Q2 2026 Savola Group Company SJSC Earnings Call

August 12, 2026

Speaker #2: Equity analyst at Morgan Stanley. And I'm delighted to be joined today by the Savola management team. From the company, we've got Chief Financial Officer Wajid Khan, we've got Chief Investment Officer Mohamed Nasser, and Head of M&A Mohamed Ali Bilal.

[Analyst] (Morgan Stanley): Equity analyst at Morgan Stanley, and I am delighted to be joined today by the Savola management team. From the company, we have Group Chief Financial Officer, Wajid Khan, Chief Investment Officer, Mohammed Nasr, and Head of M&A, Mohammed Ali Bilal. Before we begin, I would like to inform you that this call is being recorded for transcription purposes. Format-wise, I will pass it over to the company to talk through its earnings presentation, and then we will open it up for Q&A. For the Q&A, you can either use the raise your hand functionality, and I will unmute your line to ask a question, or you can type your question into the chat box, and I will read it on your behalf. With that, I will pass it over to Mohammed Ali Bilal to walk through the presentation.

Rashad Kawan: Equity analyst at Morgan Stanley, and I am delighted to be joined today by the Savola management team. From the company, we have Chief Financial Officer, Wajid Khan, Chief Investment Officer, Mohammad Nasr, and Head of M&A, Mohammed Ali Bilal. Before we begin, I would like to inform you that this call is being recorded for transcription purposes. Format-wise, I will pass it over to the company to talk through its earnings presentation, and then we will open it up for Q&A. For the Q&A, you can either use the raise your hand functionality, and I will unmute your line to ask a question, or you can type your question into the chat box, and I will read it on your behalf. With that, I will pass it over to Mohammed Ali Bilal to walk through the presentation.

Speaker #2: Before we begin, I'd like to inform you that this call is being recorded for transcription purposes. Format-wise, I'll pass it over to the company to talk through its earnings presentation, and then we'll open it up for Q&A.

Speaker #2: For the Q&A, you can either use the raise your hand functionality and I'll unmute your line, ask a question, or you can type your question into the chat box, and I'll read it on your behalf.

Speaker #2: With that, I'll pass it over to Mohamed Ali Bilal to walk through the presentation.

Speaker #3: Thank you, Rashad. And I'm a Steam good afternoon, everyone, and welcome to Savola Group's Q2 2026 earnings call. Thank you for joining us today.

Mohammed Ali Bilal: Thank you, Rashad and MS team. Good afternoon, everyone, and welcome to Savola Group's Q2 2026 earnings call. Thank you for joining us today. Before we begin, I would like to draw your attention to the disclaimer on forward-looking statements presented on Slide 2. Moving to Savola Group operational performance section. Savola Group delivered a strong H1 2026 performance despite regional headwinds. Group reported net income reached SAR 401 million, increasing 36% year-on-year from SAR 295 million. Recurring net income increased to SAR 372 million from SAR 266 million. Food processing remained the main earning driver, delivering recurring operational net income of SAR 419 million in H1 2026 compared to SAR 329 million in the same period last year.

Speaker #3: Before we begin, I would like to draw your attention to the disclaimer on forward-looking statements presented on slide 2. Moving to Savola Group operational performance section, Savola Group delivered a strong H1 2026 performance despite regional headwinds.

Speaker #3: Group reported net income reached Saudi Riyal 401 million increasing 36% year-on-year from Saudi Riyal 295 million. Recurring net income increased to Saudi Riyal 372 million from Saudi Riyal 266 million.

Speaker #3: Food processing remained the main earning driver, delivering recurring operational net income of SAR 419 million in H1 2026, compared to SAR 329 million in the same period last year.

Speaker #3: Panda demonstrated resilient performance in a challenging retail environment with recurring net income of Saudi Riyal 46 million in H1 2026. Which is supported by gain in market share, strong e-commerce growth, and ongoing operational improvements.

Mohammed Ali Bilal: Panda Retail Company demonstrated resilient performance in a challenging retail environment with recurring net income of SAR 46 million in H1 2026, which is supported by gain in market share, a strong e-commerce growth, and ongoing operational improvements. Frozen food, Al Kabeer, delivered improved profitability despite marginal drop in sales, with net income grew by 20% year-on-year to SAR 36 million. Margin expansion in Q2, a more favorable product mix, and a channel diversification supported the results in H1 2026. Herfy narrowed its net loss to SAR 1 million for H1 2026 from SAR 18 million a year ago, driven by margin improvement and disciplined cost management across the network. The difference between reported and recurring group net income primarily reflect the impact of discontinued operations, including the gain on Sudan disposal and the write-off of certain intangibles related to retail segment.

Speaker #3: Frozen food, Al Kabir, delivered improved profitability despite marginal drop in sales, with net income grew by 20% year-on-year to Saudi Riyal 36 million. Margin expansion in Q2, a more favorable product mix, and a channel diversification supported the results in H1 2026.

Speaker #3: Harfi narrowed its net loss to SAR 1 million for H1 2026 from SAR 18 million a year ago, driven by margin improvement and disciplined cost management across the network.

Speaker #3: The difference between reported and recurring group net income primarily reflect the impact of discontinued operations including the gain on Sudan disposal and the write-off of certain intangibles related to retail segment.

Speaker #3: Looking at the operating environment, macroeconomic uncertainty, and a regional shipping disruption, persisted throughout H1 2026. However, disciplined sourcing, strong commercial execution, and a robust operating framework supported a strong Q2.

Mohammed Ali Bilal: Looking at the operating environment, macroeconomic uncertainty and a regional shipping disruption persisted throughout H1 2026. However, disciplined sourcing, strong commercial execution, and a robust operating framework supported a strong Q2. Expected cost pressures are manageable through ongoing pricing, procurement, and productivity initiatives. Moving to slide 9 and 10, which shows our revenue and net income bridge and revenue mix by geography and business units. Arabia now represents 76% of our revenues, while other markets contribute 24%. Moving to slide 10 and 11. Group maintained a strong balance sheet and a disciplined approach to capital allocation. Net debt stood at SAR 851 million at June 2026, while gearing ratio remained low, supported by strong operating cash flows and prudent capital allocation. Capital expenditure was SAR 385 million, reflecting continued investment in group's growth and operating platform while preserving financial flexibility. Moving to food processing section.

Speaker #3: While expected cost pressures are manageable throughout ongoing through ongoing pricing, procurement, and productivity initiatives. Now, moving to slide 9 and 10, which shows our revenue and net income bridge and revenue mix by geography and operation and business units.

Speaker #3: Arabia now represents 76% of our revenues. While other markets contribute 24%. Moving to slide 10 and 11, group maintain a strong balance sheet and a disciplined approach to capital allocation.

Speaker #3: Net debt stood at Saudi Riyal 851 million at June 2026, while gearing ratio remaining low supported by strong operating cash flows, and prudent capital allocation.

Speaker #3: Capital expenditure was Saudi Riyal 385 million, reflecting continued investment in group's growth and operating platform, while preserving financial flexibility. Moving to food processing section, the oil business continued to deliver volume growth in all operating regions, leading to an improved revenues and profitability.

Mohammed Ali Bilal: The oil business continued to deliver volume growth in all operating regions, leading to improved revenues and profitability. Sugar performance improved on the back of volume growth and better margins. Pasta continued its momentum, supported by high volumes and lower input cost. Bayara improved gross margins through its continued focus on profitability, while the Mehbaj acquisition is expected to strengthen Bayara KSA's scale and market presence. Moving to Panda section. Panda reported a stable performance in H1 2026 while continuing to strengthen its core capabilities amid an increasingly competitive retail environment. The business continued to gain market share, supported by strong customer engagement and rapid growth in e-commerce. E-commerce revenue nearly tripled year on year, driven by continued channel focus and expanded aggregators partnerships. Moving to Al Kabeer section.

Speaker #3: Sugar performed well on the back of volume growth and better margins. Pasta continued its momentum, supported by high volumes and lower input costs. Bayara improved gross margins through its continued focus on profitability, while the Mahbaj acquisition is expected to strengthen Bayara KSA's scale and market presence.

Speaker #3: Moving to Panda, section, Panda reported a stable performance in H1 2026, while continuing to strengthen its core capabilities amid an increasingly competitive retail environment.

Speaker #3: The business continued to gain market share, supported by strong customer engagement and rapid growth in e-commerce. E-commerce revenue nearly tripled year-on-year, driven by continued channel focus and expanded aggregator partnerships.

Speaker #3: Moving to Al Kabir, section, Al Kabir delivered improved profitability despite a modest decline in revenue, driven by margin expansion lower operating costs, and a diversified channel mix.

Mohammed Ali Bilal: Al Kabeer delivered improved profitability despite a modest decline in revenue, driven by margin expansion, lower operating costs, and a diversified channel mix. In summary, H1 2026 demonstrates the resilience and quality of Savola's portfolio. Food processing delivered strong volume-led growth and higher profitability. Panda maintained and remained resilient despite intense retail competition, and Al Kabeer improved earnings due to margin enhancements and channel diversification. At the same time, the group continued to invest in strategic growth initiatives while maintaining balance sheet discipline and financial flexibility. We remain focused on managing regional supply chain risks, protecting margins through disciplined execution, and building scalable growth platforms across our core food and retail businesses. Thank you for your continued support, and we will now open the floor for your questions.

Speaker #3: In summary, H1 2026 demonstrates the resilience and quality of Savola's portfolio. Food processing delivered strong volume-led growth and higher profitability, Panda maintained and remained resilient despite intense retail competition, and Al Kabir improved earnings due to margin enhancements and channel diversification.

Speaker #3: At the same time, the group continued to invest in strategic growth initiatives while maintaining balance sheet discipline and financial flexibility. We remain focused on managing regional supply chain risks protecting margins through disciplined execution and building scalable growth platforms across our core food and retail businesses.

Speaker #3: Thank you for your continued support, and we will now open the floor for your questions.

Speaker #1: Thank you very much. I'm Adali Bilal, and the team. If you have a question as a reminder, please use the raise your hand function or send your question through the chat box.

[Analyst] (Morgan Stanley): Thank you very much, Mohammed Ali Bilal and the team. If you have a question, as a reminder, please use the raise your hand function or send your question through the chat box. I will start, if that's okay, gentlemen, with a couple of questions. First one on Panda. You've been in a bit of an expansion mode over the past couple of years. Can you update us on plans for the full year? Are you still targeting 20 net new stores and I think 20 CXR completions? As we get into next year, clearly, this cadence of openings and renovations has weighed on margins. But as we think to 2027, are you expecting to scale back the pace of openings or maintain the same level of cadence into 2027?

Rashad Kawan: Thank you very much, Mohammed Ali Bilal and the team. If you have a question, as a reminder, please use the raise your hand function or send your question through the chat box. I will start, if that's okay, gentlemen, with a couple of questions. First one on Panda. You've been in a bit of an expansion mode over the past couple of years. Can you update us on plans for the full year? Are you still targeting 20 net new stores and I think 20 CXR completions? As we get into next year, clearly, this cadence of openings and renovations has weighed on margins. But as we think to 2027, are you expecting to scale back the pace of openings or maintain the same level of cadence into 2027?

Speaker #1: I will start, if that's okay, gentlemen with a couple of questions. First one on Panda. You've been in a bit of an expansion mode over the past couple of years.

Speaker #1: Can you update us on plans for the full year? Are you still targeting 20 net new stores and I think 20 CXR completions in.

Speaker #1: As we get into next year, clearly this cadence of openings and renovations has weighed on margins, but as we think to 2027, are you expecting to scale back the pace of openings or maintain the same level of cadence into 2027?

Speaker #3: So thank you, Rashad. So I think that let's tackle Panda's expansion plans and growth. We started opening stores really in a meaningful way end of 2024 into 2025.

Mohammad Nasr: Thank you, Rashad. I think that let's tackle Panda's expansion plans and growth. We started opening stores really in a meaningful way end of 2024 into 2025. This year, we have in the pipeline that are committed 12 stores. Obviously, that can expand further, but at the current moment, we're talking about probably 15 by the end of the year opening. Majority of them will open late the H2. In the H1, we've opened about six additions, but we also had a couple of closures, so net four new stores that came into the H1. But we're talking about today, that are actually under construction or signed and work commenced on those stores, we're talking about roughly 12. That's what we're focused on.

Speaker #3: This year, we have in the pipeline that are committed 12 stores. Obviously, that can expand further, but at the current moment, we're talking about probably 15 by the end of the year opening.

Speaker #3: Majority of them will open late the second half in the first half, we've opened about 6 additions, but we also had a couple of closures so net new 4 new stores that came into the first half.

Speaker #3: But we're talking about today that are actually under construction or signed and work commenced on those stores. We're talking about roughly 12. That's what we're focused on.

Speaker #3: In terms of CXR stores, we have another wave that is underway that kicked off it started in February, but then it was paused during Ramadan.

Mohammad Nasr: In terms of CXR stores, we have another wave that is underway that kicked off. It started in February, but then it was paused during Ramadan to avoid further disruption in the store, and it continued in the later part of the H1, and it's still undergoing. These are roughly 20 stores, give or take, that are under CXR. We expect then, the CXR becomes almost, I would say, your regular operating model because the majority of the stores, we've done around 150, roughly, stores year to date. So the majority of the network is updated, and then obviously any new store is following the, I would say, the CXR blueprint. So this is the 2026 story on the physical stores. But I think what also more importantly is the e-commerce. The journey of e-commerce came suddenly and drastically and imposed during COVID.

Speaker #3: To avoid further disruption in the store—and it continued in the later part of the first half, and it's still ongoing. These are roughly 20 stores, give or take, that are under CXR.

Speaker #3: And we expect then I mean, the CXR becomes almost, I would say, your regular operating model because the majority of the stores we've done around 150 roughly stores year to date.

Speaker #3: So the majority of the network is updated, and then obviously any new store is following the, I would say, the CXR blueprint. So this is the 2026 story on the physical stores.

Speaker #3: But I think what's also more important is the e-commerce aspect. The journey of e-commerce came suddenly and drastically, and was imposed during COVID. And just to remind people, back just as lockdowns came, we acquired a small delivery app in e-grocery.

Mohammad Nasr: Just to remind people back in, just as lockdowns came, we acquired a small delivery app in e-grocery, and we've just been building on it in-house slowly but surely just to have an e-commerce offering. However, as we mentioned, roughly I would say 18 months ago or so, we kicked off a technical partnership with Ocado for a full revamp and reprocess engineering of the e-grocery offering. I'm pleased to say that we now have the foundation to build on, I would say, a new chapter in e-grocery. The numbers demonstrate the initial tests, as you can see here on the new platforms, and overall huge growth. Obviously, it is coming from a low base given the number of sales, but it's really important to note that the growth in number of daily orders continues to drastically rise.

Speaker #3: And we've just been building on it in-house slowly but surely just to have an e-commerce offering. However, as we mentioned roughly, I would say 18 months ago or so, we kicked off a technical partnership with Ocado for a full revamp and reprocess engineering of the e-grocery offering.

Speaker #3: And I'm pleased to say that we now have the foundation to build on, I would say, a new chapter in e-grocery. The numbers demonstrate the initial tests, as you can see here, on the new platforms and overall, huge growth.

Speaker #3: Obviously, it is coming from a low base given the number of sales, but it's really important to note that the growth in the number of daily orders continues to drastically rise.

Speaker #3: Obviously, the average basket size is also growing because the larger basket size obviously is more economical. And we are also still expanding with the aggregators.

Mohammad Nasr: Obviously, the average basket size is also growing because the larger basket size obviously is more economical. We are also still expanding with the aggregators. Obviously, we do have the customer data. It's not given away like your typical QSR arrangement. But the aggregators are doing the last mile, I would say, quick commerce delivery. But what we are doing also is the scheduled and click and collect, which is the Ocado partnership that's going to be built on. Now, that is not yet, frankly, a whole new app will be launched later in the year. Also, a whole new website for ordering will be launched, and that will only drive the momentum there. As you can see that a Panda customer, there's a big demand for e-grocery from Panda.

Speaker #3: Obviously, we do have the customer data. It's not given away like your typical QSR arrangement. But the aggregators are doing the last mile I would say quick commerce delivery.

Speaker #3: But what we are doing also is the scheduled and click-and-collect, which is the Ocado partnership that's going to be built on. Now, that is not yet, frankly, a whole new app.

Speaker #3: It will be launched later in the year. Also a whole new website, forwarding will be launched, and that will only drive the momentum there, as you can see.

Speaker #3: That if Panda customer, there's a big demand for e-grocery from Panda. And once we roll it out across the full network, I would say full network as in covering the kingdom, it doesn't mean every store is going to be an e-grocery store.

Mohammad Nasr: Once we roll it out across the full network, I would say full network as in covering the Kingdom. It does not mean every store is going to be an e-grocery store. What I am saying is that we will cover our entire network and customer reach. The good thing is, given our footprint, we do not necessarily need to build dark stores. It is leveraging the existing physical footprint in the back rooms that we have emptied. Again, reminding people, we have emptied most of the back stores and back rooms, which is real estate that can be used for e-grocery delivery without disrupting the in-store customer experience. You do not want to have shelf pickers crowding our store with customers trying to shop physically. I think the Panda store is, as we say, is a phygital story. You have the physical side that is expanding, but in a smart way.

Speaker #3: But what I'm saying is that we will cover our entire network and customer reach. And the good thing is given our footprint, we don't necessarily need to build the dark stores.

Speaker #3: It's leveraging the existing physical footprint. In the back rooms that we've emptied, again, reminding people, we've emptied most of the back stores and back rooms.

Speaker #3: Which is real estate that can be used for e-grocery delivery without disrupting the in-store customer experience because you don't want to have shelf pickers crowding out store with customers trying to shop physically.

Speaker #3: So I think the Panda store is, as we say, is a physical story. You have the physical side that is expanding. But in a smart way, we are obviously we've closed some stores that we believe are not necessarily accretive.

Mohammad Nasr: You have the physical side that is expanding, but in a smart way. Obviously, we have closed some stores that we believe are not necessarily accretive, and we are replacing those with newer stores in better areas, and we will continue to expand. Is it 20 stores in 2026? I think that is a number that I do not want to commit to today on the call, but today, I think we are comfortably going to deliver around 12 to 15 this year. More importantly, the bigger story also for Panda is expanding the e-grocery offering later this year. That is the core retail. I keep reminding people that we only do core retail. We do not have necessarily all the monetization opportunities yet in Panda, whether it is data, whether it is retail media. We have talked about these.

Mohammad Nasr: Obviously, we have closed some stores that we believe are not necessarily accretive, and we are replacing those with newer stores in better areas, and we will continue to expand. Is it 20 stores in 2026? I think that is a number that I do not want to commit to today on the call, but today, I think we are comfortably going to deliver around 12 to 15 this year. More importantly, the bigger story also for Panda is expanding the e-grocery offering later this year. That is the core retail. I keep reminding people that we only do core retail. We do not have necessarily all the monetization opportunities yet in Panda, whether it is data, whether it is retail media. We have talked about these. These are still in the development phase, but those are additional net income contribution in the future, which is what you see in global retail.

Speaker #3: And we're replacing those. We're opening newer stores in better areas, and we'll continue to expand. Is it 20 stores in 2026? I think that is a number that I don't want to commit to today on the call, but I think we're comfortably going to deliver around 12 to 15 this year.

Speaker #3: But more importantly, the bigger story also for Panda is expanding the e-grocery offering later this year. And that's the core retail. I keep reminding people that we only do core retail.

Speaker #3: We don't have necessarily all the monetization opportunities yet in Panda, whether it's data, whether it's retail media. We've talked about these. These are still in the development phase.

Mohammad Nasr: These are still in the development phase, but those are additional net income contribution in the future, which is what you see in global retail.

Speaker #3: But those are additional net income contributions in the future, which is what you see in global retail—the best practice, if you look at the best-practice retailers.

Mohammad Nasr: The best practice, if you look at the best practice retailers, their income streams do not only come from core retail, but services attached to the retail offering that can only enhance margins and enhance profitability. It is still a year of build up. The challenge, obviously, the market is tough. Rashad, you and I were talking just before this call. It is a tough market, but we continue to see growth. We maintain our market share, and we grab some market share. I think the plan. Most importantly, the brand equity studies that we have done recently only reinforces that we are still top of the mind. We are the frequent shopper destination for customers. The number of transactions continue to increase, so we are not losing customers. Obviously, customers are doing value shopping, so maybe they are buying things.

Speaker #3: Their income streams don't only come from core retail, but also from services attached to the retail offering that can only enhance margins and enhance profitability. So, it's still a year of build-up.

Speaker #3: The challenge obviously the market is tough. Rashad, you and I were talking just before this call. It is a tough market, but we continue to see our market share and we grab some market share.

Speaker #3: So, I think the Panda, and then most importantly, the brand equity studies that we've done recently, only reinforce that we are still top of mind.

Speaker #3: We are the frequent shopper destination for customers, and the number of transactions continues to increase. So, we are not losing customers. Obviously, customers are doing value shopping.

Speaker #3: So maybe they're buying things, and where we are, honestly, the biggest pain for us in the store is the grocery non-food, where we continue to see challenges there, especially on personal care.

Mohammad Nasr: Where we are, honestly, the biggest pain for us in the store is the grocery non-food, where we continue to see challenges there, especially on personal care. But the team is working on some initiatives to develop that, to reverse the trends that we have been seeing, honestly, for a number of years. The core food segment continues to grow, and that is really important because food for us is what we focus on in Panda, and that is where it makes customers very sticky to Panda. I hope I answered your question clearly, Rashad.

Speaker #3: But the team will is working on some initiatives to develop that to reverse the trends that we've been seeing. Honestly, for a number of years.

Speaker #3: But the core food segment continues to grow. And that's really important because food for us is what we focus on in Panda. And that's where it makes customers very sticky to Panda.

Speaker #3: So, I hope I answered your question clearly, Rashad.

Speaker #2: Yeah, no, that makes sense. Maybe if I can just follow up on that. As you think about kind of the medium term, let's say, I don't want to kind of pin you down to a specific year, but it sounds like the focus is going to shift a lot more towards online and catering to this kind of shifting consumer habits that we've been seeing as opposed to expanding more on your physical footprint.

[Analyst] (Morgan Stanley): Yeah. No, that makes sense. Maybe if I can just follow up on that. As you think about the medium term, let's say, I don't want to pin you down to a specific year, but it sounds like the focus is going to shift a lot more towards online and catering to this shifting consumer habits that we have been seeing, as opposed to expanding more on your physical footprint. You are still going to have some of that, but it is going to be more of a focus towards building out the online platform. Then maybe help us understand the margin impact, right? Clearly, as you build out the online platform, that might have some margin implications, but you are going to get a bit of easing in terms of margins from maybe pulling back a little bit in terms of your store expansion. Does that make sense?

Rashad Kawan: Yeah. No, that makes sense. Maybe if I can just follow up on that. As you think about the medium term, let's say, I don't want to pin you down to a specific year, but it sounds like the focus is going to shift a lot more towards online and catering to this shifting consumer habits that we have been seeing, as opposed to expanding more on your physical footprint. You are still going to have some of that, but it is going to be more of a focus towards building out the online platform. Then maybe help us understand the margin impact, right? Clearly, as you build out the online platform, that might have some margin implications, but you are going to get a bit of easing in terms of margins from maybe pulling back a little bit in terms of your store expansion. Does that make sense?

Speaker #2: You're still going to have some of that, but it's going to be more of a focus toward building out the online platform. And then maybe help us understand the margin impact, right?

Speaker #2: I mean, clearly, as you build out the online platform, that might have some margin implications, but you're going to get a bit of easing in terms of margins from maybe pulling back a little bit in terms of your store expansion.

Speaker #2: Does that make sense?

Speaker #3: Yeah. So our e-commerce is profitable. Both on the aggregator side, and when I say aggregator side, it's the quick commerce solution that has a limited SKU range.

Mohammad Nasr: Our e-commerce is profitable, both on the aggregator side, and when I say aggregator side, it is the quick commerce solution that has a limited SKU range, versus the scheduled delivery, which will bring the full supermarket SKU range, right? It is tens of thousands of products as opposed to a few thousand. While margin, frankly speaking, shouldn't be diluted, what we are trying to do is avoid losing customers, especially in major cities, right? E-commerce, like the physical retail story, store by store has its own story and own catchment area and customer base. E-grocery also has somewhat a city to city and demographic, right? A city like Riyadh, we expect significant uptick of e-grocery. A tier 3 city, probably very little. Or I do not want to say very little, but relative to Riyadh, much smaller, right? In terms of margins, we are hyper-focused on margins.

Speaker #3: Versus the scheduled delivery, which will bring the full supermarket SKU range, right? It's the tens of thousands of products as opposed to a few thousand.

Speaker #3: So, while margin, frankly speaking, shouldn't be diluted, what we're trying to do is avoid losing customers, especially in major cities, right? I mean, e-commerce, like physical retail, is a story where each store has its own story, its own catchment area, and customer base.

Speaker #3: E-grocery also has somewhat a city to city and demographic, right? So a city like Riyadh, we expect significant uptake of e-grocery. A tier three city probably very little or I don't want to say very little, but relative to Riyadh, much smaller, right?

Speaker #3: So in terms of margins, we are hyper focused on margins. This is why we haven't also scaled up e-grocery very fast in the past.

Mohammad Nasr: This is why we haven't also scaled up e-grocery very fast in the past, and because our commitment to our boards, and more importantly, our shareholders and stakeholders, is to do it in a very profitable way, right? This partnership will allow us. This is why we did the process re-engineering. We are seeing positive indication that the path we are taking in e-grocery is not going to dilute our margins. In fact, we probably will be able to capture additional pockets that we are losing to others that are doing e-grocery or solely e-grocery, right? Especially on the non-grocery food. This is where also a lot of the bleed is happening. It is going to discounters, and it is going to online shoppers, right? It is the easiest thing to sell online or through other channels. This is one thing that we want to mitigate that.

Speaker #3: And because of our commitment to our boards, and more importantly, our shareholders and stakeholders, to do it in a very profitable way, right? And this partnership will allow us.

Speaker #3: This is why we did the process re-engineering. And we are seeing positive indication that the path we're taking e-grocery is not going to dilute our margins.

Speaker #3: In fact, we probably will be able to capture additional pockets that we're losing to others that are doing e-grocery, or solely e-grocery, right? Especially on non-grocery food, this is where also a lot of the bleed is happening.

Speaker #3: It's going to discounters and it's going to online shoppers, right? It's the easiest thing to sell online. Or through other channels. So this is one thing that we want to mitigate that.

Speaker #3: So hopefully, I can give you a better answer, I think, once we really become of a meaningful size. But if I look at the half-year momentum we've done around 263 million real of sales, given Panda size, this is small.

Mohammad Nasr: Hopefully, I can give you a better answer, I think, once we really become of a meaningful size. But if I look at the H1 momentum, we have done around SAR 263 million of sales. Given Panda sizes is small, but that should give you an indication of where we want to go and how big we want to make it, but profitably, right? This is very, very, very important, Rashad.

Speaker #3: But that should give you an indication of where we want to go and how big we want to make it. But profitably, right? This is very, very, very important, Rashad.

Speaker #2: That makes sense, thank you. We'll go to questions on the line. We've got a few written questions as well. Just as a reminder, if you have questions, please use the raise your hand function or type your question in the chat box.

[Analyst] (Morgan Stanley): That makes sense. Thank you. We will go to questions on the line. We have got a few written questions as well. Just as a reminder, if you have questions, please use the raise your hand function or type your question in the chat box. We will go to Faris Al Louzi. I will unmute you now, Faris.

Rashad Kawan: That makes sense. Thank you. We will go to questions on the line. We have got a few written questions as well. Just as a reminder, if you have questions, please use the raise your hand function or type your question in the chat box. We will go to Faris Al Louzi. I will unmute you now, Faris.

Speaker #2: We'll go to Faris Al-Yusuf. I will unmute you now, Faris.

Speaker #4: Hi. Thank you very much for the presentation. I had a question on the food processing business. And I just wanted to understand, especially on the oil and the sugar, how can we think of run rate, volumes, excluding Ramadan, into the year and how should these grow in the medium term?

Faris Al Louzi: Hi. Thank you very much for the presentation. I had a question on the food processing business. I just wanted to understand, especially on the oil and the sugar, how can we think of run rate volumes excluding Ramadan into the year, and how should these grow in the medium term? Also, if you could separately talk a bit about the quarter-over-quarter net income performance of the food processing division, and just what the drivers were going from around SAR 240 million of normalized net income to the SAR 130 million range, just to understand that and get a sense for what the run rate should be into the full year and how volumes would be growing into the next few years. Thank you.

Speaker #4: And also, if you could separately talk a bit about the quarter-over-quarter net income performance of the Food Processing division, and just kind of what the drivers were going from around 240 million of normalized net income to the 130 range. Just to understand that and kind of get a sense for what the run rate should be into the full year, and how volumes would be growing into the next few years.

Speaker #4: Thank you.

Speaker #3: So, let's talk about volumes first. And Bilal, please interject if I missed something. On volumes, it's not just a Q1 or Q2 story. I mean, if you look at the past quarters, we've been following a deliberate strategy to expand our oil volumes.

Mohammad Nasr: Let us talk about volumes first, and Bilal, please interject if I miss something. On volumes, it is not a Q1 only or Q2 story. If you look at the past quarters, we have been having a deliberate strategy on expanding our oil volumes. The biggest driver of that is B2B, right? B2B for us is both food service and industrial that goes into food packaging and so on and so forth. I think that the volume is not growing because we are lucky, but there has been a deliberate strategy to expand. If you recall, I want to say about 3 or 4 years ago, we launched an organized platform internally called Savola Professional to tackle growth in oils and other food products in our portfolio. Tackling Savola Professional, that is basically tasked with growing our B2B volumes. They do come with a lower margin, right?

Speaker #3: And the biggest driver of that is B2B, right? I mean, and B2B for us is both food service and industrial—that goes into food packaging and so on and so forth.

Speaker #3: So I think that the volume is not growing because we're lucky but they've been a deliberate strategy to expand. If you recall, I want to say about three or four years ago, we launched an organized platform internally called Savola Professional to tackle growth in oils and other food products in our portfolio.

Speaker #3: Tackling what's called Savola Professional, that's basically tasked with growing our B2B volumes. They do come with a lower margin, right? And you see that in the gross profit-per-ton metrics; you see that it's been lower than, let's say, a few years back.

Mohammad Nasr: You see that in the gross profit per ton metrics that you see that has been lower than, let us say, a few years back, but that is compensated with higher volumes and stickier volumes that allows us to continue to grow and benefit from that in terms of net income contribution in the immediate term, and obviously the longer term. This is where the growth is behind on volumes and the oil story. Sorry, I missed the second part of your question. If you can elaborate.

Speaker #3: But that's compensated by higher volumes and stickier volumes, which allow us to continue to grow and benefit from that in terms of net income contribution in the immediate term.

Speaker #3: And obviously, the longer term. So, this is where the growth is behind on volumes and the oil story. Sorry, I missed the second part of your question.

Speaker #3: If you can elaborate.

Speaker #4: Yes, absolutely. I just wanted to kind of maybe walk through the different if you can help us walk through the different pieces. From a volume and a margin kind of decomposition on the food processing business net income versus last quarter.

Faris Al Louzi: Yes, absolutely. I just wanted to maybe walk through the different. If you can help us walk through the different pieces from a volume and a margin kind of decomposition on the food processing business net income

Mohammad Nasr: Okay

Mohammad Nasr: Okay.

Faris Al Louzi: versus last quarter.

Faris Al Louzi: Versus last quarter.

Speaker #3: So I mean, last quarter, obviously, you had the Ramadan effect, naturally, there's a benefit of that, right? And we always have a higher so if you look at I think the best way to look at it compared to Ramadan last year to this year and quarter post Ramadan and post Ramadan last year versus this year, both show positive trends.

Mohammad Nasr: Last quarter, obviously, you had the Ramadan effect. Naturally, there is a benefit of that, right? We always have a higher. If you look at, I think the best way to look at it, compare Ramadan last year to this year and quarter post-Ramadan and post-Ramadan last year versus this year, both show positive trends. If I look at Q1 to Q1 last year, it is very healthy. Q2 to Q2 last year, also very healthy growth. I do not think it is. In food business, we do not look at it, for example, from Q1, where Ramadan fell into Q2, expecting Q2 to be higher in terms of net income contribution. That is normal, right? We have generally strong Ramadan, then softening in terms of profitability in Q1, Q2, Q3, and then picking up back-to-school momentum. This also applies to retail business, frankly speaking.

Speaker #3: So if I look at Q1 to Q1 last year, it's very healthy. Q2 to Q2 last year also shows very healthy growth. So I don't think, in the food business, we look at it, for example, from Q1 where Ramadan fell into Q2, expecting Q2 to be higher in terms of net income contribution.

Speaker #3: But that's normal, right? We generally have strong Ramadan, then some softening in terms of profitability in Q1, Q2, and Q3, and then we pick up back-to-school momentum.

Speaker #3: And this also applies to retail business. Frankly speaking. So with that said, I think it's very important to understand also the context of the regional conflict, right?

Mohammad Nasr: With that said, I think it is very important to understand also the context of

Mohammad Nasr: With that said, I think it is very important to understand also the context of the regional conflict, right?

Wajid Usman Khan: Regional

Wajid Usman Khan: the regional conflict, right?

Wajid Usman Khan: Yeah.

Speaker #3: That really came fully in Q2. What does that mean? That means the cost of operations has drastically gone up, right? Whether it's shipping costs, whether material costs, the supply chain has just naturally become more complex.

Mohammad Nasr: That really came fully in Q2. What does that mean? That means there was a cost of operations have drastically gone up, right? Whether it is shipping costs, whether material costs, supply chain just naturally become more complex. But despite all those challenges, we have offset it with very disciplined cost structure internally to protect margins where we can, and not necessarily resort to just price increase, right? This is very important. What does that also mean? Is our working capital went up, right? The cost to fund this translates also to bottom line, right? In terms of financing charges. Because we are also taking more stock than usual to ensure that our supply chain and operations are not disrupted in the coming quarters, right? So this is the cost to operate in an environment where you have conflicts, but this is also resilience of Savola.

Speaker #3: But despite all those challenges, we've offset it with very disciplined cost structure internally to protect margins where we can. And not necessarily resort to just price increase, right?

Speaker #3: This is very important. Now, what that also means is our working capital went up, right? The cost to fund this translates also to the bottom line, right?

Speaker #3: In terms of financing charges. Because we are also taking more stock than usual. To ensure that our supply chain and operations are not disrupted in the coming quarters, right?

Speaker #3: So this is the cost to operate in an environment where you have conflicts. But this also demonstrates the resilience of Savola. I mean, we always say that our biggest strength is our balance sheet.

Mohammad Nasr: We always say that our biggest strength is our balance sheet, and given our size, we are able to navigate such issues. Our CEO reminds us, went through COVID, similar issues, then we had the Ukraine-Russia war, then we had the Red Sea issue, and now we have the Strait issue, right? So it has been five, six years of this, where we are jumping from one conflict to another or one disruption to another, and we have a very disciplined supply chain team that knows how to navigate this. But that comes at a cost, and that cost obviously is there to stay for the foreseeable future until the conflict is resolved. But that doesn't mean that we are slowing our business.

Speaker #3: And given our size, we're able to navigate such issues. I mean, as our CEO reminds us, we went through COVID—similar issues. Then we had the Ukraine-Russia war.

Speaker #3: Then we had the Red Sea issue. Now we have the Strait issue, right? So it's been five or six years of this, where we were jumping from one conflict to another or one disruption to another.

Speaker #3: And we have a very, very disciplined supply chain team that knows how to navigate this. But that comes at a cost, and that cost obviously is here to stay for the foreseeable future, until the conflict is resolved.

Speaker #3: But that doesn't mean that we are slowing our business. And our business continue to benefit from initiative strategic initiatives as well as operational initiatives that both focus on continue to expand our volumes where it makes sense.

Mohammad Nasr: Our business continue to benefit from strategic initiatives as well as operational initiatives that both focus on continue to expand our volumes where it makes sense, and also try to mitigate those additional costs through internal measures, whether operating efficiencies or other cost measures that we can leverage to ensure that we translate to a profitable quarter. So I think it is not a Q1 to Q2 story, right? I think you should look at it H1 to H1 last year, because that gives you a full spectrum. But the conflict has been painful, and that's the nature of the beast that we are in at the moment.

Speaker #3: We are also trying to mitigate those additional costs through internal measures, whether through operating efficiencies or other cost measures that we can leverage to ensure that we achieve a profitable quarter.

Speaker #3: So, I think it's not a Q1 to Q2 story, right? I think you should look at it half one to half one last year, because that gives you a full spectrum.

Speaker #3: But the conflict has been painful, and that's the nature of the beast that we are in at the moment.

Speaker #2: In our priority is remain to bring or keep our products on the shelf, basically.

Wajid Usman Khan: Our priority is remain to bring or keep our products on the shelf, basically.

Wajid Khan: Our priority is remain to bring or keep our products on the shelf, basically.

Speaker #3: Yeah.

Mohammad Nasr: Yeah.

Speaker #4: Clear. Understood. Thank you. And maybe one very quick follow-up on your first answer. So on the volumes for oil, I see you've done 345,000 tons for this quarter.

Faris Al Louzi: Clear. Understood. Thank you. Maybe one very quick follow-up on your first answer. On the volumes for oil, I see you have done 345,000 tons for this quarter. Is this a representative quarter for a non-Ramadan quarter? Into Q3 and Q4 is like the mid 300s, the number we should maybe have roughly in mind?

Speaker #4: Is this a representative quarter for a non-Ramadan quarter? So into 3Q and 4Q, is it like the mid-300s the number we should maybe have roughly in mind?

Speaker #3: I think you wanted to say H1 because in H1, I think we have 354 volumes for KSA. If you can see on the screen, right?

Mohammad Nasr: I think you wanted to say H1, because in H1, I think we have 354 volume for KSA, if you can see on the screen, right? Is that you are referring to?

Speaker #3: Is that you're referring to?

Speaker #4: Sorry, I was referring to the overall KSA and other markets. So, the 749 minus the 404 from the first quarter.

Faris Al Louzi: Sorry, I was referring to the overall KSA and other markets. The 749 minus the 404 from the first quarter.

Speaker #3: Yeah. I mean, that's representative H1, right? Which has Ramadan. But also don't forget some of the Ramadan next year some of that season I mean, like last year comes a bit towards the end of Q4, right?

Mohammad Nasr: Yeah. That's representative H1, right, which has Ramadan. Do not forget some of the Ramadan next year, some of that season, like last year, comes a bit in towards the end of Q4, right, because the food manufacturers start, as we call it, the season, Ramadan season, start building up inventory and whether on the retail shelf or in the warehouses, towards the end of Q4 to be ready for Q1. So some of it will spill over in Q4, right. But I think the challenge, and I appreciate the challenge that you're raising for yourself to forecast, because you should look at the longer trends. Do not look at half to half, look at 2023, 2024, 2025 to understand the volume progression in oil.

Speaker #3: Because manufacturers food manufacturers start as we call it the season Ramadan season start building up inventory and whether on the retail shelf or in the warehouses.

Speaker #3: Towards the end of Q4 to be ready for Q1. So some of it will spill over in Q4, right? But I think the challenge and I appreciate the challenge that you're raising for yourself to forecast.

Speaker #3: But you should look at the longer trend. Don't look at it half to half. Look at '23, '24, and '25 to understand the volume progression in oil.

Speaker #3: Obviously, we've divested some businesses, and so on and so forth. But a lot of the growth is also because of B2B, and B2B is showing healthy growth compared to B2C.

Mohammad Nasr: Obviously, we've divested some businesses and so on and so forth, but a lot of the growth is also because B2B, and B2B is a healthy growth compared to B2C. B2C is population growth. It's low single digits. Will always be there as part of the consumer branded products that we produce, and we continue to protect our market share. But also the B2B continues to benefit us because that's we've been focusing on.

Speaker #3: B2C is population growth. It's low single digits. It will always be there. There as part of the consumer branded products that we produce and we continue to protect our market share.

Speaker #3: But also the B2B continues to benefit us because of that we've been focusing on.

Speaker #4: Understood. Thank you.

Faris Al Louzi: Understood. Thank you.

Speaker #1: Yeah. Thanks a lot, Mohammed. I just wanted to add one thing for the clarity of the audience that our business is obviously have some seasonal effects as you Mohammed has rightly mentioned in Q1, it's Ramadan effect.

Wajid Usman Khan: Yeah, thanks a lot, Mohammed. I just wanted to add one thing for the clarity of the audience, that our businesses obviously have some seasonal effects as you, Mohammed, has rightly mentioned, and Q1 is Ramadan effect. Q2 is normally a very normal quarter, but Q3 we will see some back to school season. A little impact of that. People will come back after the vacations and break. The fourth quarter this time around will see some of the effect of the season because some of the pre-Ramadan sales will also kick in Q4. So we cannot just take the just for the guidance of all the people, we cannot just take the 749, let's say the volume of oil we are seeing for H1, and multiply it by two and say that this should be our run rate. No.

Wajid Khan: Yeah, thanks a lot, Mohammad. I just wanted to add one thing for the clarity of the audience, that our businesses obviously have some seasonal effects as you, Mohammad, has rightly mentioned, and Q1 is Ramadan effect. Q2 is normally a very normal quarter, but Q3 we will see some back to school season. A little impact of that. People will come back after the vacations and break. The fourth quarter this time around will see some of the effect of the season because some of the pre-Ramadan sales will also kick in Q4. So we cannot just take the just for the guidance of all the people, we cannot just take the 749, let's say the volume of oil we are seeing for H1, and multiply it by two and say that this should be our run rate. No.

Speaker #1: And Q2 is normally a very normal quarter, but a third quarter we will see some back to school season, a little impact of that.

Speaker #1: People will come back after the vacations and break, and the fourth quarter this time around—we'll see some of the effect of the season because some of the pre-Ramadan sales will also kick in Q4.

Speaker #1: So we cannot just take the just for the guidance of all the people. We cannot just take the 749, let's say the volume of oil we are seeing for H1 and multiply it by 2 and say that this should be our run rate.

Speaker #1: No, we need to see Q2, Q3 has its own peculiarity and Q4 will have its own. So in all the markets, Arabia plus Egypt, plus Algeria, we are seeing we are focusing on volume growth by increasing our portfolio of products in B2C side.

Wajid Usman Khan: We need to see Q2, Q3 has its own peculiarity, and Q4 will have its own. In all the markets, Arabia plus Egypt, plus Algeria, we are focusing on volume growth by increasing our portfolio of products in B2C side. A lot of new innovation and product in B2B side as well, both for industrial as well as food service. We still believe that there is a room to grow. While we are managing to capture as some of the questions I am also seeing on the volume side of Arabia, we have Arabia volumes have increased, and it is because of our dedicated focus on the B2B industrial side as well as food services side. We have the operation of International Food Industries for fat business in Saudi, which we commenced back in 2017.

Wajid Khan: We need to see Q2, Q3 has its own peculiarity, and Q4 will have its own. In all the markets, Arabia plus Egypt, plus Algeria, we are focusing on volume growth by increasing our portfolio of products in B2C side. A lot of new innovation and product in B2B side as well, both for industrial as well as food service. We still believe that there is a room to grow. While we are managing to capture as some of the questions I am also seeing on the volume side of Arabia, we have Arabia volumes have increased, and it is because of our dedicated focus on the B2B industrial side as well as food services side. We have the operation of International Food Industries for fat business in Saudi, which we commenced back in 2017.

Speaker #1: A lot of new innovation and product in B2B side as well, both for industrial as well as food service. We still believe that there is a room to grow.

Speaker #1: And while we are managing to capture some of the questions, I'm also seeing on the volume side of Arabia that Arabia volumes have increased.

Speaker #1: And it is because of our dedicated focus on the B2B industrial side as well as food services side. We have the operation of IO5 for fat business in Saudi.

Speaker #1: Which we commence back in 2017. And as you know that it takes a lot of time for us to get the product qualified for all the industrial players.

Wajid Usman Khan: As you know that it takes a lot of time for us to get the product qualified for all the industrial players, and now we are going towards premium products more than the basic product. All of this is also helping us in increasing our volumes and maintaining the momentum. There is an increase in B2C side, which is massive, as well as for value, for money and other categories which are more emerging, as per the consumer dynamics in GCC, I would say in the entire markets we are operating in. This is also helping us in gaining volumes. Definitely when we are producing more, selling more, then the operational leverage kick in. Despite that, the B2B margin of CM1, as mentioned by Mohammed, is on average will be lower, but the trickle-down effect to the bottom line will be much better.

Wajid Khan: As you know that it takes a lot of time for us to get the product qualified for all the industrial players, and now we are going towards premium products more than the basic product. All of this is also helping us in increasing our volumes and maintaining the momentum. There is an increase in B2C side, which is massive, as well as for value, for money and other categories which are more emerging, as per the consumer dynamics in GCC, I would say in the entire markets we are operating in. This is also helping us in gaining volumes. Definitely when we are producing more, selling more, then the operational leverage kick in. Despite that, the B2B margin of CM1, as mentioned by Mohammad, is on average will be lower, but the trickle-down effect to the bottom line will be much better.

Speaker #1: And now we are going towards premium products more than the basic product. So all of this is also helping us in increasing our volumes and maintaining the momentum.

Speaker #1: So there is an increase on the B2C side, which is massive, as well as for value for money and other categories which are more emerging as per the consumer dynamics and GCC, I would say, in the entire markets we are operating in.

Speaker #1: And this is also helping us in gaining volumes, and definitely, when we are producing more, selling more, then the operational leverage kicks in. And despite that, the B2B margin, or CM1 as mentioned by Mohammed, on average will be lower, but the trickle-down effect to the bottom line will be much better.

Speaker #1: At the same time, you would appreciate that there are a lot of factors, or a lot of conflict-related cost pressures, which are there in the business.

Wajid Usman Khan: At the same time, you would appreciate that there are a lot of factors or a lot of conflict-related cost pressures which are there in the business. Least to mention is just the freight and war risk insurance and the holding costs and the financing costs related to that. On top of it, we are also seeing a lot of governments initiatives to actually reducing the burden on their own budget. We have seen some increase in cost in Egypt and Saudi, especially on the energy side and the labor side, which is continuously putting pressure on the overall margin. All in all, it is a very robust quarter, solid performance, and we would like to carry the momentum to the Q3 and Q4, inshallah.

Wajid Khan: At the same time, you would appreciate that there are a lot of factors or a lot of conflict-related cost pressures which are there in the business. Least to mention is just the freight and war risk insurance and the holding costs and the financing costs related to that. On top of it, we are also seeing a lot of governments initiatives to actually reducing the burden on their own budget. We have seen some increase in cost in Egypt and Saudi, especially on the energy side and the labor side, which is continuously putting pressure on the overall margin. All in all, it is a very robust quarter, solid performance, and we would like to carry the momentum to the Q3 and Q4, inshallah.

Speaker #1: Least to mention is just the freight and war risk insurance, and the holding costs and the financing costs related to that. But on top of it, we are also seeing a lot of government initiatives to actually reduce the burden on their own budgets.

Speaker #1: So we have seen some increase in cost in Egypt and Saudi. Especially on the energy side and the labor side. Which is continuously putting pressure on the overall margin.

Speaker #1: So all in all, it is a very robust quarter. Solid performance. And we would like to carry the momentum. To the Q3 and Q4, inshallah.

Speaker #1: And as we speak, the momentum of volumes is building up, due to the fact that we are an incumbent player, with prices increasing slightly. There's another question in the chat box.

Wajid Usman Khan: As we speak, the momentum of volumes is built up to the fact that we are an incumbent player, with prices increasing slightly. There is another question in the chat box. It has actually helped the incumbent players as compared to the non-incumbent players because it needs more working capital. It requires more lines from the banks, and the cost of funding is very high. Apart from that, the challenges of supply chain is not easy to navigate. At the moment, with Red Sea and Bab el-Mandab is also on the radar, it is creating a lot of disruptions for a lot of players. Our focus is just to maintain supply, is to see whatever we can do to make sure that our consumers and customers will get our products on time, in full, and inshallah, at the right economics for them and for us.

Wajid Khan: As we speak, the momentum of volumes is built up to the fact that we are an incumbent player, with prices increasing slightly. There is another question in the chat box. It has actually helped the incumbent players as compared to the non-incumbent players because it needs more working capital. It requires more lines from the banks, and the cost of funding is very high. Apart from that, the challenges of supply chain is not easy to navigate. At the moment, with Red Sea and Bab el-Mandab is also on the radar, it is creating a lot of disruptions for a lot of players. Our focus is just to maintain supply, is to see whatever we can do to make sure that our consumers and customers will get our products on time, in full, and inshallah, at the right economics for them and for us.

Speaker #1: It's actually helped the incumbent players as compared to the non-incumbent players because it needs more working capital it requires more lines from the banks and the cost of funding is very high.

Speaker #1: And apart from that, the challenges of supply chain are not easy to navigate. At the moment, with the Red Sea and Bab al-Mandab also on the radar.

Speaker #1: It is creating a lot of disruptions for a lot of players. So our focus is just to maintain supply is to see whatever we can do to make sure that our consumers and customers will get our products on time in full.

Speaker #1: And inshallah, at the right economics for them and for us. So this is in nutshell, I try to cover certain topics including the seasonality.

Wajid Usman Khan: This is, in a nutshell, I tried to cover certain topics, including the seasonality, and you can always use reference volumes for the last quarter and last year in those markets to build on that. Thank you.

Wajid Khan: This is, in a nutshell, I tried to cover certain topics, including the seasonality, and you can always use reference volumes for the last quarter and last year in those markets to build on that. Thank you.

Speaker #1: And we can build on—you can always use reference volumes from last quarter or last year in those markets to build on that. Thank you.

Speaker #4: Thank you very much, guys. We'll go to our next question. On the phone, Mahsa Namiri, please I'm going to unmute you now, introduce yourself, and then oh, actually, I see that he's dropped off.

[Analyst] (Morgan Stanley): Thank you very much, guys. We will go to our next question on the phone. Mohsen Amiri, please, I am going to unmute you now. Introduce yourself and then. Actually, I see that he has dropped off. Okay. Actually, wait here, he is back. One second. Mohsen Amiri, please introduce yourself and ask your question.

Rashad Kawan: Thank you very much, guys. We will go to our next question on the phone. Mohsen Amiri, please, I am going to unmute you now. Introduce yourself and then. Actually, I see that he has dropped off. Okay. Actually, wait here, he is back. One second. Mohsen Amiri, please introduce yourself and ask your question.

Speaker #4: Okay, actually, wait here. He's back. One second. Mahsa Namiri, please introduce yourself and ask your question.

Speaker #3: Thanks, everyone. Mahsa Namiri here from Bank of America. On panda, I guess maybe a macro and then a micro question. The macro is on the e-commerce, do you have any sense of how much of this is sort of substitution of brick and mortar visits?

Mohsen Amiri: Thanks, everyone. Mohsen Amiri here from Bank of America. On Panda, I guess maybe a macro and then a micro question. The macro is on the e-commerce. Do you have any sense of how much of this is sort of substitution of brick-and-mortar visits? For example, do you track how many existing Panda loyalty members that you see in the loyalty data are not making the brick-and-mortar visit, but they are making the e-commerce visit? So that is something I would like to understand. Then the micro question is if you can give some more detail on what is in that write-off of intangibles and why it hits in this quarter as opposed to any other time.

Speaker #3: For example, if do you track how many is existing panda loyalty members that you see in the loyalty data are not making the brick and mortar visit, but they're making the e-commerce visit?

Speaker #3: So that's something I'd like to understand. And then the micro question is if you can give some more detail on what's in that write-off of intangibles, and why it hits in this quarter as opposed to any other time.

Speaker #5: Okay, I'll tackle the first part, and maybe Waja can tackle the next one. So, the first answer is there's no kind of localization at all.

Mohammad Nasr: Okay, I will tackle the first part, then maybe Wajid can tackle the next one. The first answer is there is no cannibalization at all. I mean, all our data shows that it is a top-up to their existing physical visits of the existing customers. So we are seeing the same customer that comes to our store is buying online when they need to top up. So they are doing the, I would say, the omnichannel experience, which is the physical and digital. Then what we are seeing is that actually it is becoming almost 50% more visits on some of these stores because the customer that is buying online for the first time is coming and visiting those physical stores that are close to them. So if anything, it is sort of like a network, maybe that is not the right expression, but maybe it is a network effect. It feeds both.

Speaker #5: I mean, all our data shows that it's a top-up to their existing physical visits. Of the existing customers. So we are seeing the same customer that comes to our store, is buying online when they need to top up.

Speaker #5: So they are doing the sort of I would say the omnichannel experience, which is the physical and digital. And then what we're seeing is that actually it's becoming almost 50% more visits on some of these stores because the customer that's buying online for the first time is coming and visiting those physical stores that are close to them.

Speaker #5: So it's anything. It's sort of like a network. Maybe that's not the right expression, but maybe it's a network effect. It feeds both the physical feeds the online feeds the physical.

Mohammad Nasr: So if anything, it is sort of like a network, maybe that is not the right expression, but maybe it is a network effect. It feeds both.

Mohammad Nasr: The physical feeds the online, the online feeds the physical, this is very important. The one thing that is nice is that this is a low cost of operation because the physical footprint exists. For Panda, it is benefiting not just from this network effect, but it is also cost to operate is not expensive for this. This is the part around the online commerce. I hope that, Mohsen, answers the question. What about the second part of your question that I might have missed? Sorry.

Speaker #5: And this is very important. One thing that's nice is that this is a low-cost operation because the physical footprint already exists.

Speaker #5: So for panda, it's benefiting not just from this network effect, but it's also cost to operate is not expensive for this. So this is the part around the online commerce.

Speaker #5: I hope that Mahsa answers the question. So, what about the second part of your question that I might have missed? Sorry.

Speaker #3: Yeah. So the second part was on the.

Mohsen Amiri: Yeah. The second part was on.

Mohammad Nasr: The experiment, right?

Speaker #5: The impairment, right?

Speaker #3: But before I go there, if I may. So if they're top-up visits, how does that square with a 200 real average basket? That's pretty big.

Mohsen Amiri: Before I go there, if I may.

Mohammad Nasr: Yeah.

Mohsen Amiri: So if they are top-up visits, how does that square with a SAR 200 average basket? That is pretty big.

Speaker #5: Because when I say top-up, I mean, it's 200 real is not a huge basket. I mean, compared to historically. So if I look at physical stores, the average basket size sometimes is bigger than that.

Mohammad Nasr: When I say top up, I mean, SAR 200 is not a huge basket, compared to historically. If I look at physical stores, the average basket size sometimes is bigger than that, depending on the store and depending on time of the month, right? But these top-up visits are, especially in the places we rolled out this offering, because again, e-grocery for Panda is not everywhere. And people are using it to benefit themselves on top-up visits that are not necessarily they want to do it on a weekly basis, right? So these are households that are looking to expand their shopping experience in Panda, but online. So this is not a contradiction. If anything, it is enhancing. And we are seeing the data shows us that the customers are doing different shopping experiences depending on the physical versus online. But that is the short answer on that.

Speaker #5: Depending on the store and depending on the time of the month, right? But these top-up visits are especially in the places where we rolled out this offering.

Speaker #5: Because again, e-grocery for panda is not everywhere. And people are using it to benefit themselves on top-up visits that are not necessarily they want to do it on a weekly basis, right?

Speaker #5: So these are households that are looking to expand the their shopping experience in panda, but online. So this is not a contradiction. If anything, it's enhancing.

Speaker #5: And we are seeing the data shows us that the customers are having different shopping experiences depending on whether it's physical or online. But that's a short answer on that.

Speaker #3: Okay. And then my other question was a little bit more detail on the what is in the write-off of intangibles. And why it hits in this quarter.

Mohsen Amiri: Sure. And then my other question was a little bit more detail on what is in the write-off of intangibles, and why it hits in this quarter versus any other time.

Speaker #3: Versus any other time.

Speaker #4: Oh, thanks, Mahsa. Let me take this up moment. So the write-off of intangible is actually we are consistently working on upgrading the experience and software for us for customer experience.

Wajid Usman Khan: Oh, thanks, Mohsen. Let me take this up, Mohammed. So the write-off of intangible is actually we are constantly working on upgrading the experience and software for us for customer experience. It is basically on the loyalty side. So we just moved from one parent software and infrastructure to another. And it resulted in that while it may give us some money, but conservatively, we have written it off and moved on as per the business needs on the new software. So this is just a small accounting hit which has taken place on our cash and that has been reflected in the quarter when the decision was made. Thank you.

Wajid Khan: Oh, thanks, Mohsen. Let me take this up, Mohammed. So the write-off of intangible is actually we are constantly working on upgrading the experience and software for us for customer experience. It is basically on the loyalty side. So we just moved from one parent software and infrastructure to another. And it resulted in that while it may give us some money, but conservatively, we have written it off and moved on as per the business needs on the new software. So this is just a small accounting hit which has taken place on our cash and that has been reflected in the quarter when the decision was made. Thank you.

Speaker #4: Especially on the loyalty side. So we just moved from one current software and infrastructure to another. And it resulted in that while it may give us some money, but conservatively, we have written it off and moved on as per the business needs on the new software.

Speaker #4: So this is just a small accounting hit. Which has taken place and I'll catch and that hasn't reflected. And the quarter and the decision was made.

Speaker #4: Thank you.

Speaker #3: Thank you.

[Analyst] (Morgan Stanley): Thank you very much. We'll move to questions in the chat box. We've got a few. I know, Wajid, you tried to address some of them, but I'll read the first one from Hamad Salloom from BSF Capital. He wanted to ask how higher commodity prices will affect the business.

Rashad Kawan: Thank you very much. We'll move to questions in the chat box. We've got a few. I know, Wajid, you tried to address some of them, but I'll read the first one from Hamad Salloom from BSF Capital. He wanted to ask how higher commodity prices will affect the business.

Speaker #4: Very much. So, we'll move to questions in the chat box. We've got a few. I know, Waja, you tried to address some of them, but I'll read the first one from Hamed Salum from BSF Capital.

Speaker #4: He wanted to ask how higher commodity prices will affect the business.

Speaker #5: I mean, commodity prices increasing, I mean, for the B2B, it's back to back. B2C, we tend to have the room as in past managing our pricing without necessarily increasing the actual listed price, but by reducing discounts where it makes sense, right?

Mohammad Nasr: Commodity prices increasing, for the B2B, it's back to back. B2C, we tend to have the room, as in past, managing our pricing without necessarily increasing the actual listed price, but by reducing discounts where it makes sense to maintain the margin. That's how we've done it in the past, and we'll continue to do it today. We are not obsessed so much about the actual headline commodity price as much as managing the margins per ton on those commodities. As I said, B2B, it's more straightforward. B2C, when prices of the underlying cost is higher, certainly we manage it through reduced discounts and promotions on our products. Beside that, obviously, I would say the more indirect cost or direct cost of the conflict is really the bigger issue in the H1.

Speaker #5: To maintain the margin. So that's how we've done it in the past and we'll continue to do it today. So we are not obsessed so much about the actual headline commodity price as much as managing the margins per ton on those commodities, right?

Speaker #5: And as I said, B2B, it's more straightforward. B2C, when prices of the underlying cost is higher, certainly we manage it through reduced discounts and promotions on our and then beside that, obviously, in a more, I would say the more indirect cost or direct cost of the conflict is really the bigger issue in the first half.

Speaker #5: It's not a commodity price issue as much as the direct cost and indirect cost of operating in today's environment. And that's what we mentioned at the beginning of the call, that we are focusing on operating leverage enhancements and cost management to avoid raising prices—especially on B2C—and to make sure that the products are on the shelf at a fair price.

Mohammad Nasr: It's not a commodity price issue as much as the direct cost and indirect cost of operating in today's environment, and that's what we mentioned in the beginning of the call, is that we're focusing on operating leverage enhancements and cost management to avoid raising prices absolutely, especially on B2C, and make sure that the products are on the shelf at a fair price. This is the short answer to that.

Speaker #5: So this is the short answer to that.

Speaker #4: Thank you very much. And then we've got a few questions on panda. Margins, as you'd expect. So I'll lump them together. So one of them is kind of looking at Q2 particularly when you look at your gross margins.

[Analyst] (Morgan Stanley): Thank you very much. We've got a few questions on Panda margins, as you'd expect, so I'll lump them together. One of them is looking at Q2 particularly. When you look at your gross margins, they declined, I think, about 250 basis points year-over-year. What drove the margin pressure there, and what are you seeing in terms of promotions, mix, operating leverage that could support margin recovery going forward? Related to that, there's a more longer-term question around Panda margins as well, which I think you partially addressed earlier, but maybe there's something else to add there.

Rashad Kawan: Thank you very much. We've got a few questions on Panda margins, as you'd expect, so I'll lump them together. One of them is looking at Q2 particularly. When you look at your gross margins, they declined, I think, about 250 basis points year-over-year. What drove the margin pressure there, and what are you seeing in terms of promotions, mix, operating leverage that could support margin recovery going forward? Related to that, there's a more longer-term question around Panda margins as well, which I think you partially addressed earlier, but maybe there's something else to add there.

Speaker #4: They declined I think about 250 basis points year over year. What drove the margin pressure there and what are you seeing in terms of promotions, mix, operating leverage that could support margin recovery going forward?

Speaker #4: And then related to that, there's a more longer-term question around panda margins as well, which I think you kind of partially addressed earlier, but maybe if there's something else to add there.

Speaker #5: Yeah, I mean, the competitive nature of the market is hard, especially due to the conflict and everything like that. So there are fewer suppliers actually spending less on supporting retailers.

Mohammad Nasr: The competitive nature of the market is hard, especially due to the conflict and everything like that. There are less suppliers that are actually spending less on supporting retailers because of the current conflict and their own costs to operate. That is part of the story. The other part is obviously the competitive nature, where we still have elevated promo mix. That continues, even post-Ramadan. I think these are the biggest issue or the biggest challenge we saw in Q2. Cutting their marketing campaigns, which tend to go into the margin enhancement of retailers, has been muted because of the current conflict, and I do not think that is a story that is going to change anytime soon, given the current context of where we are today. In terms of the longer term, we always say that our target is to hit 2%.

Speaker #5: Because of the current conflict. And their own cost to operate. So that's part of the story. The other part is obviously the competitive nature where we still have elevated promotion promo mix.

Speaker #5: That continues even post Ramadan. So I think these are the biggest issue that or the biggest challenge we saw in Q2. So cutting their marketing campaigns, which tend to go into the margin enhancement of retailers, has been muted because of the current conflict.

Speaker #5: And I don't think that is a story that was going to change anytime soon given the current context of where we are today. Now, in terms of the longer term, I mean, we're always say that our target is to hit 2%.

Speaker #5: We're investing and we're focusing on that. On terms of net income, that's our, I would say, happy medium. And that requires several other initiatives to come online in the coming quarters.

Mohammad Nasr: We are investing, and we are focusing on that in terms of net income. That is our, I would say, happy medium, and that requires several other initiatives to come online in the coming quarters. But once we get further visibility on this, we can certainly give a proper sort of target. But our objective is 2%. We do not typically comment and do not comment on when we are going to achieve this 2%, but certainly, this is our immediate focus in the coming quarters. And obviously, other factors need to help in terms of macro condition to be able to achieve that as well.

Speaker #5: But once we get further visibility on this, we can certainly give a proper sort of target. But our objective is 2%. We typically do not comment, and do not comment, on when we are going to achieve this 2%.

Speaker #5: But certainly, this is our immediate focus in the coming quarters. And obviously, other factors need to help, in terms of macro conditions, to be able to achieve that as well.

Speaker #4: Understood. Thank you. Just as a reminder, if you want to ask a question live, just use the raise your hand function. Or type your question in the chat box.

[Analyst] (Morgan Stanley): Understood. Thank you. Just as a reminder, if you want to ask a question live, just use the raise your hand function, or type your question in the chat box. The next question I have got here, gentlemen, is what explains the increase in growth rate in oil volumes in Q2 versus Q1 in Arabia? In Q1, there was 15% growth. In Q2, 30% growth. Is all of this coming from B2B?

Rashad Kawan: Understood. Thank you. Just as a reminder, if you want to ask a question live, just use the raise your hand function, or type your question in the chat box. The next question I have got here, gentlemen, is what explains the increase in growth rate in oil volumes in Q2 versus Q1 in Arabia? In Q1, there was 15% growth. In Q2, 30% growth. Is all of this coming from B2B?

Speaker #4: The next question I've got here, gentlemen, is: What explains the increase in growth rate and oil volumes in Q2 versus Q1 in Arabia? So, in Q1, there was 15% growth.

Speaker #4: In Q2, 30% growth. Is all of this coming from B2B?

Speaker #2: Yeah, thank you. I think, Rashad, I tried to respond to it—that the growth has increased, but the volume, if we see from Q1 to Q2, is not changing much as far as the B2B is concerned.

Wajid Usman Khan: Yeah. Thank you. I think, Rashad, I tried to respond to it, that the growth has increased, but the volume, if we see from Q1 to Q2, it is not changing much as far as the B2B is concerned. Rather, it has declined a little bit. But because B2B, again, the focus for our operations has remained to increase the B2B business, especially in Arabia. And we have our own plant, which is almost going to be utilized 100% on capacity in International Food Industries Company. And this volume increase is based on continuous efforts for so many past quarters for us to reach to that level of acceptance with the international industrial place. And we believe that this will remain robust, and the growth will continue, or at least will grow from there.

Wajid Khan: Yeah. Thank you. I think, Rashad, I tried to respond to it, that the growth has increased, but the volume, if we see from Q1 to Q2, it is not changing much as far as the B2B is concerned. Rather, it has declined a little bit. But because B2B, again, the focus for our operations has remained to increase the B2B business, especially in Arabia. And we have our own plant, which is almost going to be utilized 100% on capacity in International Food Industries Company. And this volume increase is based on continuous efforts for so many past quarters for us to reach to that level of acceptance with the international industrial place. And we believe that this will remain robust, and the growth will continue, or at least will grow from there.

Speaker #2: Rather, it's declined a little bit, but because of B2B—again, the focus for our operations has remained to increase the B2B business, especially in Arabia.

Speaker #2: And we have our own plant, which is almost going to be utilized 100% on capacity in IFI, International Food Industries Company. And this volume increase is based on continuous efforts for so many past quarters for us to reach to that level of acceptance with international industry players.

Speaker #2: And we believe that this will remain robust, and the growth will continue—or at least we'll grow from there. Of course, the 30% growth or 15% growth may not be something which will remain there for a long period of time, but the growth will be there.

Wajid Usman Khan: Of course, the 30% growth or 15% growth may not be something which will remain there for a long period of time, but the growth will be there, and this pace is not a one-off, and this pace is going to continue.

Wajid Khan: Of course, the 30% growth or 15% growth may not be something which will remain there for a long period of time, but the growth will be there, and this pace is not a one-off, and this pace is going to continue.

Speaker #2: And the space is not a one-off. The space is going to continue.

Speaker #4: Okay, excellent. So, the next question that we have here: looking into the second half of the year, based on what you're currently seeing in commodity costs, pricing, volumes, and procurement, how should we think about the direction of food margins relative to the first half of '26?

[Analyst] (Morgan Stanley): Excellent. So the next question that we have here, looking into the H2 of the year, based on what you are currently seeing in commodity costs, pricing, volumes, and procurement, how should we think about the direction of food margins relative to the H1 of 2026? Are there any key tailwinds or headwinds we should factor into our expectations for Q3 and Q4?

Rashad Kawan: Excellent. So the next question that we have here, looking into the H2 of the year, based on what you are currently seeing in commodity costs, pricing, volumes, and procurement, how should we think about the direction of food margins relative to the H1 of 2026? Are there any key tailwinds or headwinds we should factor into our expectations for Q3 and Q4?

Speaker #4: Are there any key tailwinds or headwinds we should factor into our expectations for Q3 and Q4?

Speaker #2: As usual, very—yeah, let me start. And Mohammed, you can jump in afterwards. No problem. No, very interesting question by Sultan. Thanks a lot for it.

Wajid Usman Khan: As usual, very

Wajid Khan: As usual, very.

Mohammad Nasr: You want to tackle that?

Wajid Usman Khan: Yeah, let me start, and Omar, you can jump in afterwards, no problem. A very interesting question by Sultan. Thanks a lot for it. As we know that currently the prices of commodities have increased. Definitely, if we go with the typical margin percentage, it will be different in the quarters to come because of that. At the same time, the margin per ton is something which we are trying to manage. Certain margin per ton has a kind of declining trend if we see the GP per ton for edible oil as well, mainly due to the fact that the B2B volumes are also growing and the B2B margin as compared to B2C margin at the level of GP is always, most of the time, lower than that B2C one. Those factors will continue.

Wajid Khan: Yeah, let me start, and Omar, you can jump in afterwards, no problem. A very interesting question by Sultan. Thanks a lot for it. As we know that currently the prices of commodities have increased. Definitely, if we go with the typical margin percentage, it will be different in the quarters to come because of that. At the same time, the margin per ton is something which we are trying to manage. Certain margin per ton has a kind of declining trend if we see the GP per ton for edible oil as well, mainly due to the fact that the B2B volumes are also growing and the B2B margin as compared to B2C margin at the level of GP is always, most of the time, lower than that B2C one. Those factors will continue.

Speaker #2: Again, as we know that currently the price is of commodities have increased. Definitely, if we go with the typical margin, but margin percentage it will be different.

Speaker #2: In the quarters to come, because of that. At the same time, the margin per turn is something which we are trying to manage. And a certain margin per turn has a kind of declining trend if we see the GP per turn for edible oil as well.

Speaker #2: Mainly due to the fact that the B2B volumes are also growing. And the B2B margin as compared to B2C margin at the level of GP is always or most of the time lower than that B2C one.

Speaker #2: So that factors will continue. So again, it will be if only the it will have major impact if the volume will increase a lot as compared to B2C.

Wajid Usman Khan: It will have major impact if the volume will increase a lot as compared to B2C. Otherwise, we believe that that mix should continue and will give a hopefully very good H2 of the year as well. Q4 will be partly season. Q1 is more season. We need to see how the season is also shifting slightly from Q1 to Q4 in the year or so this year and the next year as well. This is one thing. Number two, the cost of doing the business, especially on the supply chain logistics side, are increasing, and that is quite uncertain. Situation of actually getting the supply is uncertain. That will also factor in how long will it continue and how severe it will be.

Wajid Khan: It will have major impact if the volume will increase a lot as compared to B2C. Otherwise, we believe that that mix should continue and will give a hopefully very good H2 of the year as well. Q4 will be partly season. Q1 is more season. We need to see how the season is also shifting slightly from Q1 to Q4 in the year or so this year and the next year as well. This is one thing. Number two, the cost of doing the business, especially on the supply chain logistics side, are increasing, and that is quite uncertain. Situation of actually getting the supply is uncertain. That will also factor in how long will it continue and how severe it will be.

Speaker #2: And otherwise, we believe that mix should continue, and it will hopefully give a very good second half of the year as well. Again, Q4 will be partly seasonal.

Speaker #2: Q1 is more season. We need to see how the season is also shifting slightly from Q1 to Q4. In the year or so, this year and the next year as well.

Speaker #2: So this is one thing. Number two, the cost of doing business, especially on the supply chain logistics side, is increasing. And that is quite an uncertain situation of actually getting the supplies—uncertain.

Speaker #2: That will also factor in how long it will continue, and how severe it will be. If everything settles, and everything is signed off and things calm down, then you will see a different outcome.

Wajid Usman Khan: If everything will be done and everything is signed off and things will calm down, then you will see a different thing. Now, even the freight has increased due to the crude oil prices. It went down, then it went up again. All of these situations are quite volatile. While we are trying our best to use our risk management practices as well as our own experience of operating in those markets commercially to provide sustainable profitability and margins, these situations are too complicated for us to predict exactly how it still will pan out. But given our experience and track record, we believe that we are equipped enough to tackle the situation, hopefully, in a very robust manner.

Wajid Khan: If everything will be done and everything is signed off and things will calm down, then you will see a different thing. Now, even the freight has increased due to the crude oil prices. It went down, then it went up again. All of these situations are quite volatile. While we are trying our best to use our risk management practices as well as our own experience of operating in those markets commercially to provide sustainable profitability and margins, these situations are too complicated for us to predict exactly how it still will pan out. But given our experience and track record, we believe that we are equipped enough to tackle the situation, hopefully, in a very robust manner.

Speaker #2: Now, even the freight has increased due to the crude oil prices. It went down, then it went up again. So all of these situations are quite volatile.

Speaker #2: And while we are trying our best to use our risk management practices as well as our own experience of operating in those markets commercially, to provide sustainable profitability and margins, these situations are too complicated for us to predict exactly how it's to will pan out.

Speaker #2: But given our experience and track record, we believe that we are equipped enough to tackle the situation, hopefully in a very robust manner.

Speaker #4: Thank you very much, Wajid. I have a couple of questions on the recent acquisition, but maybe you could start by talking about the strategic rationale for it. How should we think about its earnings contribution and synergies to Bayara and Saudi?

[Analyst] (Morgan Stanley): Thank you very much, Wajid. A couple questions on the recent acquisition, but maybe if you guys can kind of just talk about the strategic rationale for it. How should we think about its earning contribution and synergies to Bayara and Savola?

Rashad Kawan: Thank you very much, Wajid. A couple questions on the recent acquisition, but maybe if you guys can kind of just talk about the strategic rationale for it. How should we think about its earning contribution and synergies to Bayara and Savola?

Speaker #5: Thanks, Rashad. And let me take that question. This transaction completed post-Q2 2026, and we need to understand, My Badge was our competitor in the KSA market, having a net revenue of around 113 million in 2025.

Mohammed Ali Bilal: Thanks, Rashad, and let me take that question. This transaction completed post Q2 2026, and we need to understand Mehbaj was our competitor in KSA market, having a net revenue of around $113 million in 2025. It has access to around 140-plus shop-in-shop stores. The strategic rationale is very simple for us. It is a consolidation in the market, and again, it helps us to have access to the root of the market with the vehicles it has, the fleet it has. Again, it supports Savola's strategy of accelerating NSP in KSA. So these were the two major reasons or strategic rationales we did this acquisition. The consolidation of the acquisition was around SAR 11.5 million, which is well disclosed in the financial statements and our earning press release early last week or a week earlier.

Speaker #5: And it has access to around 140-plus shopping shops and stores. The strategic rationale is very simple for us: it's a consolidation in the market.

Speaker #5: And again, it helps us to have access to the route to the market with the vehicles it has, the fleet it has. And again, it supports Savola's strategy of accelerating NSP in KSA.

Speaker #5: So, these were the two major reasons or strategic rationales we did this acquisition. The consideration for the acquisition was around SAR 11.5 million, which is well disclosed in the financial statements.

Speaker #5: And our earnings press release was issued early last week or the week before. So just to conclude, I think it's very early to discuss Mehbaj, and this is why we haven't discussed it today.

Wajid Usman Khan: Just to conclude, I think it is very early to discuss about Mehbaj, and that is why we have not discussed it today. But as Bilal said, it is about consolidation, acquiring a premium brand. Savola loves brands. So now today in our nuts and spices, we have Bayara, we have Afia, and now Mehbaj. Mehbaj has an interesting infrastructure as Bilal talked about, the go-to-market infrastructure and the shop-in-shop. So we will only accelerate the plans in KSA. We do not expect, frankly, any necessarily immediate benefit in terms of synergies. I think we need a bit of more time on that. But that is a story we can discuss further in the future quarters once the acquisition is fully digested within the system. But this is in summary.

Wajid Khan: Just to conclude, I think it is very early to discuss about Mehbaj, and that is why we have not discussed it today. But as Bilal said, it is about consolidation, acquiring a premium brand. Savola loves brands. So now today in our nuts and spices, we have Bayara, we have Afia, and now Mehbaj. Mehbaj has an interesting infrastructure as Bilal talked about, the go-to-market infrastructure and the shop-in-shop. So we will only accelerate the plans in KSA. We do not expect, frankly, any necessarily immediate benefit in terms of synergies. I think we need a bit of more time on that. But that is a story we can discuss further in the future quarters once the acquisition is fully digested within the system. But this is in summary.

Speaker #5: But as Bilal said, it's about consolidation, acquiring a premium brand, Savola loves brands. So now today in our nuts and spices, we have Bayara, we have Afya, and now Mehbaj.

Speaker #5: And Mehbaj has an interesting infrastructure as Bilal talked about the go-to-market infrastructure. And the shop and shop. So we'll only accelerate the plans in KSA.

Speaker #5: We don't expect, frankly, any necessarily immediate benefit in terms of synergies. I think we need a bit more time on that. But that's a story we can discuss further in future quarters, once the acquisition is fully digested within the system.

Speaker #5: But this is in summary.

Speaker #4: Thank you very much. And then maybe just kind of while we're on the Bayara topic, if you can talk about the because I think it was an interesting dynamic in the first half, right, where the UAE saw some meaningful improvement in profitability and then Saudi, I know that's been a bit of a focus area, but profitability still seems to be kind of quite weak.

[Analyst] (Morgan Stanley): Thank you very much. Then maybe just kind of while we are on the Bayara topic, if you can talk about the, because I think there was an interesting dynamic in the H1, right? Where the UAE saw some meaningful improvement in profitability. Then Saudi, I know that has been a bit of a focus area, but profitability still seems to be kind of quite weak. Maybe if you can talk about those two in contrast to each other and what you guys have been seeing.

Rashad Kawan: Thank you very much. Then maybe just kind of while we are on the Bayara topic, if you can talk about the, because I think there was an interesting dynamic in the H1, right? Where the UAE saw some meaningful improvement in profitability. Then Saudi, I know that has been a bit of a focus area, but profitability still seems to be kind of quite weak. Maybe if you can talk about those two in contrast to each other and what you guys have been seeing.

Speaker #4: Maybe if you can talk about those two in contrast to each other and what you guys have been seeing.

Speaker #5: So in the UAE, it was honestly just better management of the operating costs. And better execution. So this is the benefit we're continuing to see in the UAE.

Mohammad Nasr: So in the UAE, it was honestly just better management of the operating costs, and better execution. So this is the benefit that we are continuing to see in the UAE. So even though we have had some setbacks relative

Speaker #5: So even though we've had some setbacks relative to history in the last year, I think UAE is back on a strong track. And that's resulting in expansion, profitability, and margins.

Mohammad Nasr: To history in last year, but I think UAE is back on a strong track. That's the resulting, you see expansion in profitability and margins. This is very important. We need to go back to stronger gross profits, stronger EBITDA margins, where it was at the time of acquisition, through better, I would say, procurement as well as internal operations, not necessarily just increasing prices. On KSA, we did a massive reorganization of KSA in the beginning of the year into Q2. That basically resulted in deliberate reduction of sales as well as a complete overhaul of the organization itself in KSA in terms of people and systems. This is a setback that you see in KSA. But I think, right now, the current team that is tasked to continue the story of KSA have a very clear execution roadmap.

Mohammad Nasr: That's the resulting, you see expansion in profitability and margins. This is very important. We need to go back to stronger gross profits, stronger EBITDA margins, where it was at the time of acquisition, through better, I would say, procurement as well as internal operations, not necessarily just increasing prices. On KSA, we did a massive reorganization of KSA in the beginning of the year into Q2. That basically resulted in deliberate reduction of sales as well as a complete overhaul of the organization itself in KSA in terms of people and systems. This is a setback that you see in KSA. But I think, right now, the current team that is tasked to continue the story of KSA have a very clear execution roadmap.

Speaker #5: This is very important. We need to go back to stronger gross profits and stronger EBITDA margins, where they were at the time of acquisition, through better, I would say, procurement as well as internal operations—not necessarily just increasing prices.

Speaker #5: On KSA, we did a massive reorganization of KSA in the beginning of the year, into Q2. That basically resulted in deliberate reduction of sales.

Speaker #5: As well as a complete overhaul of the organization itself in KSA in terms of people and systems. So this is a setback that you see in KSA.

Speaker #5: But I think, right now, the current team that is tasked with continuing the story of KSA have a very clear execution roadmap. And the Mehbaj acquisition, since someone brought it up, will hopefully accelerate that as well.

Mohammad Nasr: The Mehbaj acquisition, since someone brought it up, will hopefully accelerate that as well. It's another SAR 113 million of sales in 2025. So that should give you an idea of our ambitions in Saudi. We have a new factory coming up later in the year, beginning of next year. Obviously, that will add cost in terms of depreciation and fixed costs, but also it would give us the opportunity to consolidate the operations of KSA under one roof and produce more in KSA. Today, a meaningful portion of products is reliant on UAE operation. So I think all of these levers are coming into play, and will only hopefully give us a very strong 2027 from where it is.

Speaker #5: I mean, it's another 113 million riyals of sales in 2025, so that should give you an idea of our ambitions in Saudi. We have a new factory coming up later in the year, or at the beginning of next year.

Speaker #5: Obviously, that will add cost in terms of depreciation and fixed cost, but it would also give us the opportunity to consolidate the operations of KSA under one roof and produce more in KSA.

Speaker #5: Today, a large and meaningful portion of products is reliant on UAE e-operation. So, I think all of these levers are coming into play.

Speaker #5: And hopefully, it will give us a very strong 2027 from where we are. But I would say KSA took a big step back, but it's a deliberate action by our teams and management team to reorganize the business. Because while we were growing sales, as we saw in the past, it wasn't translating into profitability.

Mohammad Nasr: But I would say KSA took a big step back, but it's a deliberate action by our teams and management teams to reorganize the business because while we were growing sales, as we saw in the past, it wasn't translate to profitability and certainly, that's not a good story. So we needed to take a, I would say, refresh on Saudi and how to approach it. This is now there's a full new team that's managing this, starting in, I would say, mid Q2 throughout this business. So I'd say to watch and see. I was hoping to give you a better answer and a stronger answer on this, but it is a painful story for us as well. But I think we're in a better shape going into next year on this business today.

Speaker #5: And certainly, that is not a good story. So we needed to take, I would say, a refresh on Saudi and how to approach it.

Speaker #5: And now there's a completely new team that's managing this, starting in, I would say, mid-Q2, driving this business. So I'd say it's a watch and see.

Speaker #5: I was hoping to give you a better answer, a stronger answer on this, but it is a painful story for us as well.

Speaker #5: But I think we're in better shape going into next year on this business today.

Speaker #4: Yeah. Thanks. Thanks, Mohammed. And just building on one thing, that you might have seen that the UAE revenues are going down by almost 2.8%.

Wajid Usman Khan: Yeah. Thanks, Mohammed. Just building on one thing that you might have seen, that the UAE revenues are going down by almost 2.8%. Actually, the reason is the food services business has really gone down by almost 80% due to tourism decline, especially since 28 February. So this is something which is reversible, inshallah, once the things will normalize. The business overall is doing very good or I would say UAE, given the current situation, net profit-wise, EBITDA and GP-wise. The sales will also come as soon as the things will normalize. It will also show growth in the future.

Wajid Khan: Yeah. Thanks, Mohammed. Just building on one thing that you might have seen, that the UAE revenues are going down by almost 2.8%. Actually, the reason is the food services business has really gone down by almost 80% due to tourism decline, especially since 28 February. So this is something which is reversible, inshallah, once the things will normalize. The business overall is doing very good or I would say UAE, given the current situation, net profit-wise, EBITDA and GP-wise. The sales will also come as soon as the things will normalize. It will also show growth in the future.

Speaker #4: Actually, the reason is that the food services business has really gone down by almost 80%, due to the decline in tourism, especially since February 28th. So this is something which is reversible.

Speaker #4: Inshallah, once the things will normalize. So the business overall is doing very good or I would say UAE given the current situation. Net profit-wise, EBITDA and GP-wise.

Speaker #4: And the sales will also come as soon as things normalize. It will also show growth in the future. Sorry, Roger, just to clarify, you were saying the food service business in the UAE for Bayara was down 80%, eight-zero?

[Analyst] (Morgan Stanley): Sorry, Wajid, just to clarify, you were saying the food service business in the UAE for Bayara was down 80%, 80?

Rashad Kawan: Sorry, Wajid, just to clarify, you were saying the food service business in the UAE for Bayara was down 80%, 80?

Speaker #6: Yeah, for the quarter

Wajid Usman Khan: Yeah, for Q2 because of the fact that the tourism is not there and even if I don't know how many people have traveled to Dubai, the hotel occupancy used to be 10% or below for most of the time, and then after even the agreement signed, started creeping up to 20% and 40%. Now it's again, it still is pretty low.

Wajid Khan: Yeah, for Q2 because of the fact that the tourism is not there and even if I don't know how many people have traveled to Dubai, the hotel occupancy used to be 10% or below for most of the time, and then after even the agreement signed, started creeping up to 20% and 40%. Now it's again, it still is pretty low.

Speaker #4: two. Because of the fact that the tourism is not there and the even if I don't know how many people have traveled to Dubai, the hotel occupancy was used to be 10% or below for most of the time.

Speaker #4: And then, even after the agreement was signed, it started creeping up to 20% and 40%. Now, again, it's still pretty low. Have you seen—and I don't know if you have these numbers—but have you seen a bit of sequential improvement? Maybe April was, obviously, understandably, companies across the board have talked about how weak that was.

[Analyst] (Morgan Stanley): Have you seen, and I don't know if you have these numbers, but have you seen a bit of a sequential improvement? Maybe April was obviously understandably, companies across the board have talked about how weak that was. But since then, has it kind of sequentially improved from there?

Rashad Kawan: Have you seen, and I don't know if you have these numbers, but have you seen a bit of a sequential improvement? Maybe April was obviously understandably, companies across the board have talked about how weak that was. But since then, has it kind of sequentially improved from there?

Speaker #4: But since then, has it kind of sequentially improved from there?

Speaker #6: I think what we

Wajid Usman Khan: I think what we have seen is some sequential improvement in July. But since then, the attacks have started again or the conflict resumed. We are again seeing some dampening. I think things will go start-stop kind of situation for some time. The food service is linked to tourism and tourism linked to so many other things, I would say. This is a much broader subject of hospitality and when it will be resumed as compared to just us selling nuts to them. We are just looking at the situation from all the sides, but this is something, a reversible situation, hopefully.

Wajid Khan: I think what we have seen is some sequential improvement in July. But since then, the attacks have started again or the conflict resumed. We are again seeing some dampening. I think things will go start-stop kind of situation for some time. The food service is linked to tourism and tourism linked to so many other things, I would say. This is a much broader subject of hospitality and when it will be resumed as compared to just us selling nuts to them. We are just looking at the situation from all the sides, but this is something, a reversible situation, hopefully.

Speaker #4: What we have seen is some sequential improvement in July. But since then, the attacks have started again as the conflict resumed. So we are again seeing some dampening.

Speaker #4: So, I think things will go in a start-stop kind of situation for some time. And this food service is linked to tourism, and tourism is linked to so many other things, I would say.

Speaker #4: This is a much broader subject of hospitality and when it will be resumed, as compared to just us selling nuts to them. So we are just looking at the situation from all sides.

Speaker #4: But this is hopefully not an irreversible situation. Understood. I know we only have a couple of minutes, so I'll go to the last question in the chat box.

[Analyst] (Morgan Stanley): Understood. I know we only have a couple of minutes, so I will go to the last question on the chat box. Have we seen a change in sugar pricing cycle or white premiums after India banned exports? Remember you mentioning the prices were subdued from cheaper exports from India.

Rashad Kawan: Understood. I know we only have a couple of minutes, so I will go to the last question on the chat box. Have we seen a change in sugar pricing cycle or white premiums after India banned exports? Remember you mentioning the prices were subdued from cheaper exports from India.

Speaker #4: Have we seen a change in the sugar pricing cycle or white premiums after India banned exports? I remember you mentioning that prices were subdued due to cheaper exports from India.

Speaker #6: No, first of all, honestly, I don't recall that we discussed the Indian export ban, because they normally come in and go depending upon their own production and consumption in the country.

Wajid Usman Khan: First of all, honestly, I do not recall that we discussed Indian export ban because they normally come in and go depending upon their own production and consumption in the country. The last Indian export ban they put, I think, in May for four months until September. I think right now the prices have gone considerably up, maybe because of the El Niño effect and the production decline in Brazil because of the heavy rains and floods. Apart from the sugar to energy consumption more than sugar to human consumption phenomena, which is playing its role in sugar prices. As far as the white premium is considered, it has gone up for the later parts of 2026. It is going now in the range of around $140 or so as compared to what it was $80 to $110 in the past three quarters or so.

Wajid Khan: First of all, honestly, I do not recall that we discussed Indian export ban because they normally come in and go depending upon their own production and consumption in the country. The last Indian export ban they put, I think, in May for four months until September. I think right now the prices have gone considerably up, maybe because of the El Niño effect and the production decline in Brazil because of the heavy rains and floods. Apart from the sugar to energy consumption more than sugar to human consumption phenomena, which is playing its role in sugar prices. As far as the white premium is considered, it has gone up for the later parts of 2026. It is going now in the range of around $140 or so as compared to what it was $80 to $110 in the past three quarters or so.

Speaker #6: And the last Indian export ban, they put in, I think, May, for four months until September. I think right now the prices have gone considerably up, maybe because of the El Niño effect and the production decline in Brazil because of the heavy rains and floods.

Speaker #6: Apart from the sugar-to-energy consumption, which is more than sugar-to-human consumption, this phenomenon is playing its role in sugar prices. As far as the white premium is concerned, it has gone up for the later parts of 2026.

Speaker #6: It's going now in the range of around 140 dollar or so. As compared to what it was 80 to 110 in the past three quarters or so.

Speaker #6: So, it has widened because of all this emerging situation, I would say. It's anybody's guess how long it will be there. As far as our business is concerned, we just don't look at the white premium in all the channels and all the businesses.

Wajid Usman Khan: It has widened because of all this emerging situation, I would say. It is anybody's guess that how long will it be there. As far as our business is concerned, we just do not look at the white premium in all the channels and all the businesses. We have, as Mohammed mentioned earlier, our B2B contracts are normally cost plus with our customers. For B2C is something we normally keep it based on our own branding power, especially in the KSA and GCC. Rest of the exports are normally white premium based, mostly. There we normally have contracts, again, with some global customers, regional customers, whereby they normally go cost plus as well, or sometimes we go in open market for the extra productions we have, where we enjoy these kind of lower high white premium margin, plus minus physical premium as well, not only white premium.

Wajid Khan: It has widened because of all this emerging situation, I would say. It is anybody's guess that how long will it be there. As far as our business is concerned, we just do not look at the white premium in all the channels and all the businesses. We have, as Mohammed mentioned earlier, our B2B contracts are normally cost plus with our customers. For B2C is something we normally keep it based on our own branding power, especially in the KSA and GCC. Rest of the exports are normally white premium based, mostly. There we normally have contracts, again, with some global customers, regional customers, whereby they normally go cost plus as well, or sometimes we go in open market for the extra productions we have, where we enjoy these kind of lower high white premium margin, plus minus physical premium as well, not only white premium.

Speaker #6: We have as Mohammed mentioned earlier, our B2B contracts are normally cost plus, with our customers. For B2C, it's something we normally keep it based on our own branding power, especially in the KSA and GCC.

Speaker #6: And the rest of the exports are normally white premium base, mostly. And there we normally have contracts again with some global customers and regional customers, whereby they normally go cost plus as well, or sometimes we go into the open market for the extra productions we have. There, we enjoy these kinds of low or high white premium margins, plus or minus physical premium as well—not only white premium.

Speaker #6: So, this is what I can say about the current situation in sugar, and the outlook. It is difficult for me to say where it will go.

Wajid Usman Khan: This is what I can talk about the current situation of what is happening in sugar. The outlook is difficult for me to say where it will go. But our risk management policy, business practices, and commercial acumen all are geared up for dealing with all kind of eventualities, especially on the commodity prices and the way it is moving, because we are not trading per se. We are just doing back-to-back hedging. Make sure that our operations are sustainable and profitability is also sustainable. Thank you.

Wajid Khan: This is what I can talk about the current situation of what is happening in sugar. The outlook is difficult for me to say where it will go. But our risk management policy, business practices, and commercial acumen all are geared up for dealing with all kind of eventualities, especially on the commodity prices and the way it is moving, because we are not trading per se. We are just doing back-to-back hedging. Make sure that our operations are sustainable and profitability is also sustainable. Thank you.

Speaker #6: But our risk management policy, business practices, and commercial acumen all are geared up for dealing with all kinds of eventualities, especially regarding commodity pricing and the way it's moving, because we are not trading per se.

Speaker #6: We are just doing back-to-back hedging to make sure that our operations are sustainable and profitability is also sustainable. Thank you.

Speaker #4: Understood. Okay. I think that's a good place to wrap. Wajid, Mohammed, and Bilal, thank you very much for the time. I'll hand it back over to you for any quick closing remarks.

[Analyst] (Morgan Stanley): Understood. Okay, I think that's a good place to wrap. Wajid, Mohammed, and Bilal, thank you very much for the time. I will hand it back over to you for any quick closing remarks. Thank you everyone for attending on our side.

Rashad Kawan: Understood. Okay, I think that's a good place to wrap. Wajid, Mohammed, and Bilal, thank you very much for the time. I will hand it back over to you for any quick closing remarks. Thank you everyone for attending on our side.

Speaker #4: But thank you, everyone, for attending on our side.

Speaker #1: Thanks, Rashad. And also thanks for everyone that attended the call. Again, it's been a tough operating environment, but we continue to deliver. And I hope you stay with us on the long-term as we continue to realize different strategies that we've been employing the last years continue to deliver.

Mohammad Nasr: Thanks, Rashad, and also thanks for everyone that attended the call. Again, it has been a tough operating environment, but we continue to deliver. I hope you stay with us on the long term as we continue to realize different strategies that we have been employing the last years continue to deliver. We hope to see you in the next coming conferences. We will be on the road between Riyadh, UAE, London, and New York in the coming months, so we hope to see you all in some of these conferences. Again, please reach out to Rashad or us directly at ir@savola.com if you wish to discuss further. We are always happy to have one-on-one calls to support your understanding of Savola Group. Thank you all.

Speaker #1: And we hope to see you at the upcoming conferences. We will be on the road between Riyadh, UAE, London, and New York in the coming months.

Speaker #1: So we hope to see you all in some of these conferences. Again, please reach out to Rashad or us directly at ir@savola.com if you wish to discuss further.

Speaker #1: We're always happy to have one-on-one calls to support your understanding of Savola Group. Thank you all.

Speaker #4: Thank you very much.

[Analyst] (Morgan Stanley): Thank you very much.

Rashad Kawan: Thank you very much.

Operator: Goodbye

Operator: Goodbye.

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Q2 2026 Savola Group Company SJSC Earnings Call

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