Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Renaissance Services SAOG (MUS:RNSS, Financial) reported a significant increase in occupancy levels, reaching 5,500 from 4,500, indicating strong demand from existing clients.
- The company is on track to achieve its target of 6,000 occupancy by the end of the year, driven by green hydrogen and steel projects in Duqm.
- The PAC business has expanded its capacity to 10,100 beds, contributing positively to the company's bottom line.
- EBITDA margins improved from 21% to 23%, attributed to operational efficiencies and contract profitability improvements.
- The company is cash-rich and self-sufficient, with a strong focus on maintaining a healthy balance sheet and exploring growth opportunities.
Negative Points
- Occupancy in RSVD is currently low at 24% to 26%, which is below the breakeven level for net profit.
- There are delays in project start dates, particularly in the green steel projects, affecting occupancy and revenue projections.
- The company faces challenges in international expansion, with no major breakthroughs in Qatar and Saudi Arabia.
- Higher finance costs due to increased repo rates have impacted the company's financial performance.
- The company is dealing with tax provisions related to a disallowed loss from a 2019 divestment, which could affect future profitability.
Q & A Highlights
Q: Do you still stick with your guidance for RSVD occupancy levels by the end of this year and 2025?
A: Yes, we are on track with our guidance. We were averaging around 4,500 last quarter and expect to reach 6,000 by the end of the year. Currently, we are at 5,500, primarily from existing clients. We anticipate further growth with upcoming projects, particularly in green hydrogen and steel, which will boost occupancy beyond 6,000 by year-end and improve further in 2025.
Q: What kind of occupancy is required for RSVD to breakeven at the net profit level?
A: The EBITDA breakeven has been brought down to 3,500. For profitability, it would be around 4,700, depending on the room mix. We foresee positive momentum with ongoing projects and expect further mobilization towards the end of the year.
Q: Can you provide details on the new projects related to smart meters and wastewater treatment?
A: We were awarded the smart meter rollout for the capital area, contributing to this year's and next year's results. We are also targeting additional zones in upcoming tenders. These projects are positive margin businesses, but we won't disclose specific margins due to competitive reasons.
Q: Could you give us some color on the PAC business and current occupancy levels?
A: We have expanded to 10,100 beds in the PAC business, with occupancy around 90%. We expect to cross 90% occupancy this year. The expansion has helped compensate for the downturn in Duqm, and we anticipate further growth with upcoming tenders and projects.
Q: What led to the improvement in EBITDA margins from 21% to 23% this quarter?
A: The improvement is due to enhanced contract profitability, process efficiencies, and operational excellence. We continue to manage overheads efficiently, and these efforts have resulted in better margins at both EBITDA and operating profit levels.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
