Kuwait Projects Company Holding K.S.C.P. (KPROJ) Earnings Call Transcript
August 21, 2025
Earnings Call Speaker Segments
Good afternoon, everyone, and welcome to KIPCO's Q2 2025 Results Call. This is Ahmed El-Shazly from EFG Hermes, and it's a pleasure to have with us on the call today from KIPCO's management; Mr. Sunny Bhatia, Group CFO, Mr. Moustapha Chami, Deputy Group CFO; and Ms. Eman Al Awadhi, Group Senior Vice President, Corporate Communications and IR. I will now hand the call over to Eman to start with the presentation.
Thank you, Ahmed and good afternoon, everyone, and thank you for waiting. We welcome you to our earnings call for the first half of 2025. Please note that today's presentation is also available on our website along with the financial statement for the first 6 months of 2025. Moving on to the presentation, please refer to a brief disclaimer on Slide 2. Some of the statements that we'll be making today and information available in the presentation can be forward-looking. Such statements are based on KIPCO's current expectations, predictions and estimates and are subject to risks and uncertainties, which may adversely or otherwise affect future outcome. They are not a guarantee of our future performance, achievement or results. I will now hand over to Sunny to take you through some of the highlights for the period.
Thank you, Eman. Good afternoon, everyone. Let us move to Slide 4 where we covered KIPCO's consolidated financial performance for H1 2025, During H1 2025 KIPCO Group consolidated total revenue by increased 6% to USD 2.52 billion compared to USD 2.38 billion reported for the same period of 2024. This is primarily due to higher revenues from our businesses in banking, in energy, hospitality and real estate and industrial and logistics sector and an increase in investment income, partially offset by variations and the share of results of associates. KIPCO's total assets at the consolidated level stood at USD 44.2 billion in H1 2025 which is a 4% increase from USD 42.5 billion reported at the year end 2024, KIPCO Group reported a net profit of USD 33.3 million in H1 2025, which represents an 8.9% reduction compared to the net profit reported in H1 2024, primarily attributable to an increase in credit provisioning in our banking subsidiaries. Slide 5 shows that most revenue line items saw a healthy growth during H1 2025 compared to H1 2024. Interest income from banking operations saw an increase of 7.8%, increasing to increasing USD 1.26 billion compared to USD 1.7 billion for the same year last year, primarily stemming from a 10 basis point increase in net interest margin, which increased from 2.1% in H1 2024 with 2.2% in H1 2024 in Burgan Bank growth and also attributable to growth in the loan book. Media and digital satellite income increased by 3% to USD 118.2 million. Hospitality and real estate income also saw an increase of 23.2% to reaching to USD 150.3 million. Income from energy sector increased by 47.5% to USD 97 million. Industries -- industrial and logistics sector income also saw an increase of 7.2%, reaching to USD 497 million. Whereas the net fees and commission income declined to USD 144.6 million in H1 2025 from USD 187.6 million in H1 2024 primarily due to a reduction in fees and commission income JKB consolidated banking operations. Furthermore, the group's interim condensed consolidated financial information includes the effect of hyperinflations in accordance with IAS 29 Financial Reporting in Hyperinflationary Economies, standard from our Turkish operations. As a result, the group recorded a net monetary loss of USD 32.7 million during H1 2024 compared to a higher loss of USD 41.6 million in H1, 2024, this is related to Burgan Bank Turkey operations. For further details, please refer to note 2.4 of the published interim condensed consolidated financial statement. I will now hand over to Moustapha to provide details on financial performance of the group's principal operations.
Thank you, Sunny, and good afternoon, everyone. Let us move to Slide 7 where we cover key performance highlights of our banking operations. We start with Burgan Bank results for H1 2025, I would like to note that Burgan Bank had its earnings call on August 5, and you can refer to the transcripts for more details. Net operating income for H1 2025 came to $411.8 million up 13.7% from the $362.1 million in the quarter and H1 2024. Net profit dropped 2% to $68.2 million versus $69.6 million in H1 2024. Burgan Bank's loan book went up 3.3% to $15.1 billion, while deposits increased 9.3% in $17.6 billion in H1 2025 when compared to year-end 2024. The bank reported a strong liquidity coverage ratio of 225% and the net stable funding ratio of 113% above the regulatory requirement of 100% for both metrics. The NPL ratio increased to 3.2% for the period compared to 2.5% for the same period last year. The bank reported a CET1 of 11.7% and a CAR of 17.4% for H1 2025, well above regulatory requirements of 10.5% and 14%, respectively. In March 2025, Burgan Bank completed the acquisition of 100% stake in United Gulf Bank from United Gulf Holding. The price of the transaction was agreed at $190 million, roughly onetime UGBs book value. The acquisition is in line with Burgan's new strategy of asset reallocation and building new revenue streams. The transaction gave Burgan access to Kamco Invest platform and subsequently in April the Capital Markets Authority granted the bank an exemption from submitting a mandatory tender offer for all Kamco Invest shares. Access to Kamco platform further drives Burgan's strong interest income, increased its footprint across the GCC regions and has the potential of revenue and synergies through UGB's Islamic banking license. The acquisition resulted in an impact of approximately 60 basis points on the bank's regulatory capital ratios. We move on to Slide 8 to cover JKB in H1 2025. And JKBs net profit for H1 2025 came to $73.7 million, up 2% from the $72.1 million reported for H1 2024. Total income dropped 4% to reach $247.6 million versus $258.4 million in 2024. At the end of H1 2025, JKB's loan book remained at $2.8 billion and deposits decreased 7% to $5.2 billion from year-end 2024. The bank's total assets came $7.5 billion at the end of H1 2025, down 5% from $7.9 billion reported at 2024 end. On Slide 9, we can see the performance of SADAFCO, the foodstuff company reported an 8.6% increase in revenue for H1 2025 at $470 million compared to $384 million in H1 2024. Operating profit was down 4.5% to $64.3 million compared to $67.3 million for H1 2024. SADAFCO's net profit dropped 4% to $65 million compared to $67.7 million in H1 2024. SADAFCO continues to dominate the market in its 3 main product lines, UHT milk, tomato paste and ice cream. In Q2 2025, year-on-year, sales on dairy, ice cream and culinary increased 10.4%, 5.2% and 7.5% respectably. United Gulf Holding UGH has featured on Slide 10. UGH incurred loss of $13.7 million in H1 2025 compared to a net loss of $15.3 million in H1 2024, representing an improvement of 10%. Total income dropped from $68.1 million reported in H1 2024 to $48.9 million at the end of H1 2025. Meanwhile, total assets dropped 22% to $2 million in H1 2025 compared to $2.6 million at the end of 2024. Liabilities also saw a 19% drop from $2.2 billion at the end of 2024 to $1.8 billion in H1 2025 on the basis of debt repayments. On Slide 11, we have the results of United Real Estate Company, URC, across its key income streams of the business, the company reported a 7.4% increase in rental and hospitality income and a 45.2% increase in the contracting and services revenue resulting in a 22% increase in total revenue in H1 2025 to $160.6 million. Operating profit went up slightly by 0.3% to reach $39.5 million versus $39.4 million in H1 2024. URC's net profit posted an increase of 10.5% in H1 2025 at $14.5 million versus $13.1 million in H1 2024. The company's total assets went up 2.5% at the end of the first 6 months of 2025 to reach $2.3 million compared to $2.2 million at the end of 2024. Moving on to Slide 12, starting with our logistics and power and healthcare business, JTC, which reported a total revenue of $51.7 million for H1 2025, a 12.6% higher than the $45.9 million reported in H1 of 2024. The increase is attributed to enhanced revenue from the port division, alongside equipment leasing and warehouse. Net profit for H1 2025 amounted to $11.7 million, 7.1% higher than the reported $10.9 million in H1 2024. On to the National Petroleum Services company, NAPESCO, our oilfield services provider, NAPESCO's revenue for H1 2025 went up 44.7% to reach $93 million versus $64.3 million in H1 2024. NAPESCO posted a net profit of $25 million for the first half of the year, 48.3%, up from $16.9 million for the corresponding period of the previous year. The increase in net profit was primarily driven by operational efficiencies and improved market share. Moving on to the health sector with Advanced Technology Company. ATC witnessed an 8% decrease in revenue to reach $262.7 million compared to $286.2 million in H1 2025. ATC reported a net loss of $11.6 million in H1 2025 compared to a profit of $2.9 million in H1 2024. Finally, Slide 13 shows the recent business updates OSN. As you know, last year, OSN successfully closed the merger between Anghami and OSN+. The deal involving an injection of $38 million has created a media tech company with AI at its core. The MENA streaming powerhouse now has 120 million users more than 3.4 million subscribers and the $100 million combined revenue. This year, Warner Bros. Discovery announced a strategic minority investment of 30% in OSN Streaming Limited, a subsidiary of OSN Group for a value of $57 million. The investment reinforces WBD's commitment to the region rapidly growing streaming landscape. The transaction will be completed in stages and is subject to customary conditions, including regulatory approvals. This investment builds on OSN's strong growth trajectory and market leadership in MENA's streaming industry, strengthening its competitive position as one of the region's premier entertainment destination. As part of this partnership, both OSN and Warner Bros. Discovery will invest in high-quality, locally produce content to ensure a richer and more diverse offering for viewers. I will now hand over the call to Ahmed to invite our listeners to raise any questions they may have.
Thank you for the presentation. We will now open the floor for questions. [Operator Instructions] We have our first question from Zafar Nazim.
I actually had -- I'll try to limit my questions to 3. So my first question is on Anghami, the New York listed company in which you invested this year. I think, close to $55 million. I just wanted to get an idea about what's going on over there because since you made the announcement of making this investment, the stock price of the company is now less than half of what it was, the total market cap is only, I think, $22 million, which is less than half of your total investment of $55 million or so. So if you can just give us some clarity on what's the disconnect between the market price reaction and what you see in the company.
Thank you, Zafar, for your questions. So we will not be commenting specifically as to what's the net share in the market valuation is, at what price the stock trades at. That is for the market participants to decide. Now as far as KIPCO group strategy is concerned, the Anghami is not just music. It also has the OSN+ Streaming plus and as you would have seen from the filings of Anghami and my colleague, Moustapha also mentioned, there is a strategic decision by Warner Bros. so you take an equity stake in the OSN Streaming business through which they actually get a stake in Anghami. And they also have an option to increase their stake. And it is a strategic partnership between the streaming business of OSN+ and the Warner Bros. so actually, as we have discussed in past, the value preservation and value enhancement initiatives through strategic acquisitions or through which was the Anghami acquisition in 2024 for the music, all through the strategic partnerships like with the Warner Bros. Discovery, the value is being created in this business. And it is a road map, which should -- which in the OSN management team manifest that even in the near future it should bring the business to a stabilization phase and also create regional medium within not just the premium content of lines of HBO and Discovery, but also the local content and local production, which is the aligned vision as declared in the press announcement of Warner Bros. and OSN.
I had a couple of other questions about your subsidiary, one of your subsidiaries, UGH, United Gulf Holding. So United Gulf Holding in its financial statements, there's a few things there, which I wanted some clarity on. One is that in the most recent financial statement, there's a footnote which says that UGH after the quarter ended, acquired a 49% stake in Al Rawabi Holding from KIPCO, so what price did UGH pay for acquiring this from KIPCO? And then also in the footnote, there's a couple of other things, which I wanted clarity on. One of the footnote says that there's a loan from the parent, there's a total of $98 million loan from the parent, $98 million from the parent to this entity. And I guess the parent is KIPCO. And this loan is split into 2 parts, $61 million and $37 million. The $61 million is going to be repaid on the 31st of December of this year in the form of shares and an affiliate. So which affiliate are we talking about? And then the second bit, the $37 million loan is going to be returned on the 31st of December in cash, I guess. So I just wanted to find out if this is actually going to happen. Are you going to get this money back, whether in shares or in cash? And then lastly, there's another footnote in the same company's financial statement, which says that there is -- this is footnote number 10.3, which says that the parent has committed to acquire the -- I guess, it's fair value, FVOCI investment of the group as its carrying value of $65.7 million or higher. So I guess, the parent is KIPCO. So you're going to acquire this investment from UGH for $66 million. When do you plan to acquire this? Is there a time line for this?
So answering your last question Zafar, is -- there is no time line for and as you know, on a consolidation perspective, these intercompany balances between the parent and the subsidiary are eliminated. So that's why we don't find those notes in KIPCO's financial statements. And with regards to the -- to your first item, we would comment on that in Q3, and there will be much more clarity about this from UGH itself, and there in Q3 financials since that transaction took place. It's again, it's an intercompany transaction that took place post the H1 2025.
And the bids on the loan from the parent?
It's a per -- normal, as business as usual, again, between the parent company. And we know any parent company that owns more than 20% in any subsidiaries as per their principal activities, they can give a shareholder loan, get repaid on a contractual basis between the 2.
So this loan is to be repaid by the end of this year? Do you expect that to be repaid? And part of this loan is going to be repaid in the form of shares. So which shares are we talking about?
We will discuss this between us and UGH by year end. But we will not be able to share the specifics of that contractual arrangements.
We will now take a question from Rakesh Tripathi.
A couple of questions from my side. First one, again, just to get some clarity on the cash flows that have happened in H1. First, can you give us some sense of what kind of -- what was the size of the dividend received from -- by the company in the first half, from its holdcos -- from its opcos.
$94 million.
$94 million?
That is right.
So now keeping that number as it is about $94 million and around $50 million to $55 million in interest and general and admin expenses for the business for the first half? Or is that -- I think it is close to $100 million, right? $100 million in G&A and interest expenses for the first half. So the dividend is basically used up there, at the same time, for the first half, I see that your parent level debt balance is up by close to $58 million, while the cash balance is down by about $80 million. So $138 million $139 million roughly is the difference that I'm not able to account for. So after considering the dividend receipts and the interest outflows and the general and admin expenses. So is it fair to basically assume then that this would be the kind of, in one form or the other, some form of cash support that has been extended to subsidiaries or the various operating companies either in the form of a loan or in the form of direct equity rejection or some other form?
Generally, Rakesh, as we said, we present our consolidated financials in accordance with the local requirements and not specifically the parent level financial, but in general, I mean, if one was analyzing the data, the financials on their own then the dividend income, opcos, as you rightly said is the right cash flows. But at the same time, the G&A and the interest expense of the key among growth apart from quarter-on-quarter, first half or first of variations in the cash flows or it can also involve the capital injection, the investments of the shareholders loans to the various internal companies market which are actually reflected, as my colleague said on a elimination basis. So in general, the trajectory of bringing the company's cash on a stand-alone basis, initially to a flat and to improve the overall coverage, we are doing 2 things. One is improving the overall operating performance of our key company, which remains an integral part of our strategy. But these things do take time to realize in form of the dividend out flows, but at the same time, our priorities is to create the enhanced shareholder value of each company. So therefore, they would be adequately capitalized to pursue their respective strategies. So in terms of balance between the medium to long-term objectives of creating the shareholders value, and at the same time, improving or strengthening the integral backlog. And this is the right balance, which we as an investment holding company have to make in the managing or the way we manage our core operating company's investments.
So just to reconfirm, there is no cash flow specifically any line -- any heads that I have missed here, right? Dividends are the primary inflow, interest and operating expenses, at the parent level, I'm saying, are the key outflows and then any other cash differences as of now would be related to any such capital injections or shareholder loans or any such form of support extended to the various subsidiaries and associates. Is that a fair assumption?
Yes. Generally, yes, your assessment is accurate in this regard. .
The second question I had was on the refinancing plans again for the upcoming bond. So this quarter, basically, next month, is when one of the bonds will become current, right, the $500 million EMTN, one of them. So just wanted to hear if there's any new updates on the refinancing status on potentially getting some kind of a bridge facility set up if there's anything in the works that you can share as an update with us?
Yes, sure. I mean as we said that our group treasury remains committed to proactively manage the maturities. And as you rightly said, the 26th -- 27th of October 2026, that is the first maturity of the $0.5 billion EMTN. And we are working towards creating an appropriate -- address them of the upcoming maturities and in accordance with our transparency and disclosure policies, as and when we have a complete plan or a complete thing to execute in this regard, making the right announcements. And so generally, yes, we are working. But at the same time, we need to stay tuned to -- once we reach a concrete step towards it and towards our regulatory announcement, which we will be making, of course, on Kuwait, and of course, through RNS announcements for the benefit of the investors in the EMTN notes, Sukuk investors and credit bondholders orders.
Right. So I understand. I think -- so the update pretty much is the same as it was last quarter. Just can you give some sense of, say, what is your internal time line by which you say you would want to get the cash in place to be able to redeem the bonds. So what is the time line that you would look at internally, say, 6 months before, 1 quarter before, 3 quarters before?
Sorry. Rakesh. I think we target to do it ahead of the 12 months windows. So that would be rather something you would be aiming to work at.
12 months, did you say? Just reclarifying. Sorry, I didn't get that.
So 12-months for me is from October 2026 is the maturity, 12 months before that is at least October 2025. So we would be within -- broadly within that range we are working towards that. 12 months, around more or less, 12 months, ahead of 12 months.
So should we expect some kind of an announcement like without any details, do we expect something to come out, say, in the next couple of months around...
Sorry, Rakesh, this is very specific -- sorry Rakesh, this is extremely specific. You cannot need to ask us to be very specific. As I said, generally, we are working towards proactively managing our liability. But at this stage, we have nothing specific or concrete to announce. And as stated earlier, we would be making the announcement as and when we are ready. But as and when, we have some concrete announcements to make. But the direction is more proactively and the general target is to do it generally ahead of the maturity by year or so, give or take whatever, but we are about the ballpark at least 1 year ahead of maturities.
[Operator Instructions] We have no further questions. So I'd like to hand the call back to KIPCO management team for any concluding remarks.
Thank you, Ahmed and thank you for everyone who joined us on this call. We look forward to having you again with us for the Q2 results and updates, Thank you, and have a good afternoon. .
Thank you so much.
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