Mezzan K S C P : Transcript of the Analysts Conference

Transcript of Mezzan Holding

Earnings Call

For Q1 2023

Date Held

8 May 2023

Transcript of Earnings Call/Webcast for Q1 2023

Mezzan Holding Company KSCP.

Date: May 8, 2023

Time: 14.30 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:

Good afternoon ladies and gentlemen. This call is held to discuss the Mezzan's Q1 earnings, which were announced earlier today, May 8th.

This call is held live from Kuwait and Dubai. And 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. We have with us:

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

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.

First, the CEO and then the CFO will each deliver their statement over the next10 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. You can do that starting from now.

I would like to mention that today's call is held in two locations, and it might take us a bit longer to address your questions.

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.

And, Mr. Walsh, the mic is yours.

Garry Walsh:

Good afternoon, everyone. Thank you Fawaz.

As Fawaz said, we will take you through a short presentation reviewing both the tailwinds we enjoyed and headwinds we faced during the three-month period ended 31 March 2023.

Transcript of Earnings Call - Q1 2023

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.

Lastly as Fawaz said, we will be happy to receive all 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 as soon as humanly possible.

So in terms of our tailwinds:

• Firstly, we had a much more effective credit collection and management of receivables. Those of you who followed us last year, have seen that we struggled in that area. I am pleased to say that Q1 showed an improvement as did Q4.
• We managed to get new products allowing Mezzan to capitalize on market opportunities and focus on categories where we have been able to position it at the higher end of the market, which has really helped our gross margin as we will come to later on.
• KITCO in Jordan continues to improve its performance and gain a more substantial presence in the market. Again, Nabil will take you through that shortly.

From headwinds perspective:

• We continue to be challenged by inflation. Whilst, there's some easing up in the logistics cost. Overall, inflation is still an issue.
• And as you all are aware that Kuwait has still got an embargo in place against any price increase. This continues to cause us difficulties which we are encountering by managing our cost very seriously. That's the price caps.
• Finally, Staff turnover. As we focus on managing our cost. Obviously, one of our key cost is staff and we will see people leaving as they are able to obtain higher salaries in other areas.

So, where did we finish up?

• From a revenue perspective in Q1 2023, we finished at KD 79 million, compared to KD 72.5 million in the corresponding period of 2022, for a growth of 8.9%.
• Gross profit reached KD 16.5 million compared to KD 14.6 in the corresponding period of 2022.
• Gross profit margin reached 20.9% compared to 20.1% in the previous comparable period.
• EBITDA reached KD 8.3 million, up from KD 6.2 million in the previous comparable period of 2022, for an increase of 33.8%.
• SG&A, reached to KD 10.3 million compared to KD 10.7 million in the previous comparable period, for an increase of 3.3%.
• In summary, Mezzan recorded a profit of KD 4.6 million, versus a year ago of KD 3.1 million, an improvement of 49.9%.
• Finally, Mezzan's net profit to shareholders of the parent company reached KWD 4.3 million for Q1 2023, compared to KWD 2.9 million in Q1 2022, for an increase of 45.1%.

Transcript of Earnings Call - Q1 2023

And now, I will hand over to Nabil to take you through the details.

Nabil Ben Ayed:

Thank you Garry and Fawaz. And thank you everyone for attending the call. Let me walk you through the financial results as of 31 March 2023:

As for revenue contribution by business line at Mezzan Group:

• In the three-months period ended 31 March 2023, the food group accounted for 62% of total group revenue, for an increase of 7% year-on-year; while the revenue of non-food group accounted for the balance of 38% of total group revenue, for an increase of 12.2% year-on-year.
• Within food group, revenue of Food Manufacturing and Distribution increased by 11.2% contributing to 51% of Group revenue.
• Revenue of Food Catering decreased by 19.1% contributing to 7% of Group revenue.
• Revenue of Food Services grew by 15.2% contributing to 4% of Group revenue.
• In our non-food group, revenue of FMCG and Healthcare increased by 11.4% contributing to 35% of Group revenue.
• Revenue of Industrial segment grew by 25.2% contributing to 2% of Group revenue.

We now move on to discuss operations per geography for the three-month period of 2023:

• Operations in Kuwait contributed to 75.4% of Mezzan's revenue, up by 9.4%.
• Revenue from our operations in the United Arab Emirates contributed to 11% of Mezzan's revenue, for a slight decline of 0.5%.
• Revenue in Qatar grew by 16.3%, and contributes to 6.8% of Mezzan's revenue.
• Saudi Arabia accounted for 2.6% of Mezzan's revenue for an increase of 3.7%.
• In Jordan, sales increased by 25.1%. Jordan's revenue contributed to 3% of the group's revenue.
• While our operations in Iraq accounted for only 0.7% of Mezzan's revenue with an increase of 19% year-on-year.

Moving to the Profit and Loss:

In the three-month period, ended 31 March 2023, Mezzan Group recorded:

• Revenue of KWD 79 million, compared to KWD 72.5 million in the corresponding period of 2022, for a growth of 8.9%.
• Gross profit reached KWD 16.5 million, compared to KWD 14.6 million in the corresponding period of 2022, and Gross Profit Margin reached 20.9%, compared to 20.1% in the previous comparable period.
• EBITDA, reached KWD 8.3 million, up from KWD 6.2 million in the previous comparable period of 2022, for an increase of 33.8%.
• SG&A and other expenses reached to KWD 10.3 million, compared to KWD 10.7 million in the previous comparable period, for an increase of 3.3%.
• In summary, Mezzan recorded a profit of KWD 4.6 million in the three-month period of 2023, an increase of 49.9% from the same period in 2022.
• The group recorded a profit attributable to equity holders of the parent company of KWD 4.3 million, compared to a profit of KWD 2.9 million in the corresponding period of 2022, for an increase of 45.1%.

Transcript of Earnings Call - Q1 2023