Kuwait Projects Company Holding K.S.C.P. (KPROJ) Earnings Call Transcript
November 20, 2025
Earnings Call Speaker Segments
Good afternoon, everyone, and welcome to KIPCO's Q3 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 SVP, 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. We welcome you to our earnings call for the first 9 months of 2025. Please note that today's presentation is also available on our website, along with the financial statements for the first 9 months of the year. Moving on to the presentation. Please refer to the brief disclaimer on Slide 2. Some of the statements that we will 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 the future outcome. They are not a guarantee of future performance, achievements 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 cover KIPCO's consolidated financial performance for 9 months 2025. KIPCO Group's consolidated total revenue increased by 5.8% to USD 3.79 billion compared to USD 3.58 billion reported for the same period of 2024. This is primarily due to higher revenues from our businesses in energy, hospitality, in real estate and industrial and logistics sector and an increase in interest and investment income, partially offset by reduction in the share of results of associates and net fees and commission income. KIPCO's total asset at the consolidated level stood at USD 44.3 billion at the end of 9 months 2025, which is a 4.2% increase from USD 42.5 billion reported at the end 2024. KIPCO Group reported a net profit of USD 44 million in 9 months of 2025, representing a 7.3% increase compared to the net profit reported in 9 months of 2024. Slide 5 shows the most -- Slide 5 shows that most revenue line items saw a healthy growth during 9 months of 2025 compared to the 9 months of 2024. Interest income from banking operations saw an increase of 8.9%, reaching USD 1.92 billion compared to USD 1.76 billion for the same period last year, primarily stemming from a 10 basis point increase in net interest margin, which increased from 2.2% in 9 months of 2024 to 2.3% in 9 months of 2025 in Burgan Bank Group and also the growth in the loan book of the bank. Media and digital satellite income increased marginally by 1% to USD 178.7 million, whereas hospitality and real estate income saw an increase of 22.7% to USD 233.1 million. Income from energy sector increased by 52.9% to USD 155.8 million. The industrial and logistics sector income also saw an increase of 6.1% to USD 752.5 million, whereas the net fees and commission income declined to USD 206.3 million in 9 months of 2025 compared to USD 288.7 million in 9 months of 2024, primarily attributable to reduction in fees and commission income in JKB consolidated banking operations. Furthermore, the group's interim condensed consolidated financial information includes the effect of hyperinflation in accordance with IAS 29, the financial reporting in hyperinflationary economies standard, stemming from our Turkish operations. As a result, the group recorded a net monetary loss of USD 42 million during 9 months of 2025 compared to a loss of USD 54.1 million in 9 months of 2024 due to Burgan Bank's operations in Turkey. For further details, please refer to Note 2.4 of the published interim condensed consolidated financial information. During Q3 2025, KIPCO parent company launched and successfully completed cash tender offer made to purchase in cash on any and all basis of the USD 500 million 4.229% notes, which are due on 29th of October 2026, we call them 2026 notes and USD 500 million 4.5% notes due on 23rd February 2027, we call them 2027 notes, representing an aggregate principal amount of USD 1 billion. The company had not set any caps on the bond buyback amounts and expressed its willingness to accept for repurchase in cash any and all of the notes which were validly offered. At the expiration of the deadline of tender offers, in aggregate nominal amount of USD 304 million of bonds were validly tendered for purchase. The company accepted all the offers, and this enabled KIPCO to reduce its debt position by USD 153.3 million in 2026 notes and USD 150.8 million in 2027 notes, aggregating to USD 304.1 million or 30.4% of total outstanding EMTN notes. The tender offers for the buyback on any and all basis, about 1 to 1.5 years ahead of the maturity reiterates the company's commitment to proactively manage its debt maturities and optimize its debt portfolio by selective deleveraging at the parent level and taking out near-term maturities. For further details, please refer to Note 7 of the published interim condensed consolidated financial information. I will now hand over to Moustapha to provide details on the financial performance of the group's principal operations.
Thank you, Sunny, and good afternoon, everyone. Let's move to Slide 7, where we cover key performance highlights of our banking operations. We start with Burgan Bank Group's results for 9 months 2025. I would like to note that Burgan Bank held its earnings call on November 10, and you can refer to the transcript for more details. Net operating income for 9 months 2025 came to $630.1 million, up 16.3% from $542 million reported in 9 months 2024. Net profit dropped 2.5% to $106.4 million versus $109.1 million in 9 months 2024. Burgan Bank's loan book went up 5.9% to $15.5 billion, while deposits increased 5.8% to $17 billion in 9 months 2025 when compared to year-end 2024. The bank reported a strong liquidity coverage ratio of 229% and a net stable funding ratio of 112%, above the regulatory requirements of 100% for both metrics. The NPL ratio increased to 3.1% for the period compared to 1.9% for the same period last year. The bank reported a CET1 ratio of 11.4% and a CAR of 17.1% for 9 months 2025, well above regulatory requirements of 10.5% and 14%, respectively. In October 2025, Burgan Bank announced the successful issuance of a $500 million 5-year senior unsecured bond under the $1.5 billion EMTN program. The issuance supports strengthening the bank's long-term liquidity profile and regulatory liquidity ratios. We move on to Slide 8 to cover JKB's performance in 9 months 2025. JKB's net profit for 9 months 2025 came to $108.4 million, down 11.8% from the $122.8 million reported for 9 months 2024. Total income dropped 12.8% to reach $360.1 million versus $413.2 million in 9 months 2024. At the end of 9 months 2025, JKB's loan book remained at $2.8 billion and deposits decreased 10.4% to $5 billion from year-end 2024. The bank's total assets came to $7.5 billion at the end of the period 2025, down 5.3% from the $8 billion reported 2024 year-end. On Slide 9, we can see the performance of SADAFCO. The foodstuff company reported 6.3% increase in revenue for 9 months 2025 at $632.1 million compared to $594.5 million for 9 months 2024. Operating profit was up 11.2% to $113.2 million compared to $101.8 million for 9 months 2024. SADAFCO's net profit increased 9.4% to $114.2 million compared to $104.4 million in 9 months 2024. SADAFCO continues to dominate the market in its 3 main product lines, UHT milk, tomato paste and ice cream. In Q3 2025, year-on-year sales in dairy increased 4.1% and ice cream remained steady. Market share remained firm at 57.7% for UHT milk and 53.9% for tomato paste and 30.2% for ice cream. United Gulf Holding, UGH is featured on Slide 10. UGH incurred a loss of $11.1 million in 9 months 2025 compared to a net loss of $27.1 million in 9 months 2024, representing an improvement of 59%. Total income dropped from $90.4 million reported in 9 months 2024 to $73 million at the end of 9 months 2025. Meanwhile, total assets dropped 16.7% to $2.2 billion in 9 months 2025 compared to $2.6 billion at the end of 2024. Liabilities also saw a 12.8% drop from $2.2 billion at the end of 2024 to $2 billion in 9 months 2025. The reduction in total assets and total liabilities was primarily driven by deconsolidation of UGB on its sale to Burgan Bank in Q1 2025. Last month, UGH announced that it is in talks to sell its 80.4% stake in FIMBank Malta to JKB. The transaction is subject to regulatory approvals in both Jordan and Malta as well as that of the European Central Bank. On Slide 11, we have the results of United Real Estate Company, URC. Across its income streams of the business, the company reported a 7.5% increase in rental and hospitality income and a 42.9% increase in the contracting and services revenue, resulting in a 21.5% increase in total revenue in 9 months 2025 to $246.2 million. Operating profit went up 1.9% to reach $59.7 million versus $58.6 million in 9 months 2024. URC's net profit posted a decrease of 7.5% in 9 months 2025 at $16.1 million versus $17.4 million in 9 months 2024. The company's total assets went up 1.7% at the end of the first 9 months of 2025 to reach $2.24 billion compared to $2.2 billion at the end of 2024. Moving on to Slide 12, starting with our logistics and power rental business, JTC, which reported a total revenue of $78.5 million for 9 months 2025, 14.2% higher than $68.8 million reported in 9 months 2024. The increase is attributed to enhanced revenue from the Port Division alongside equipment leasing and warehouse. Net profit for 9 months 2025 amounted to $17.1 million, 0.8% higher than the reported $17 million in 9 months 2024. On to the National Petroleum Services company, NAPESCO, our oilfield services provider. NAPESCO's revenue for 9 months 2025 went up 52.8% to reach $150.9 million versus $98.7 million in 9 months 2024. NAPESCO posted a net profit of $41.6 million for the 9 months of the year, 49.5% up from $27.8 million for the corresponding year of the previous year -- for the corresponding period of the previous year. The increase in net profit was primarily driven by increased revenue and improved gross margin. Moving on to the health care sector with Advanced Technology Company. ATC witnessed a 12.2% decrease in revenue to reach $395 million compared to $449.7 million in 9 months 2025. ATC reported a net loss of $14.8 million in 9 months 2025 compared to a profit of $5.2 million in 9 months 2024. Finally, on Slide 13, shows the recent business updates of 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's streaming powerhouse now has 120 million users, more than 3.5 million subscribers -- 3.4 million subscribers and $100 million of combined revenues. 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's 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 streaming industry, strengthening its competitive position as one of the region's premier entertainment destinations. As part of this partnership, both OSN and Warner Bros. Discovery will invest in high-quality locally produced 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, Moustapha. Thank you for the presentation. We will now open the floor for questions. [Operator Instructions] So we have our first question from Ali Dhaloomal. I think there's a technical issue there. So we can take the next question from Rakesh Tripathi.
My first question was about the cash that was used to redeem part of the -- that was used basically to bring about the tender for the 2 bonds. I just wanted to understand what was the source of this cash for the parent company and how much was the total cash receipts? That's my first question. My second question was the cash on books of the parent itself has increased sizably in Q3. So I'm assuming some of the cash that the company received from whatever source was also kept in the -- with the company itself. Despite this bank borrowings, so term loan basically increased by about KWD 42 million, so I wanted to understand what was the driver behind the increase in this bank debt when the cash balance had already gone up? And my last question is if you can give us some sense of the LTV as on date with respect to how the rating agencies see it. It used to be 45%, 50% in the past and 40% to 45% as of last year as per your confirmations. Just wanted to get a sense of where that number is now.
Thank you, Rakesh, for your question. So as you can see from the notes to the financial statement, the total cash at the parent level, which includes the bank deposits is KWD 300.9 million. For the liability management exercise, which we conducted in the month of April, the exercise was primarily facilitated through a tactical monetization of certain assets in [ Group. ] And this liability management exercise actually covered the tender offer, the settlement of all the tenders, which all the bonds which were tendered to us and also setting aside the liquidity for the ongoing maturities so that the maturities which are in 12- to 15-month period, we have sufficient cash. So as we have said it in the past, this all reflects our commitment to proactively address the maturities well ahead of their due maturity, but at the same time, keeping the liquidity structure of the company conservative.
Right. And can you clarify what was the total cash that was raised through this monetization exercise? And if you can give some sense of which assets were monetized in this exercise?
Rakesh, due to the private nature of the transaction, we should not be in a position to share any further details. But as you can see from the note to the financial statement on cash and cash equivalents at the end of 30th of September, we had KWD 300.9 million of cash on our balance sheet. Thank you, Rakesh. Maybe we can move to the next question.
Can you also refer to the other questions I had around the LTV if it's possible to talk a little bit about that.
Sure. As far as the LTV is concerned, as we discussed it in the past, the LTV -- the company's focus remains is to reduce its LTV in a medium to long-term basis through a 2-pronged strategy. One side of it is the making our operating companies produce better financial and operational performance so that in the medium term, the improved performance can lead into a better valuation of these companies. So that addresses the V side of the LTV equation. On the other side, we continue to selectively manage our debt profile, prioritize the extension of maturities, diversify our funding sources. But at the same time, selectively address the parent level debt reduction wherever feasible. And that you can see from the net debt reduction at the parent level on 30th of September when you compare it with the year-end 2024. So we expect the loan-to-value ratio to remain on a path of -- directionally on a path of reduction. But specifically, we do not disclose the LTV apart from the rating agencies, which they do make their computations and disclose it in their rating reports because LTV is a non-IFRS number. So we do not specifically comment on it. But as and when a new rating is published, you can see the launched computed LTV as per a specific rating companies assigned policy.
That is very clear. And the increase in bank borrowings was the last thing.
I think you have to look at the whole thing in totality because the -- as we said that you have to look at the -- you should not be picking up elements of our capital structure because our aim always remains is to diversify our pools of liquidity within our capital structure. So I would suggest that the better measure would be to look at the capital structure in totality, which means that the net debt is the right measure we would like you to look at rather than specifically looking at one element of it rather.
[Operator Instructions] Ali Dhaloomal, please unmute your microphone and go ahead. Ali, can you hear us?
Do you hear me now?
Yes. Yes.
Perfect. I mean just to jump on and a follow-up on the question about this massive deleveraging that we have seen in third quarter. I mean your net debt has reduced by [ $916 million ] over just the quarter. So I mean, I can understand that you don't want to disclose the nature of this transaction into group, even though I mean we will have to wait for the full year results to look at your positions within the group. But I mean, can you just give us a sense of, I mean, how to think about maybe the maturities that you have in 2026 and 2027. I mean with this cash position now that is very healthy, I mean, do you -- will you address it just with your cash at hand? Or are you still aiming to come back maybe at some point with a dollar sukuk, dollar or local currency transaction? Or do you think that it will be fully funded with the cash at hand?
Ali, its a excellent question. So effectively, as we say that our -- we always aim to diversify our source of funding within our capital stack. And we always attempt to ensure that every pool of liquidity, whether it is international DCM, Kuwait bond market, conventional or Islamic or our relationship or syndicated loan markets, we at some point or another, we tap into all of these pools. So specifically, whether we would address these maturities directly with the liquidity available or we would approach the international or DCM markets, either conventional or Islamic is something which we would be evolving in the coming days and then conclude. But one way or another, the net debt should remain, I mean, we should not expect any significant increases in the net debt. So what it means is that in the event we tap into the international DCM, which should mean is that the liquidity would go to reduce the borrowings from the other pools of liquidity. So to answer your question, by and large, the net debt, we don't expect any major increases even if we were to approach the international DCM market unless in the coming days, in the coming months, we have any major -- on our asset side, if there is a major capital deployment or thing or a new investment, which as a holding company, we always say that we are always looking at either exits or investments or bolt-ons or capital deployment into our companies. But anything -- there are no specific information to share at this stage. So as and when we have any material information, whether it relates to our asset side, which means that the utilization of the liquidity or on our funding strategy, which involves whether to address the maturities from the available liquidity or to approach the international DCM market, we would make the requisite disclosures.
Understood on that front. And just a last follow-up. I mean, in the second quarter earnings, I think you discussed this -- the fact that UGH was in the plan to acquire this 49% stake in Al Rawabi Holding. I mean can you update us on that one? Has it been completed? And any color you can provide on this transaction?
Sure. It has been completed. Moustapha, would you like to add any further details on that? The transaction actually has been completed in accordance with the terms of the transaction.
Yes, Sunny. So the transaction has been completed. The main idea UGH is looking at diversifying. They have a plan -- we have a plan internally for the group to have the banking, which is outside Kuwait or outside Burgan under a certain holdco entity. So that goes within that direction. And start with a strategic stake in Al Rawabi that has underneath a majority control of JKB, Jordan Kuwait Bank, our bank in Jordan that has also underneath the Iraqi component as well, Bank of Baghdad. They have also a strategic stake of 52% of Burgan Turkey. And the idea is along with the banking network with the already existing stakes of FIMBank and UGH and also Syria Gulf Bank, the aim is to have a certain networking of all these banks together and how to connect, create added value and add synergies.
Okay. And then the transaction value, is it something that you can disclose?
Well, at consolidated group level, that has no material impact from a subsidiary to another subsidiary. The aim behind this transaction is that strategic directional rather than any material impact at the consolidation level.
[Operator Instructions] So I guess at this point, we have no further questions. So I'd like to hand the call back to KIPCO's management for any concluding remarks.
Thank you very much, Ahmed, and thanks to everyone who joined us today. We'll see you on our -- or you'll hear from us on our next call.
Thank you so much. Thank you, everyone. Goodbye.
Thank you.
Thank you, everyone. This ends our call for today. Thanks, everyone, for joining. Have a good day.
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