I'm not quite sure that HoReCa will take 50% of the market. That is something data we don't have because they're selling directly to distributors.
My question here is about the capacity utilization. I see it declined from 96% to 81%, while the sales and the profit increased.
Because we added capacity in this.
My question is what the main reason for this decline? And when do you expect utilization will increase or recover?
Yes. This is actually not a decline because we increased our capacity of growing rooms -- growing production. So from 20 tonnes per day, it has increased to 25 tonnes per day. That is why as a percentage terms, utilization has gone down, but the sales have actually gone up.
And sales volume increased by only 6%, while revenue 16% -- so I see gross revenue came higher than the price -- the volume -- higher volume.
Yes, yes, because we had to increase the prices to match the cost increase in raw material costs.
Can I speak or is there someone else before me?
Go ahead.
So Mr. Deepak, just a question about going to the future. If everything gets better in terms of the current war situation, I keep hearing about the Iranian mushroom products in the market. Do you think or consider that that's a threat to the business by any means?
Yes, they are a good challenge to the company's business, of course, because they produce cheap and they produce in the quantities, they are a challenge. We cannot ignore that. But our advantage is the quality and consistency. That is our advantage.
Within the next, let's say, 2 to 3 years, I've heard that you have expanded a little bit and -- or are planning to expand. When do you see the impact of that investment in the coming 2 to 3 years or so?
Yes. Currently, our compost capacity expansion has just been decided and we have started working on that. So that will be completed by the year 2029. And so for the next 2, 3 years up until the compost expansion is completed, we are going to import the compost to meet the shortage. And once our own compost capacity goes up, then our margins, everything will go up accordingly.
And obviously, I'm thinking the distribution for shareholders will increase probably at that time.
We hope so, but we cannot say now. Thank you for your question that will we be able to maintain the current price levels or will we have to reduce them as normalcy returns to the region? It is possible that we may have to. If the cost of raw materials go down substantially, the competitor prices go down, then we'll also have to make adjustment to our price. So it all depends.
Mr. Deepak, you've seen the local mushrooms, especially the ones in Salalah -- this is just a random question. From what I've been hearing that it has very good qualities, -- is that cable?
I think you are talking about -- I think Mr. Abdullah will answer this question, sir. Abdullah?
Talking about the -- this is the [indiscernible] It is a type of tables. And this is -- till now not cultivable. We can't cultivate indoors because it needs special food that comes from ants.
Because what I've seen is it looks like mushroom and it's quite large in size. Because it's still for very highly expensive prices in Salalah. So, I think 1 kilogram is like QAR 10 or so.
Now it's the season.
Now a question from one of the attendees. Can you tell us about distributors? Sorry, that again is a competitive information we would not like to go into. And when is the next mushroom production expansion -- mushroom production expansion? Well, we have just completed 6 growing rooms this year in January, and we don't have enough compost to use it fully. So we are importing temporarily. So the next mushroom expansion, we don't plan anytime soon until our capacity is completed. Do you have any volume growth targets for full year? We are not discussing budget and we would like to keep it that way, sir, if you don't mind. That might give some misleading ideas. We always try to, of course, improve. We can go by our previous year growth will give you an idea. One question from Mohamed regarding export percentage compared to local sales in Oman. Yes, as you have mentioned, about 90% is exported and that we are maintaining that, plus/minus 1%. So Oman market is growing consistently, of course. But then our overall sales is growing. So that sectarian ratio is still maintaining. And a question from Mohamed is what is the expected percentage increase in net profit this year compared to net profit achieved last year? Well, as you can see, we have increased in the first half by 40%. So we can base our understanding from this. I cannot exactly comment on that, but that should be a good indicator. I hope I've answered your question. Do you think that the rise in net profit will continue in the coming years? Or will it reach a point where it remains stable? Hypothetically, the profits will rise as long as our production goes up. So once we reach our capacity, we're not able to expand our capacity further then there will be kind of stability. That also will be subject to matching increase in selling price with increase in costs. So basically, if you can see that once you reach the capacity, the profit should start basically tapering down slightly. It will not remain stable continuously or indefinitely. So we have to continue to grow. Will you decrease cash dividends in the next few years to focus on compost expansion and pay debt like when the company stopped it doing. Well, our cash flow as we are planning to -- I mean, as of now, I mean, there's no commitment as to what kind of dividend will be for the next 2 years. But it's difficult to say anything. But our cash flows and our funding lines are comfortable to meet the expansion cost without creating undue pressure on our internal cash requirements for dividend purpose. So that's all I can say. But anything is possible in the next 3 years. But definitely, we are not under pressure to liquidate our debt. Debt servicing ratio is comfortable. Yes, sir.
I have 2 questions. First question regarding the geopolitical issues currently, what implication that you had? And what is your motivation towards it? This is the first question. Second question is, as an investor, when I would feel the expansion effect as a return at what time?
Yes. So taking your first question, geopolitically, the circumstances are challenging. The raw material supplies are affected. The container costs have increased. The raw material availability also is under pressure. But we have mitigated that risk by keeping a good stock of material, raw material. We're keeping some high stocks. And we have dedicated supply lines. We plan our procurement well in advance. So that is the mitigation steps we have taken regarding the geopolitical impact on the supply chain. And regarding the expansion, it will take 3 years for the expansion. And during that time, we have -- we don't expect any problem in getting sufficient funding for the project. So our cash flow from operations should not get impacted. So our dividends will not be under a threat, as you can see, if everything remains the same. That also again depends on the policy of the Board, the policy of the shareholders. But as far as cash availability is concerned, if everything goes on fine as it is, then the cash flows are not under pressure.
So by end of -- I mean 29. And this year, you should not be affected by dividends due to geopolitical or due to the expansion. Do you see any effect on dividends this year?
We don't know. There is going to be a policy decision by the Board. But from the cash flow side, I can say I'm not very worried.
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