Riyadh Cables Group Company (4142) Earnings Call Transcript

Good morning, ladies and gentlemen. This is Ahmed Hazem from EFG Hermes Research speaking, and I would like to welcome you all today to this Third Quarter 2025 Results Conference Call for Riyadh Cables Company. We have with us on the line today, Mr. Borjan Sehovac, CEO of Riyadh Cables; Mr. Bahaa Eissa, CFO; and Mr. Mouaaz Al-Younes, Chief Strategy Officer. First off, congratulations on a great set of results in the third quarter as usual. And then I'd like to hand over without further delay to Mouaaz. Mouaaz, please, the line is yours.

Thank you, Ahmed. Thank you, EFG. Ladies and gentlemen, thank you for attending Riyadh Cables' 9 Month '25 Earnings Call. Today, we will provide a quick overview of the company, then we will talk about the company's performance during the 9 months period. Next, we will review the financials for the same period. And afterwards, we will provide a recap on the company's strategy and an update on the market. Lastly, we will discuss the management's outlook and the way forward. I'll leave it now to Mr. Borjan, CEO.

Thank you, Mouaaz. Good afternoon, ladies and gentlemen, and welcome to Riyadh Cables' earnings call for the 9 months. I always want to give, for your background, the reminder that Riyadh Cables Group is the largest regional player in wires and cable industry since 41 years. We manufacture and supply all type of cables used in generation, transmission. Transmission means overhead lines, high voltage and extra high-voltage cables; distribution, which means medium voltage and low-voltage cables and then users low voltage and wires. We also manufacture fiber optical cables, which are used in data transmission. We are able to produce any type of cable in the market using our center of excellence plants located in Riyadh, without forgetting to mention our plants in Sharjah, UAE and Baghdad, Iraq and soon also plant in Uzbekistan after the closing of the acquisition of Artikul Kabel. Moving to the financial performance highlights. Once again, we are pleased to announce an excellent set of results marked by record high financial KPIs. Achieved revenues are almost SAR 8 billion, plus 22% compared to the previous period. Record high and sold volume, sorry, of 204,000 tons, which is almost 20% higher compared to the 9 months of 2024. And this brings us as well very good utilization rate at 97%. In fact, this quarter 3, we have sold record high 70,000 tons of cables and wires. Profitability metrics are continuing to be also very strong with gross profit per ton almost SAR 6,400 per ton, which is 18% more compared to the previous year, and we are at the same level of the previous quarter. We have as well an excellent achievement in SAR 1 billion SA, 37% higher than the previous year, an exceptional 45% increase in the net profit, which today -- which is at SAR 817 million. And if you recall this number, SAR 817 million was the net profit of the full year 2024. CapEx is on the level of SAR 150 million more or less, and this will be increased to the level of SAR 300 million after the closing of the acquisition in Uzbekistan. Free cash flow increased to SAR 240 million -- SAR 241 million, and we are still with a very low net debt-to-equity ratio of 16 multiple -- 0.16 multiple. Moving to the backlog. We are holding 162,000 tons of confirmed orders, which are equivalent to SAR 5.2 billion, and we will be discussing this in a dedicated slide later on. Showing the key performance drivers, we can see that the sales volume has increased backed by an excellent export and very strong transmission, both in domestic and export markets. In the next point, we can see that solid demand-driven revenue also increased by 22%. In fact, the performance on, again, domestic market, together with excellent export and very good as well market for all segments we have witnessed in these 9 months. Let me say that in the quarter 4, we may see some slowdown in local utility, but this happened as well last year. It's a kind of seasonality. And as always, any gap, we will try to recover with other customers and other channels and mainly by export as well. Gross profit per ton increased by 19% as a result of mix and cost efficiencies and surely as well a very good effect of the high utilization of 97% of utilization of our lights. Net profit increased by 45%, backed by strong operating income and firm control on overall cost. Again, G&A and S&D are below 3% of our revenue, which is always our target of the cost efficiency. Free cash flow, SAR 241 million. As promised, the cash generation accelerated this quarter from SAR 61 million of the previous quarter. This is as well, thanks to a good control of working capital. Moving on the Slide #10. Quarter-on-quarter, we can see the revenue is pretty much the same with a slight volume increase of 3%. This is mainly due to a small mix effect, let's say, within the copper products. 9 months to 9 months instead, the volume is higher by 22%, while the revenue increased by 20%. As mentioned, the market remains solid, both domestic and export. Generally, all segments are doing quite well. With regards to the split between copper and aluminum on the 9-month basis, we see an increase on aluminum product split, while on a quarterly basis, the split remains exactly the same. Moving to the Slide 11. we can see the backlog of SAR 5.2 billion and the volume of 162,000 tons, slightly down from the first half, but above from the first quarter. So still a very good solid backlog of confirmed orders in our system. And on top of this, we will be -- we are having as well quite good level of letter of awards and letter of intent above SAR 2 billion, which gives us again a certain degree of comfort of the solidity of our future performance domestic and export. The backlog will be realized in 6 to 12 months. And the strong demands, again, as mentioned before, are pushing our utilization rate on a high level of 97%, which level we also -- also brings very good operational efficiencies. Now I hand it over to Bahaa for more financial highlights. Thank you.

Thank you Borjan. This was another great year for Riyadh Cables, leading to an excellent performance in quarter 3. 9-month gross profit has increased by 38% to SAR 1.3 billion compared to the same period of last year. This came on the back of higher sales figures, as already mentioned, which were up 22% to SAR 7.9 billion compared to the 9 months in 2024. In addition to the increase in quantities sold by about 20%, which were 204,000 tons during the first 9 months of this year. Also, these results were helped by order selection process, our production mix and continued efficiencies. Comparing quarter 3 '25, gross profits to the same period of last year, we achieved an increase of 11% to SAR 446 million. Moving on to EBITDA, which has increased by 37% to SAR 1,007 million or SAR 1 billion during the 9 months of 2025 compared to the same period of last year. This was driven again by higher volumes and selection methodology and cost control. And when looking at the quarterly performance, quarter 3 EBITDA did increase by 19% to SAR 354 million compared to the same period of last year, which was SAR 299. Moving on to the cash flows. Again, good results. Cash flow for the 9 months stood at SAR 241 million, while operating cash flow was SAR 388 million. This was driven by the strong profits and provisions. And as mentioned -- as already mentioned, this was grown, increased from the previous quarter, which was SAR 61 million. As far as the dividends, the company has paid SAR 300 million in May 2025, which pertained to the second half of 2024 profits and also paid another SAR 300 million in October of this year, which pertains to the first half profits of 2025, which -- and again, from this, all of these were paid from its internal sources. H1 dividends -- as a reminder, H1 dividends was SAR 2 per share, and this is up 33% over the same period of last year, which was SAR 1.5 per share or a total of 2025. These results continue to support our declaration that the company is always aiming to fund its operation, including CapEx and dividends from its own cash flow. Moving on to the profitability per ton. As previously stated, our hedging and pricing strategy doesn't neutralize commodity price fluctuation. From the charts that we're looking at, we can see the gross profits per ton continued its upward trajectory and for the 9 months of 2025 has improved further compared to the same period of last year by 19% to SAR 6,393 per ton. Again, this was achieved through continuously improved pricing policy as well as better product mix, which is mainly focused on transmission cable operational efficiencies due to higher utilizations, which have reached 97% for this period. Further improvements in production lines and vertical integration did contribute to these results. The bottom chart shows that regardless of where the metal price is, our profitability has not been impacted by its movements since it is always calculated as an absolute number that we have on the selling price. Looking and if we look at the average copper prices over the past year, we can see that the fluctuation has been quite substantial, ranging from $8,500 per ton to over $10,000. And again, there was no impact on profitability on this. With that, I move it or pass it on to my colleague, Mouaaz.

Thank you, Baha. So here's a refresher on our strategy that continues to center on 5 key pillars. We're deepening our -- and expanding our geographical footprint by strengthening our position in KSA and core GCC markets while entering high-growth regions such as Central Asia, [ Eleventh ] and North Africa. Ensuring leadership in every market we serve, we will share more details on our recent acquisition in Uzbekistan and latest developments in Syria in the next slides. Through product and service innovation, we continue to evolve to a complete cable solutions provider, offering integrated systems that support energy transition. We have completed testing common medium voltage accessory sizes at third-party labs and received our first orders. Operational excellence underpins our cost leadership as we continue to enhance efficiency. We optimize our supply chain and leverage digital transformation to maintain our competitive edge. At the same time, we are investing in our people and processes to build a high-performing agile organization capable of sustaining long-term growth. Finally, we remain firmly committed to ESG principles, gradually embedding sustainability and social responsibility across our operations to ensure responsible value creation for our stakeholders. In this slide that you're very familiar with, we are providing an overview of RCG's key operating markets, which collectively account for approximately 95% of our total revenues. During the third quarter, market demand remained strong with Saudi Arabia continuing to be the largest contributor, accounting for around 71% of our total volumes, followed by the UAE and Iraq. Overall, the market maintained a steady pace broadly in line with levels recorded in the second quarter of 2025. In Saudi Arabia, volume growth continued to be driven by momentum in core demand sectors, including giga and mega projects, infrastructure projects, renewable energy development, transmission network expansions and large-scale housing and real estate programs. In our export markets, particularly across GCC and Iraq, performance was in line with expectations, maintaining levels similar to Q2 2025. This is supported -- or this was supported by ongoing infrastructure investments and utility projects. In Africa, performance was notably strong, showing a significant improvement compared with the previous quarter. We continue to maintain a market share around 38%. Regarding our outlook and based on internal market intelligence, third-party research and current backlog visibility, we project the market growth rate between 2024 and 2028 as follows: Saudi Arabia, around 5%; GCC slightly above 3% and then Iraq about 9%. As we have accustomed in previous years, we will conduct our annual market study towards year-end, and we look forward to sharing the results along with our updated market outlook during the year-end call. As mentioned earlier, here's an update on our acquisition of a majority stake in Artikul Aziya Kabel. This is an Uzbek company. On October 27, Riyadh Cables Company, a subsidiary of Riyadh Cables Group, signed a share purchase agreement and a shareholders' agreement with the existing shareholders of Artikul Aziya Kabel that we're going to refer to in the rest of the call as AAK. The transaction values approximately SAR 143 million. The deal is currently under review by the relevant authorities, and we expect closing to take place during December. As far as the company, AAK was established in 2014 by a local entrepreneur family in Uzbekistan. Since its founding, the company has focused on manufacturing electrical power cables and copper rod. Over the past decade, AAK has evolved into a significant regional player in the power infrastructure sector. The company manufactures a wide range of overhead and underground power cables up to medium voltage cables in addition to copper rod. With over 3,000 SKUs, AAK is able to meet diverse customer requirements. Its manufacturing footprint in Uzbekistan boasts the max design capacity of 20,000 metric tons annually, supporting both domestic and international demand. In 2024, AAK's revenues stood at SAR 407 million with 13,000 tons of sold volumes. Between 2022 and 2024, the company achieved a compound annual growth rate of about 20% in revenues. Both EBITDA and net profit margins are in line with RCG's averages, reflecting strong operational performance and disciplined cost management. AAK generates 60% of its revenues from exports serving approximately 17 countries. The remaining 40% comes from domestic markets where the company holds about an 11% market share, servicing a variety of sectors, mainly utilities, mining, industrial, commercial and residential construction projects. As far as the rationale behind this deal, we want to give a quick overview about Uzbekistan market itself. Uzbekistan stands out as one of the most dynamic energy and infrastructure markets in Central Asia, driven by rapid industrialization along with a strong metal mining base, notably copper and gold and strategic export corridors linking Europe and Western China. The Uzbek government continues to advance an electrification and throughput expansion agenda, underpinned by major financial and operational reforms designed to attract investment and enhance local value creation. These include local content preferences, raw material incentives and mandatory procurement list for government and semi-government projects, all of which foster in-country industrial development. This is a strategic fit for RCG. It is a partnership that represents a strong strategic fit for Riyadh Cables Group on multiple levels. First, AAK offers a compelling investment case. It is a growing company with a solid industrial base, diversified revenues and a scalable manufacturing platform. A strong local presence and export potential align perfectly with RCG's long-term regional expansion strategy. Through this investment, we're not just entering Uzbekistan. We're gaining a strategic platform to serve Central Asia, Europe and the Middle East markets, especially as new renewables -- interconnect renewables and grid expansion projects come online. On the operational side, both revenue and cost synergies will be realized. We will be introducing RCG's procurement, operational and engineering systems, refined over decades in our Saudi operations, obviously, to drive efficiency, quality and cost optimization. In parallel, our technical know-how in high and extra high-voltage cables and complete cable systems will be introduced to AAK. This will raise production standards, secure product qualifications and align their output with RCG's global benchmarks. AAK today manufactures low-voltage and medium-voltage cables and building wires, and we will now help AAK move up the value chain into high voltage and extra high voltage and renewable energy cables, all of which are currently imported into Uzbekistan. This shift will open up higher-margin segments and make AAK the leading local supplier for power and renewable energy projects. Financially, the investment is structurally conservative or it is structured conservatively, phased capital deployment with limited balance sheet impact and consolidation effects starting in 2026. Finally, Uzbekistan provides a secure long-term advantage in copper sourcing. It is among the top 20 copper producers globally with expansion plans that will increase national output to over 400,000 tons by 2030. This ensures stable raw material supply and supports AAK's growth for years to come. Overall, the partnership is not only a sound financial investment, but also a strategic step forward, expanding RCG's regional footprint, employing our know-how and creating a stronger, more competitive manufacturing hub serving Central Asia and beyond. Moving back to our region and a bit north, we'd like to provide a quick update on the company's recent progress in the Syrian market. This is a market where Riyadh Cables Group had established a presence years ago prior to the sanctions period and where operations are now gradually resuming. As many of you know, Syria presents meaningful opportunities for RCG to meet the growing cable demand expected over the coming years, particularly as reconstruction efforts and infrastructure rehabilitation gain momentum. In this context, RCG established a sales office in Damascus during the second quarter of 2025, focusing on marketing and selling our products. Our initial efforts have primarily targeted the government and retail sectors where we continue to see steady demand for power and electrical cables. Most recently, we signed a memorandum of understanding with the Syrian Sovereign Fund, the current custodian of Syrian Modern Cables Company, which is a semi-dormant industrial asset. This initiative is strategically important for RCG as it aligns with our broader objectives of regional expansion, industrial localization and technology employment. The future sustainable partnership offers strong operational synergies, combining RCG's manufacturing expertise, quality systems and supply chain capabilities with the existing infrastructure and market access of the Syrian modern cables facility. Our close geographical proximity further supports efficient logistics, faster response times and cost-effective operational support across production and distribution. Over the past month, our team have been working closely with the Syrian Sovereign Fund to define the technical scope, investment requirements and modernization plan for the facilities. Early assessments are very encouraging, showing strong potential to revive production capacity and position the plant to serve both domestic and export markets in the medium term. While the initiative -- or while the initiative remains in its early stages, it underscores RCG's commitment to long-term value creation through regional partnerships, operational excellence and sustainable industrial development. We will continue to update the market with any material developments in this regard. Over to you, Borjan.

Thank you, Mouaaz. Very exciting in seeing how we are realizing our strategy building the growth on 3 main strategic pillars, which are, as you mentioned, geographical expansion, crucial for us in derisking a single country or single region revenues. Second pillar, which is one of the strongest, I believe, as well is technological leadership, which gives us as well an extra comfort in succeeding with our operational experience, bringing it to Uzbekistan and in Syria. And last but not least, we still are the, let's say, cost leadership company because the focus on cost is the priority to us, being always one of the most competitive, if not the most competitive cable player in any market. So these 3 strategic pillars are really fundamental for us for our growth and not only country-wise, regional-wise and hopefully building as well a good leadership position in another region like Central Asia. And this brings us to the 2025 upgraded outlook. As you can see, for the second time this year, we are updating our guidance, increasing, let's say, to 30% net profit growth compared with the previous years, which take us to the level of SAR 1.060 billion plus. To avoid any doubt, this is excluding any Artikul Kabel Cable, Uzbekistan acquisition effect as we will be consolidating this new business, new acquisition, most of it next year. We also confirm the CapEx to be in the range of SAR 300 million as our initial guidance, of which SAR 120 million this year will be effect for the part of the Uzbekistan acquisition. In conclusion, we hold a very strong -- very solid, let's say, backlog with very good mix and pricing. Moreover, in the Kingdom and in the region, the macro trends are still strong. This is very good news and the growth that we are doing in export, the geographical expansions, this will surely help us to have an even more solid view for 2026. This is the end of our presentation. I believe we can now start the Q&A session. Thank you.

Thank you, Borjan and Mouaaz. [Operator Instructions] We will start of with raised hands. Khalid, please go ahead.

Thank you management and thank you EFG for organizing this call. My first question is on this quarter's OpEx level. We saw a continuation of somewhat elevated OpEx levels. Did this stem from higher SG&A? Or did we have another ECL this quarter from...

No, it came in firstly from more efficiencies during the period.

Sorry, but I think the first part of your answer was muted. My question was regarding sort of the higher OpEx level. Was this from sort of ECLs or...

The higher OpEx, there was an increase in the ECL, yes.

Could you elaborate more into the Iraq project and how -- what's the status of the receivables for the projects?

The receivables are still under control. I mean it's still within the same period of the days receivable that we have in the past. We're not seeing any major slowdown. There might be a bit of a delay. But overall, it is under control, the receivables, it gets to be paid within the time frame that we do expect. So we're not really seeing much deterioration in terms of the quality of the receivables.

And could you just give us the exact number of the ECL for this quarter?

ECL for the quarter -- for this period, for the 9-month period was SAR 240 million. And there was an increase of SAR 28 million for the third quarter.

Okay. So this -- the last 9 months or this quarter, we had SAR 28 million in ECL...

Yes, an increase.

Okay. And then when can we expect reversals to come in from the Iraq project?

Sorry?

Can we expect any increased ECLs going through the fourth quarter? Or are we confident in any reversals for -- until the end of this year?

No, we should -- we do not expect any deterioration, as I said. And mind you, I mean, the ECL is calculated based on a formula that takes many factors into consideration. One of it is also the movement on the receivable. So -- but we do not expect to see any deterioration compared to what we have seen so far.

Can we see in case ECLs as well going to the fourth quarter? Or is this the...

Can we what?

I see further expected credit losses going to the fourth quarter.

We do not have credit losses. Let's be clear on this. What we have, these are provisions that are created just in case, and this is as per IFRS rules using a specific formula that we do follow.

Okay. And if we can -- I think you just mentioned earlier on the backlog page that we have SAR 2 billion in LOIs. Is this included into the SAR 5.2 billion number that was mentioned?

Yes. Let me answer, it is Borjan speaking. It is not included. It will be on top of the SAR 5.2 billion. So it is just -- it's just very much similar number in average. If I take the Q1 backlog and the LOIs and H1 backlog and LOIs, this is an average, let's say, between the 2 quarters. So a very solid backlog and very solid LOIs. And to answer about the ECLs, we are -- maybe you did not hear properly, but we are not expecting any significant ECL movement in the next quarter. We don't have any risk. This is very important to mention. I need to stress this point. We don't have any risk of the losses. These are, of course, ECL expected losses according to IFRS. We will never do any business if we have any risk on losses. So let me simplify it in this way. We have one customer, which is a utility government customer and everything is very safe. It is just a little bit delayed in payments. As we know, nothing surprise, no surprises here. And we are deciding to continue doing the business because the -- let's say, the business is good. We know that receivables will take in average a couple of more, let's say, months than other normal customers, but there's no any risk. Every cost, all the cost, financial cost is included and [Foreign Language] being very strong financially. And from a solidity -- financial solidity point of view, we are one of those companies who can allow ourselves to make business with a good profit, including all these costs and still serve one of the customers where we are growing because we are growing the business, that's why maybe we have some ECLs increase. But this is the level we are expecting and we are forecasting as well, hopefully for the next year, this level of ECLs.

That's clear. Just further on the backlog. Globally, we see high-voltage players having increasing backlogs up to 2 and 3 years, while RGC is -- the RCG is at 6 to 8 months. Could you elaborate more into that? I mean the structural fundamentals of the market is changing globally, including in Saudi. Why do we have this slower backlog?

Very good question. Very good question. The backlog internationally, yes, you see it covered between 2, 3 years, even more, even more, especially in the transmission projects. And I can tell you that UAE is the same as any other, let's say, most of the countries outside Saudi Arabia. Saudi Arabia is a little bit different. Saudi Arabia is a country where you need to take, let's say, an average training where the volume comes and the demand come faster, very faster and where you need to be prepared for this demand. Why nobody can succeed in Saudi Arabia if not a healthy Saudi companies like Riyadh Cables Group. Because when your utility calls you and needs hundreds of kilometers, the month after, and this happens, we must deliver it. When utility comes and we signed the contract for 9 months, 6 months delivery, we can afford and we can be fast in our deliveries because Saudi, especially local utilities, normally, they plan in a very short period. They don't plan in 2, 3, 4 years' time. They plan within the budget of the year -- financial year itself. And it's important to understand. That's why we have multiple lines. That's why we have flexibility. That's why we always want to have other segments to be dynamic because this is the key of the success, not to rely on one, but when local utility gives us a short term, even for the transmission projects, we deliver. And other utilities outside Saudi, usually, the delivery time for the transmission projects are 18 months, 30 months, 36 months, even 48 months, we had one project a few, let's say, quarters back, almost 4 years delivery. But Saudi is different, and you need to be equipped for Saudi. That's why none from outside Saudi. And if you are a Saudi company and you are not strong from a capacity point of view, inventory point of view, speed, you will not succeed in Saudi. So this is in our DNA since multiple decades, and this is the reason of our success in Saudi. Saudi in nutshell is a little bit different from others.

I've got 2 questions if I'm allowed. First, we saw in the transmission sector in the transformers EIC winning a long-term framework agreement. Is there anything similar for cables? Or is it, as you say, it's more agile and shorter planning period?

We have as well framework agreement with utility. This is a standard practice, especially for distribution and some transmission products. These framework agreements are normally, let's say, of the tenure of 12 months, 18 months. But importantly, in our backlog, we don't have the framework agreement potential theoretical value. In our backlog, we are putting only the purchase orders, which are the call off of this framework agreement. Understand? So we have the framework agreement, multiple frame agreements signed for multiple products with the local utilities. These usually are 1 year, it can be extended another 6 months. And then, of course, new tenders coming from new framework agreement. So this is normal practice. We don't disclose the value of the frame agreement because it is on the paper. It is a theoretical value that until now it is always withdrawn by the customers. What we put in our backlog is the real purchase order released and metals booked. So this is the certainty of that the purchase order will be delivered within certain time of -- which is then defined in the framework agreement.

Keeping in mind that these framework agreements are a single-sided commitment from our side to deliver. It's not a commitment from the buyer to buy. It's just to make sure that -- and we plan for it. And the deliveries or the way they call these orders varies from 1 year to the other. So I mean, a good rule of thumb is what Borjan had mentioned, but depending on the performance of the utility, it can vary year-to-year.

And just one final question from my end. With AAK, revenue stood at SAR 400 million, you mentioned we have a similar margin profile as the company. Would we assume net income margin of 10% for AAK? Or is this...

I mean it's similar -- as we mentioned, the percentages or the margins are in line with our averages as well. So I mean, I can't -- we will not comment on the exact number. It's not disclosed information at this point, but you can assume the same percentages to draw up your models.

We'll move to the next set of questions from Akash.

Congratulations on a great set of results. Just 2 questions from my end, if you may. First is, can you comment on how the demand has been for you in terms of data centers? Are you seeing any -- are you in active contracts or tenders regarding data centers in UAE or in Saudi? That is the first question. And second is on the backlog. If you can give the split for backlog as of today, how much of it is in transmission, how much of it is in distribution and for renewables?

Yes. I will leave the backlog answer to Mouaaz. Let me answer the first question about the data centers. Data centers, the demand is coming. Requests for quotations are on our table. Surely, this will be the trend for the next quarters and years to come. In UAE, we have already secured, let's say, a few transmission projects for data centers. Let me -- let's say, simplify a little bit what does it mean data center. Data center means generation, means transmission and means distribution. And then data center is the utilizer like a small city using this energy. So it is -- we are planning in Saudi approximately, I believe, 2 gigawatt of data centers by 2030. These are at least the numbers that has been disclosed. A little bit more of that will be in UAE. So it is somehow as well comparable to the solar generation, transmission, distribution and then which electricity tender is utilized by all ourselves and expansion of the cities. So to answer your question, yes, we have done -- we have secured a few transmission projects in UAE for data centers. This means that as well, medium voltage distribution should be coming soon. And we are as well ready to catch any opportunity within the data centers, which are in the end, let's say, wires, very much similar building wires and low-voltage cables that we have in our portfolio to satisfy this demand as well. Will this drastically change our future demand? You are speaking about 1.9 gigawatts, 2 gigawatt by 2030. If I compare this with 10, 15 gigawatt of solar generation, which is far from the cities. So we have much longer transmission, distribution and gigawatts are 10x higher. I believe that solar generation and renewable energy will still be one of the best, let's say, market demands in the country and hopefully in the region. Then, of course, on top of these data centers will come, but with the gigawatts that I have mentioned before.

As far as the backlog, as it looks today, we're about 70% for transmission products, about 20% in distribution and 10% in the end user sector and renewable energy.

Just one follow-up, if I may, on the receivables question. So I do understand that it is more of a formula-driven thing, and it's not an actual credit loss. But if I were to look at for the first 9 months, this has been accumulating over the 3 quarters, but not once we have seen a reversal this year. There was a reversal last year and correct me if I'm wrong, there was a reversal last year in fourth quarter. But this year, so far, we have not seen any reversals. So I mean, how do we explain that? How do we contextualize that? Are we looking for a reversal anytime soon? Or because in the end, it is a provision that you are booking, it is a negative contributor to the earnings. So are we looking at some -- at some point in time, a reversal for this? Or is there something that I'm missing here?

Well, I mean, again, we go back to the -- to the fact that when ECL is calculated, it takes a number of factors into consideration. The aging of the receivable, the entity that it belongs to, the movement on the receivable itself, the economic situation and political situation in the region. So there are many factors that we take into consideration. Mind you also, our receivable has increased considerably during the period. We're looking at about SAR 600 million increase in receivable. So once you take all these factors into consideration, it would increase of course -- you would see an increase in the ECL. And we do -- I mean -- and there is still mind you, payments are coming in for the receivables. So these are not statics. These are not standing balances. We do see a rollover in the sense that old balances gets paid and the new ones get factored in.

Yes. By the way, receivables increased in absolute value because the sales increased. So -- but in number of days, we are speaking about 4, 5 days difference between this year and last year, 9 months period. So the increase in number of days of receivables is not relevant. It's not, I mean, anything more than 4, 5 days, as mentioned. Cash, we are generating cash. This is for us a very important point. So a positive free cash flow, able to finance from our own means, any acquisition, any expansion without having, let's say, any level of -- with the debt that we have mentioned before, net debt-on-equity is very healthy. So the machine is working, Akash. The machine is working. About receivable ECLs, we always say that we are quite conservative here. If we keep the same level of business, possibly some reversal will come. But I believe it is time as well to increase some level of business with some customers with a better pricing. I see the opportunity there. And then, of course, ECL will follow up, but will follow down as well. As you mentioned, last year, we have had quite good releases -- reversal of ECLs, which may happen as well in some quarter next year, but some other quarter, I'm seeing it that we will be again putting the ECLs up and down. So -- we can't allow ourselves to do it. So this is -- and we are deciding this with our own decision. It is our forecast that we are having and it is a decision that we are making in order to be strong in the market. And then you are right, financials are affected. But in the long term, the financial will be then affected positively because there's any risk of receiving this money. It is just instead of receiving in a few months, it is an average maybe 9 months receivable. So only for one customer.