Gulf Cable and Electrical Industries KPSC : Transcript of the Analysts Conference

Gulf Cable & Electrical Industries Co. (K.S.C.P)

Transcript of the Analysts Conference for Financial Year 2021

Speakers from Gulf Cable Executive Management:

• • Mr. Basel Omran Kanaan - CEO

• • Mr. Ahmad Tayem - Executive Director of Finance

• • Mr. Yannis Thalassinos - Investor Relations Manager

• • Mr. Mahmoud El Mahmoud - Deputy Investment Manager

Transcript

Mr. Mahmoud El Mahmoud: Good afternoon Everyone. Thank you for joining us today. This is Mahmoud El Mahmoud, Deputy Investment Manager at Gulf Cable & Electrical Industries. I am delighted to welcome you to our 2021 financial results call.

I have with me here today, Mr. Basel Kanaan Gulf Cable's Chief Executive Officer, Mr. Ahmad Tayem Gulf Cable's Executive Director of Finance and Mr. Yiannis Thalassinos, Gulf Cable's Investor Relations Manager. Without further delay, I will now turn over the call to Yiannis.

Mr Yiannis: Thank you Mahmoud and welcome to all who have joined us on this call. Before we begin, I would like to bring to your attention that certain comments in this presentation may constitute forward-looking statements.

These comments reflect the organization's expectations and are subject to risks and uncertainties that may cause actual results to differ materially and may adversely affect the outcome and financial effects of the plans described herein.

You are cautioned not to rely on such forward-looking statements. Gulf Cable does not assume any obligation to update its view of such risks and uncertainties or to publicly announce the result of any revisions to the forward-looking statements made herein.

Also, I would like to draw your attention to our full disclaimer in the presentation for today's call. By participating in this presentation or by accepting any copy of the slides presented, you agree to be bound by the foregoing limitations.

We will answer your questions after the management's presentation and in the order that they are received. Additionally, you can send any follow-up questions to our Investor Relations email address. I'll now turn the microphone over to the Chief Executive Officer, Mr. Basel Kannan.

Mr Basel Kanaan: Thank you Yiannis. The Group accomplished remarkable triumphs in an exceptional year as it continues to be committed to excellence.

The continued uncertainties and barriers presented by the COVID-19 pandemic were the biggest concern for the entire world in 2021. Despite the challenges, the group continued to seamlessly operate its manufacturing facilities to meet our customers' supply commitments. Our management also took proactive measures to ensure that the global supply chain challenges did not affect our operations as we continued to deliver on our commitments. During the year, we continued with our aim of disciplined acquisitions and diversified investments and forged new business relationships for product enhancement as we take crucial steps for future proofing our organization.

Mr. Ahmed Tayem will now take you through Gulf Cable's performance for the year.

Mr. Ahmad Tayem: Good afternoon ladies and gentlemen. With great happiness and pride I am here to talk about our performance in the year 2021. The Group's overall revenue for 2021 was KD 81.3 million, up 2.6 percent from KD 79.3 million in 2020.

The Group's overall revenue is made up of three components: cable sales of KD65.5 million, investment revenue of KD12.8 million, and rendering services of KD 3.0 million.

When we look into cable sales, Gulf Cable - Kuwait reported KD 50.3 million of cable sales, while our subsidiary company in Jordan reported KD 15.2 million.

Our investment revenue shows a significant growth to KD 12.8 million in 2021 from KD 3.1 million in 2020, mainly due to a gain of KD 10.8 million on a bargain acquisition of an associate company made during the year, as well as an increase in the share of associates' profits. Also, we recognised KD 3.0 million in rendering services revenue, as a result of the acquisition of "Al Reaya Company for Buildings and Cities Cleaning Contracting,"

Gulf Cable's earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 144 percent in 2021, reaching KD 19.4 million, up from KD 7.9 million in 2020.

The company's net profit increased by 188 percent to KD 16.1 million in 2021 with earnings per share of 77 fils, compared to 5.6 million KD in 2020 with earnings per share of 27 fils.

Moving on to slide 6 you will notice that total sales & contracting revenue for the Group decreased from KD 76.2 million in 2020 to KD 68.5 million in 2021, a drop of 10.1 percent year on year. Gulf Cable-Jordan saw an increase in its contribution from 18 percent in 2020 to 22 percent in 2021.

As we can see on slide 7, the largest contributor to Gulf Cable Kuwait's cable sales has been the local private sector with sales of KD 34.5 million in 2021. Meanwhile, public sector contribution in the same period was KD 12.6 million in 2021 as opposed to KD 21.3 million in 2020.

The shift in dynamics is mainly due to a decrease in medium voltage cables sales during 2020 compared to 2021. Meanwhile, export sector showed a 28.0 percent growth as movement within the GCC markets was eased.

On slide 8 we can see the production breakdown by material and sales weight. The sales of medium voltage cables decreased by 67.8 percent in 2021 as a result of significant decrease in sales to the governmental sector.

The repercussions of the rise in metal prices led to a drop in the quantities of cables production by 38.7 percent and total cables' sales by 40.8 percent. In 2021, the Group produced 33,566 metric tons and sold 33,767 metric tons of cables, compared to 54,784 metric tons produced and 57,059 metric tons sold in 2020.

Moving on to some key ratios on slide 9, Gulf Cable's gross profit margin increased from 11.5 percent in 2020 to 19.8 percent in 2021. The increase was partly due to reduced cost of sales and also as a result of government tenders awarded with relatively high profit margins due to preferential advantage for national products.

Group's debt increased by KD 68.5 million and was used for funding new acquisitions. The ratio of debt to total assets increased by 21 percent in 2021 on account of new borrowings. Also, for the groups ROE (inclusive of investment income), an increase of 4.7 percent was achieved in 2021 as opposed to 2020.

As we can see on slide 10, from a financial position perspective, Gulf Cable's total assets grew by KD 113.6 million since 2020 to reach KD 316.4 million in 2021 as the group entered into new business alliances and completed two large