Mezzan K S C P : Transcript of the Analysts Conference

Date: 19/05/2022

Ref.: MHC/Disclosure/2022 /043

Boursa Kuwait Company

Mubarak Al Kabeer St.

AlSharq, Kuwait

P.O. Box 22235 Safat, 13083 Kuwait

Subject: Minutes of the Analyst / Investor Conference Call for Q1-2022

Reference to the subject line and in compliance with "Continued Obligation of the Premier Market Companies" as per Resolution No. (1) for the year 2018, Article (8-4-2). Mezzan Holding Company KSCP is pleased to announce that it held the Analyst / Investor Conference Call for the Results of the first quarter of the year 2022 which was held through Live Webcast session on Tuesday, 17th May 2022 at 02:00 pm Kuwait Time.

Enclosed are the minutes of the Conference of the Investors earning call.

Mezzan Holding Company KSCP

Group Legal Manager

Walid Khalil

Transcript of Mezzan

Holding Earnings Call

For Q1 2022

Date Held

17 May 2022

1

Transcript of Earnings Call/Webcast for Q1 2022

Mezzan Holding Company KSCP.

Date: May 17, 2022

Time: 14.00 Kuwait Time

Speakers from Mezzan Holding Co. Executive Management:

Mr. Garrett Walsh - Group CEO

Mr. Nabil Ben Ayed - Group CFO

Moderator:

Fawaz Alsirri - Bensirri Public Relations

Fawaz Alsirri:

Hello and Good afternoon ladies and gentlemen. This call is hosted by Mezzan Holding and is held to discuss the company's 2022 first quarter earnings, which were announced yesterday morning.

Today is, May 17, 2022 and this call is held live from Kuwait and Qatar. A recording of this call will also be available on the same link within two hours.

My name is Fawaz Alsirri. I am the moderator on the call today, and allow me to introduce our speakers for the call. With us:

• Mr. Garry Walsh, the company's CEO, who is joining us today from Mezzan offices in Qatar
• Mr. Nabil Ben Ayed, the company's Group CFO, joining us from Mezzan offices in Kuwait.

Ladies and gentlemen, I will be handing over the mic to Garry in a few seconds to start the call right after I take you through our usual call format.

As you know, first, the CEO and the CFO will each deliver their statement for the next 10 minutes or so, then we will open the floor to the Q&A.

Now, to participate in the Q&A session, just type in your question on your screen at any time during the presentation, and we will get to it during the session. You can do that starting from now.

Also, some of the statements that might be made today may be forward looking. Such statements are based on the company's current expectations, predictions and estimates. There are no guarantees of future performance, achievements or results.

We will be starting the call now.

Mr. Walsh, the mic is yours. Garry you might have us on mute.

Garry Walsh:

Apologies, Fawaz. Sorry and Thank you. Good morning everyone.

We will take you through a short presentation reviewing both the tailwinds we enjoyed and headwinds we faced during Q1 2022.

Transcript of Earnings Call - Q1 2022

2

I will then discuss financial highlights, after which I will hand over to Nabil, who will take you through the details of the financial performance for Q1 2022.

It does go without saying, that in the current global context, this is difficult time for everyone and the uncertainty we experienced in Q1 is likely to continue.

Lastly as Fawaz said, we will be happy to receive your questions and answer as much as possible today. If we are unable to cover all your questions, please feel free to send your questions to our Investor Relations team at [e-mail] we will get back to you very quickly.

From a tailwinds perspective:

• Price increase implemented in KSA: We stepped up pricing in a responsible manner in KSA and we will continue to observe and analyze the situation, as further pricing and mitigating actions over the course of the year is necessary.
• We are continuing to progress very strongly in the KSA and UAE markets, our revenues sharply rose by 36% and 21.7% respectively, and:
• I am pleased to report that our KITCO salty snacks launch in Jordan is very much on track.

From headwinds perspective:

• Cost inflation continues to rise sharply: The war in Ukraine has caused severe challenges and setbacks in global and regional economic prospects, which were already strained by Covid-related supply chain issues.
• Kuwait prices remained unchanged due to regulatory restraint: Price adjustments is a key theme for the first half of the year, and we are in line with price adjustments in all markets, except in Kuwait, our biggest market, where our pricing remained unchanged due to the extension of Covid-related regulatory pricing caps. We hope these caps to be eased soon, which will positively impact our profitability in the future.
• Credit collection and payment issues in Qatar, which forced us to book an unexpected credit losses in Q1 2022. We anticipate this situation to reverse from Q3 onwards, given an arrangements that we have put in place.
• The maintenance in our KSPICO factory: We went through a series of upgrades which have entailed rolling shutdowns, in order to meet in order to meet the required standards regional GFD authorities, which we expect to complete in Q2 2022. It is anticipated that in the full year results we will closely mirror 2021.

In terms of our financial highlights and headline numbers for Q1 2022:

• Our revenue reached KWD 72.5 million down slightly from an already solid Q1 2021 revenue of KWD 73.4 million, for a slight decline of 1.2%.
• Gross Profit reached KWD 14.6 million compared to KWD 16.2 million in the comparable period, for a decrease of 10.1%. Gross Profit Margin decreased by 200 basis points to reach 20.1%.
• While EBITDA, reached KWD 6.2 million, down from KWD 8.7 million in the comparable period, for decrease of 28.3%.
• The group achieved net profit of KWD 3.1 compared to KWD 5.6 million in Q1 2021, a decrease of 44.9%.
• Finally, Mezzan's net profit to shareholders of the parent company reached KWD 2.9 million for Q1 2022, compared to KWD 5 million in Q1 2021, for a decrease of 40.7%.

Transcript of Earnings Call - Q1 2022

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At this point I will hand over to Nabil to take you through the financials in more details discussing the performance of the first quarter ended 31 March 2022.

Nabil Ben Ayed:

Thank you Garry and Fawaz. And thank you everyone for attending the call. I will walk you through the financial results as of 31 March 2022:

As for revenue contribution by business line at Mezzan Group:

• In Q1 2022, the food group accounted for 63.2% of total group revenue, for an increase of 2.7% compared to Q1 2021; while the revenue of non-food group accounted for the balance of 36.8% of total group revenue, for a decline of 7.3%.
• In Q1 2022, Revenue of Food Manufacturing and Distribution increased by 7.2% contributing to 49.9% of Group revenue.
• Revenue of Food Catering decreased by 7.6% contributing to 9.4% of Group revenue.
• Revenue of Food Services decreased by 18.3% contributing to 4% of Group revenue.
• Revenue of FMCG and Healthcare decreased by 8% contributing to 34.8% of Group revenue.
• Revenue of Industrial segment increased by 5.6% contributing to 2% of Group revenue.

We now move on to discuss operations per geography for Q1 2022:

• Operations in Kuwait contributed to 75.2% of Mezzan's revenue, down by 4.8%.
• Revenue from our operations in the United Arab Emirates contributed to 12.3% of Mezzan's revenue, increased by 21.7% compared to Q1 2021 due to the improvement in our distribution business and launch of new products.
• Revenue in Qatar increased by 4.1%, and contributes to 6.3% of Mezzan's revenue.
• Saudi Arabia accounted for 2.7% of Mezzan's revenue for an increase of 36% on the back of introduction of new brands in the Saudi market.
• In Jordan, sales increased by 11% as we continue to improve our distribution coverage, product portfolio and KITCO successful launch. Jordan revenue contributed to 2.7% of Mezzan's revenue.
• While our operations in Iraq accounted for only 0.7% of Mezzan's revenue with an increase of 2.4%.

Moving to the Profit and Loss:

In the 3 months period, ended 31 March 2022, Mezzan Group recorded:

• Revenue of KWD 72.5 million, for a decrease of 1.2% compared Q1 2021.
• Gross profit reached KWD 14.6 million, compared to KWD 16.2 million in Q1 2021, and Gross Profit Margin reached 20.1%, compared to 22.1% in Q1 2021.
• EBITDA reached KWD 6.2 million, down from KWD 8.7 million in Q1 2021, for a decrease of 28.3%.
• SG&A and other expenses increased to KWD 10.7 million, compared to KWD 9.8 million in Q1 2021, for an increase of 9.4%.
• In summary, Net profit had reached KWD 3.1 million in Q1 2022, lower by 44.9% from the same period in 2021.
• Net profit attributable to equity holders of the parent company reached KWD 2.9 million, compared to KWD 5 million in Q1 2021 for a decrease of 40.7%.

Transcript of Earnings Call - Q1 2022