Abu Dhabi National Oil for Distribution : ADNOC Distribution Q1 2024 MD&A – English – 9 May 2024

FirstQuarter2024

Results

Management Discussion & Analysis Report

9 May 2024

ADNOC Classification: Public

Key highlights: Strong Q1 2024 operating and financial performance across-the-board

Total fuel volumes - Q1 2024

3.69

billion liters

+17.3% Y-o-Y

Retail: +17.7%, driven by strong mobility trends and partially attributable to consolidation of TotalEnergies Marketing Egypt

Commercial: +16.3%, driven by economic expansion and partially attributable to consolidation of TotalEnergies Marketing Egypt

2.90

billion liters sold in the UAE and KSA

+9.3% Y-o-Y

Retail: +7.0% supported by higher mobility, sustained momentum in the region's economic growth, network expansion and higher contribution from KSA operations

Commercial: +13.7% on strong growth in corporate business, new contracts in the UAE and a recovery in aviation business

Revenue - Q1 2024

8,750	+9.4% Y-o-Y
AED million	supported by growth in fuel volumes, higher non-fuel retail segment contribution and consolidation of
TotalEnergies Marketing Egypt, partially offset by lower pump prices as a result of lower crude oil prices in
	Q1 2024 compared to Q1 2023
Gross profit - Q1 2024

1,481	+17.1% Y-o-Y
AED million	driven by strong operating performance and supported by inventory gains of AED 122 million in Q1 2024
compared to inventory losses of AED 13 million in Q1 2023

941	Fuel retail: +17.1% Y-o-Y
AED million	supported by higher retail fuel volumes and inventory gains of AED 118 million in Q1 2024 vs. zero
inventory gains in Q1 2023

200	Non-fuel retail: +16.2% Y-o-Y
AED million	supported by growth in non-fuel transactions, improved customer offerings following revitalization of
stores, marketing and promotion campaigns, and higher Food and Beverage (F&B) sales

339	Commercial: +17.8% Y-o-Y
AED million	driven by growth in corporate fuel volumes and inventory gains of AED 4 million in Q1 2024 vs. inventory
losses of AED 13 million in Q1 2023
EBITDA - Q1 2024
913	+17.6% Y-o-Y
AED million	supported by inventory gains in Q1 2024
Underlying EBITDA - Q1 2024
801	+7.0% Y-o-Y
AED million	driven by volume growth, higher contribution from non-fuel retail business and international activities
Net profit attributable to equity holders - Q1 2024
550	+2.3% Y-o-Y
AED million	despite AED 58 million UAE corporate income tax impact in Q1 2024
Net profit, excl. UAE corporate income tax impact - Q1 2024
607	+13.0% Y-o-Y
AED million	despite higher finance costs, supported by volume growth, higher contribution from non-fuel retail business
and international activities (KSA and Egypt) as well as inventory gains

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ADNOC Classification: Public

Cash generation and balance sheet - Q1 2024

581

AED million

Free cash flow

Free cash flow decreased by 44.5% Y-o-Y. Excluding the effect of working capital changes, free cash flow increased by 8.3% Y-o-Y

The Company maintained a strong financial position at the end of March 2024 with liquidity of AED 6.2 billion, in the form of AED 3.4 billion in cash and cash equivalents and AED 2.8 billion in unutilized credit facility

0.50x	Net debt to EBITDA ratio
	balance sheet remained strong with a Net debt to EBITDA ratio of 0.50x as of 31 March 2024
	(0.62x as of 31 December 2023)
Operational highlights - Q1 2024
8	New stations	846	Total stations network
	in the UAE, KSA and Egypt		532 in UAE

69 in KSA

245 in Egypt*

361	Convenience stores network
	in the UAE

45.3 Fuel transactions in the UAE

million	+6.6% Y-o-Y

89	EV fast and super-fast
	charging points in the UAE

c.70% growth compared to 53 charging points at the end of 2023

11.3	Non-fuel transactions in the
million	UAE
+6.9% Y-o-Y

24.5%	Convenience store conversion
	rate in the UAE

Compared to 24.4% in Q1 2023

*Acquisition of 50% of TotalEnergies Marketing Egypt completed in February 2023

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ADNOC Classification: Public

Sustained growth momentum in Q1 2024 following record-high EBITDA delivered in 2023

In Q1 2024, ADNOC Distribution demonstrated strong year-on-year growth in EBITDA of 17.6% to AED 913 million, while net profit was up 2.3% year-on-year to AED 550 million despite the UAE corporate tax impact. Net profit excluding the tax impact increased by 13.0% year-on-year. This financial performance was supported by a double-digit growth in fuel volumes, continued expansion of the retail fuel network, higher number of non-fuel transactions and a growing contribution from international operations (KSA and Egypt). Together with a robust balance sheet (net debt/EBITDA of 0.50x as of 31 March 2024) this provides support to future growth prospects in line with the new 2024-28 strategy recently approved by the Board of Directors and communicated to capital markets during the Investor Day in February 2024.

Fuel business (retail and commercial)

ADNOC Distribution's UAE and KSA retail and corporate fuel volumes increased in Q1 2024 by 9.3% year-on- year to 2.90 billion liters supported by region's continued economic growth and higher mobility. New stations in Dubai and network renovation in Saudi Arabia resulted in incremental retail fuel volumes. This, together with economic growth momentum and higher mobility, resulted in a 7.0% increase in retail fuel volumes in the UAE and KSA of 1.87 billion liters compared to Q1 2023. Including the operations in Egypt, ADNOC Distribution recorded a 17.3% year-on-year increase in the total fuel volumes to 3.69 billion liters, including 17.7% higher retail and 16.3% higher commercial fuel volumes.

Network expansion: In Q1 2024, ADNOC Distribution further expanded its retail fuel activities by adding eight new stations in the UAE, KSA and Egypt and is on track to open 15-20 new stations in 2024.

1. Domestically: ADNOC Distribution added four new stations in the UAE in Q1 2024 (one existing On the Go station in Abu Dhabi was closed during the period) to reach 532 stations in the home market, which compares to 507 stations at the end of Q1 2023.

1. In Dubai, the Company opened one new station in Q1 2024. As a result, ADNOC Distribution's service station network in the emirate expanded to 45 stations at the end of the period, up by 12.5% from 40 stations at the end of Q1 2023.

1. Internationally: ADNOC Distribution continued to execute on its plans in the Kingdom of Saudi Arabia, with two stations opened during Q1 2024 (one existing station was returned during the period), taking the total network in the country to 69 stations at the end of the period. The Company has revitalized and rebranded c.85% of its KSA stations as of the end of Q1 2024.

During Q1 2024, the Company's assets in Egypt added 2 new service stations to the portfolio and operated 245 service stations. In addition, the Egypt portfolio comprised aviation fuel, lubricant and wholesale fuel operations as well as 100+ convenience stores, 250+ lube changing points and 15+ car wash locations

1. Total network of ADNOC Distribution increased to 846 stations vs. 814 at the end of Q1 2023.

1. Network of fast and super-fast EV charging points increased to 89 vs. 53 at the end of 2023.

Commercial business: In Q1 2024, commercial segment fuel volumes in GCC increased by 13.7% compared to Q1 2023 to 1.03 billion liters driven by an increase of 13.9% year-on-year in corporate business volumes. This was a result of execution of new contracts signed in 2023 and Q1 2024, as the Company has been proactively focusing on gaining market share in Dubai and Northern Emirates.

Commercial segment fuel volumes in Egypt increased by 43.9% compared to Q1 2023 partially attributable to the timing of consolidation of TotalEnergies Marketing Egypt.

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ADNOC Classification: Public

The total number of export network countries in ADNOC Distribution's VOYAGER lubricants portfolio rose to 40 markets at the end of Q1 2024 compared to 28 markets at the end of the same period last year. The Company is exploring opportunities to penetrate new growing lubricant markets through collaboration with leading partners worldwide.

Additionally, in 2023 the Company launched ADNOC Voyager brand signature range of premium and OEM- approved automotive vehicle lubricants in Egypt through TotalEnergies Marketing Egypt. The products are available for the Egyptian consumers to purchase at ADNOC-branded service stations.

Non-fuel business - UAE

During Q1 2024, ADNOC Distribution in line with the non-fuel retail strategy implemented a series of marketing campaigns and customer-centric initiatives. The Company continued to enhance customer experience through various initiatives, such as offering a modern shopping environment, improvement in category management, a better assortment of products, including introduction of fresh food and premium coffee products, and digital channels to order and transact.

As a core part of its growth strategy, ADNOC Distribution is leveraging advanced technologies, such as Artificial Intelligence, to enhance customer experiences. AI-driven initiatives such as Fill and Go, which uses computer vision-enabled license plate recognition for a seamless refuelling process, are differentiating ADNOC Distribution's offering while positioning the Company as a leader in innovation within the industry.

In addition, the Company executed on its convenience store revitalization program and since the launch of the program modernized c.210 ADNOC Oasis stores, offering fresh food, barista-brewed coffee and a wider menu selection. As a result, today 90% of stores are new or refurbished, offering new look and feel and improved category management.

The Company continued to develop its non-fuel offerings in Q1 2024, opening two new high-capacity car wash tunnels, which have significantly greater capacity than conventional facilities, with plans to open eight additional car wash tunnels and upgrade 50% of existing automatic car washes over the course of 2024.

In its property management business, the Company aims to double the number of property units occupied by top international and regional food & beverage brands across its network by the end of 2025.

ADNOC Distribution increased the number of its vehicle inspection services in the UAE to 34 centres following an addition of 1 new centre between end of Q1 2023 and end of Q1 2024. The number of vehicles inspected (fresh tests) in the Company's vehicle inspection centres increased by 23.6% in Q1 2024 year-on-year, driven by an increase of the number of vehicle inspection centres, introduction of new services and supported by marketing and promotions.

ADNOC Rewards loyalty program and customer focus

ADNOC Distribution is committed to putting customers at the heart of what it does to help accelerate the mobility revolution and redefine the experience at service stations; thereby, cementing the Company's position as a destination of choice for its customers.

ADNOC Rewards loyalty program welcomed nearly 340,000 new members over the past 12 months, including more than 80,000 new members in Q1 2024. The total enrolled members in the program reached 2 million at the end of Q1, a 21% year-on-year increase, with over 120 partners providing deals and discounts through the ADNOC Distribution app. The growth was supported last year by an improvement in generosity of 3X. New system of ADNOC Rewards tiers was introduced in 2023: SILVER, GOLD, and PLATINUM - each delivering an expanded suite of exciting benefits and offers to customers.

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ADNOC Classification: Public

As part of the loyalty programme, the Company offers its customers promotions in-store, and a range of initiatives that include linking ADNOC Rewards across service station purchases and allowing customers to earn and redeem points against valuable offerings - in fuel, lube change services, convenience store, and car washes. All this contributed to growth in the non-fuel business.

OPEX

ADNOC Distribution cash OPEX increased in Q1 2024 by 14.8% year-on-year to AED 595 million which is partially explained by a one-off cost of AED 11 million vs. a one-off gain of AED 40 million in Q1 2023. Excluding the impact of the one-off items, the cash OPEX increased by 4.5% year-on-year to AED 584 million, while the Company's operations and associated costs expanded. In particular, number of stations in the UAE and KSA increased by 4.7% at the end of Q1 2024 compared to the same period of last year. In addition, ADNOC Distribution recorded additional costs associated with the assets in Egypt due to the timing of consolidation of TotalEnergies Marketing Egypt.

Efficient capital allocation

In line with the plans to continue with its expansion strategy, ADNOC Distribution invested (including accruals/provisions) AED 169 million in Q1 2024, of which nearly 60% spent on growth. Our target remains to spend AED 0.9-1.1 billion ($ 250-300 million) on CAPEX in 2024.

ADNOC Distribution has demonstrated a proven track-record of value creation since IPO, by pursuing new opportunities in domestic and international markets and allocating cash towards growth. Through efficient capital allocation, the Company has consistently achieved healthy rates of return, including Return on Capital Employed (ROCE) of 29.5% in Q1 2024 (28.3 % in Q1 2023) and Return on Equity (ROE) of 96.8 % in Q1 2024 (97.0 % in Q1 2023).

In Q1 2024, ADNOC Distribution generated free cash flow of AED 581 million, a reduction of 44.5% year-on- year. Excluding the effect of working capital changes, in Q1 2024 free cash flow increased by 8.3% vs. Q1 2023.

At the end of March 2024, the Company maintained a strong financial position with liquidity of AED 6.2 billion in the form of AED 3.4 billion in cash and cash equivalents and AED 2.8 billion in unutilized credit facility. The balance sheet remained strong with a net debt to EBITDA ratio of 0.50x as of 31 March 2024 (0.62x as of 31 December 2023).

Eng. Bader Al Lamki - Chief Executive Officer:

"Our robust first-quarter results with an 18% EBITDA growth are a testament to the Company's five-year strategy announced earlier this year. It prioritizes domestic growth, international platforms and future-proofing the business. We are well positioned to achieve our operational objectives for 2028, aiming to expand the ADNOC Distribution network to 1,000 stations, increase the number of fast and super-fast EV charging points to at least 500, grow our non-fuel transactions by 50% and increase the number of convenience stores by 25%.

The integration of AI, a cornerstone of our strategy, continues to yield tangible results across our operations. For instance, thanks to our innovative Fuel Demand AI Model, we harness predictive demand analytics to optimize fuel delivery across our network. The model is projected to prevent potential lost sales totalling AED 100 million in a five-year period."

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ADNOC Classification: Public

Positive outlook for 2024 and beyond

With the strong EBITDA growth and attractive shareholder payback, ADNOC Distribution continues to represent a compelling investment case. After delivering on a critical commitment to Capital Markets of generating in 2023 in excess AED 3.68 billion ($1 billion) EBITDA, the Company expects solid outlook for full year 2024 and beyond, underpinned by the volume growth momentum, higher contribution of non-fuel retail and growth in international operations.

In its quest to futureproof the business, the Company is rapidly developing fast and superfast EV charging infrastructure across its UAE network. In addition, ADNOC Distribution is exploring further growth opportunities in mobility and lifestyle as well as new revenue streams created through energy transition. The Company continues to target value-accretive domestic and international expansion opportunities, including new markets to generate additional value for its shareholders.

ADNOC Distribution's growth ambitions are underpinned by a solid macroeconomic backdrop. Our main market Abu Dhabi GDP grew by 3.1% in 2023 year-on-year. This was driven by a 9.1% expansion in the non-oil sector, supported by private consumption that was boosted by population growth and tourism rebound. Notably, the strong performance of the Abu Dhabi non-oil GDP continued through the end of 2023, with Q4 2023 recording non-oil growth of 10.4% year-on-year and leading to a headline GDP growth of 4.1% year-on-year. The key divers of economic growth in Abu Dhabi in 2023 were construction sector (+13.1% year-on-year), transportation and storage (+17.1% year-on-year), and financial and insurance sector (+25.5% year-on-year).

The UAE Central Bank estimates the country's GDP growth for 2023 at 3.1% and forecasts economic expansion of 4.2% in 2024 and 5.2% in 2025, driven by non-oil growth of 4.7% in both years. According to IMF, a near- term outlook is positive for the UAE but subject to elevated global risks and uncertainty. The agency estimates that the country's real GDP increased by 3.4% in 2023 and will grow by 3.5% in 2024, which is one the highest rates among the GCC economies, accelerating to 4.2% in 2025.

Beyond the strong macroeconomic indicators, the UAE business activity expansion has translated into higher traffic and improved consumer confidence across the country resulting in higher fuel volumes and number of non-fuel transactions for ADNOC Distribution in Q1 2024. Leveraging on its leadership position in the UAE, customer focus and best-in-class mobility and lifestyle experience, the Company has grown its fuel volumes at a faster rate than the country's GDP growth, increasing Q1 2024 retail volumes in the GCC markets by 7.0% and commercial volumes by 13.7% year-on-year.

ADNOC Distribution successfully delivered on a set of critical commitments to the capital markets in 2023. Building on the strong execution and 2023 momentum, during Investor Day in February 2024 ADNOC Distribution unveiled key strategic initiatives and focus areas.

The Company is ready for the new phase of growth which will see ADNOC Distribution transforming from a fuel distributor into a multi-energy, convenience and mobility leader. The Company is scaling up its portfolio of low- carbon energy solutions including biofuels, EV and hydrogen to support de-carbonization of the transport industry and expanding its non-fuel retail offerings. ADNOC Distribution is prioritizing innovation and enhancing customer experience in line with its strategic objectives. The focus on seamless customer journeys through digital and hyper-personalization will drive improved brand engagement and increased footfall.

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ADNOC Classification: Public

The Company aims to deliver EBITDA growth in the next five years through identified key strategic initiatives and focus areas, including: growing the number of non-fuel transactions by 50% in the next 5 years, increasing the number of fast and super-fast charging points by 10-15X by 2028, reducing like-for-like OPEX by up to AED 184 million ($50 million), and growing the network of service stations to ~1,000 by 2028.

Fuel business

New stations: after exceeding the 2023 target of opening 25-35 stations by adding 41 new stations, the Company expects to add 15-20 new stations across its network in 2024.

Saudi Arabia: with a fully operational team on the ground, the Company is nearing completion of revitalization and rebranding programme for its network in the Kingdom.

Egypt: ADNOC Distribution's acquisition of a 50% stake in TotalEnergies Marketing Egypt reaffirms the Company's commitment to expanding business in attractive international growth markets. Egypt's retail fuel, lubricants and aviation markets are highly attractive with a potential for future growth. Nine service stations were re-branded to ADNOC in Cairo during 2023 and Q1 2024, and further openings are targeted during 2024.

Renewal of the Refined Products Supply Agreement: at the beginning of 2023, ADNOC Distribution successfully renewed its supply agreement with ADNOC for a new five-yearterm, reaffirming the Company's strong value proposition driven by predictable margins and highly cash generative core business. The renewal also demonstrated strong and ongoing support from the majority shareholder, ADNOC.

Non-fuel business

ADNOC Distribution focuses on extracting additional growth and value by sweating the assets, providing enhanced customer experience and shifting capital towards mobility and lifestyle. By offering a modern environment and a better assortment of products to customers, including fresh food and premium coffee, bundle offers and digital channels to order and transact, the Company is transforming its stations into a "Destination of choice".

ADNOC Distribution invests in offering customers a modern and engaging retail experience. The convenience store revitalization program has ensured that the Company is positioned to capitalize on benefits of its customer- centric initiatives and generates consistent growth in its convenience stores business.

In line with its new growth strategy ADNOC Distribution is allocating capital towards convenience and mobility to transform its stations into destinations-of-choice. The Company continued to develop its non-fuel offerings in Q1 2024, opening two new high-capacity car wash tunnels, which have significantly greater capacity than conventional facilities, with plans to open eight additional car wash tunnels and upgrade 50% of existing automatic car washes over the course of 2024.

In its property management business, The Company aims to double the number of property units occupied by top international and regional food & beverage brands across its network by the end of 2025.

Operating and investment efficiency

ADNOC Distribution aims to become one of the leading cost-efficient fuel retailers and remains on track to reduce structural costs, make its operations leaner and more efficient. The key drivers for OPEX savings include optimization, with the more efficient deployment of staffing levels for stations and convenience stores, energy efficiency through smart technology, outsourcing of logistics, centralization of key functions, etc.

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ADNOC Classification: Public

AI & futureproofing of business

I/ Technology

As a core part of its growth strategy, ADNOC Distribution is leveraging advanced technologies, such as Artificial Intelligence, to enhance customer experience. AI-driven initiatives such as Fill and Go - which uses computer vision-enabled license plate recognition for a seamless refuelling process - are differentiating ADNOC Distribution's offering while positioning the Company as a leader in innovation within the industry.

Using innovative Fuel Demand AI Model, we employ predictive demand analytics to optimize fuel delivery across our network. The model offers fuel forecast accuracy exceeding 95%, far surpassing conventional methods averaging 60%, resulting in reduced total fuel inventory runout, and is expected to prevent potential lost sales totalling AED 100 million in a five-year period.

Additionally, with the improved fuel demand forecast accuracy the Company's supply chain fleet reduced total fuel truck emissions by 10% through improved delivery timing efficiencies, supporting the ADNOC Distribution's objective of reducing carbon emissions by 25% by 2030.

II/ Rollout of Electric Vehicles (EV) charging points

ADNOC Distribution is committed to futureproofing its business through a disciplined rollout of profitable fast and super-fast EV charging points. The chargers are installed across the Company's service stations and dedicated mobility hubs at strategic locations in the UAE to address current EV customer demand and offer enhanced customer value proposition.

In Q1 2024, ADNOC Distribution accelerated the rollout of chargers with 89 fast and super-fast EV charging points at the end of the period, an increase of nearly 70% compared to 53 at the end of Q4 2023. This expansion included the establishment of a dedicated Mobility Hub in Masdar City. ADNOC Distribution plans to more than double its total network of EV charging points to around 150-200 by the end of 2024.

Sustainability

I/ Decarbonization roadmap

ADNOC Distribution plans to expand its sustainability-driven efforts to futureproof its business. In January 2023, the Company unveiled its Decarbonization roadmap, committing to a reduction of carbon intensity of its operations by 25% by 2030. The Decarbonization roadmap covers Scope 1 emissions which come directly from the Company's operations, and Scope 2 carbon emissions which come from the energy ADNOC Distribution uses to run its operations.

The Company aims to cut emissions through a set of identified initiatives that will be implemented in 2024 and beyond, such as installing solar panels at service stations, use of biofuels to power its fleet of vehicles and other energy optimization initiatives. ADNOC Distribution also aims to utilize 'green concrete', that is eco-friendly and has a smaller carbon footprint than traditional concrete, in the construction of new service stations.

ADNOC Distribution started installation of solar panels across its service stations network in Dubai, as part of the Company's phased approach to UAE-wide solar rollout to provide the power needed for daily operations, and already installed them at 26 stations in 2023.

Additionally, 100% of the Company's UAE heavy fleet is now using biofuel.

In 2023, ADNOC Distribution started operation of the region's first high-speed green hydrogen pilot refuelling station opened by ADNOC, to test a fleet of zero-emissionhydrogen-powered vehicles. The station creates green hydrogen from water using an electrolyser powered by clean grid electricity and will be certified as "green" from solar sources by the International REC Standard, an internationally recognized certification organization. The pilot will be used to gather data to understand the long-term viability of hydrogen vehicles in the UAE.

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ADNOC Classification: Public

II/ Sustainability Linked Loan

ADNOC Distribution became the first UAE fuel and convenience retailer to tap into sustainable financing, by converting in January 2023 an existing AED 5.5 billion ($ 1.5 billion) term loan into a Sustainability Linked Loan. The Company committed to a penalty/incentive model which ties the loan to the sustainability-linked indicators, including GHG emissions intensity and share of renewable energy contribution. By arranging the Sustainability Linked Loan, ADNOC Distribution has aligned its funding strategy with the sustainability roadmap.

Dividend policy

ADNOC Distribution is committed to delivering sustainable, profitable growth and attractive shareholder returns. In recognition of the Company's strong financial position and confidence in the future cash flow generation, in March 2024 the shareholders approved a new dividend policy that provides long-term payback visibility and dividend upside from future earnings growth. This dividend policy represents a balance between growth investments and sustainable shareholder payback.

For 2024-28, the policy sets a dividend of AED 2.57 billion (20.57 fils per share) or minimum 75% of net profit, whichever is higher (compared to a minimum 75% of distributable profits as per the previous policy). At AED

2.57 billion, 2024 dividend yields 5.9% (at a share price of AED 3.49 as of 8 May 2024), subject to the discretion of the Company's Board of Directors and to the shareholders' approval.

In accordance with the dividend policy, ADNOC Distribution expects to continue to pay half of the annual dividend in October of the relevant year and the second half to be paid in April of the following year.

In March 2024, the shareholders approved the dividend of AED 1.285 billion for the second six-months period of 2023, which was paid in April 2024. Furthermore, H1 2024 dividend is expected to be paid in October 2024, subject to the discretion of the Company's Board of Directors and to the shareholders' approval.

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