Good afternoon, ladies and gentlemen. Welcome to Ma'aden Earnings Call first quarter of 2024. Thank you for joining us. My name is Abdulaziz Al-Harbi. All participants in today's call will be in a listening mode only. Once the call has been concluded, the presentation and all relevant material will be available on our website and on Ma'aden app. Please refer to the disclaimer on slide two, which applies to all disclosures made during today's presentation. Kindly note that all figures discussed during this presentation are in SAR, unless otherwise stated. I'm joined today by our CEO, Bob Wilt, and our CFO, Louis Irvine. They will take us through the company's performance since the beginning of this year. The chat function is open now. Please feel free to post your questions during the call. As usual, we will open the floor for your question at the end of this presentation.
We hope to get through as much as possible today. However, if you have any follow-up questions or clarifications, please email us. With that, let me hand it over to Bob.
Thank you, Abdulaziz, and thank you to everyone for joining today's call. As you can see, we're maintaining our momentum from last year and made a solid start to 2024 with steady production volumes and increased profitability. Net profit more than doubled in the first quarter to SAR 982 million, reflecting the operational improvements we are making across the organization. This puts us in a strong position as commodity prices continue to stabilize. We generated over SAR 2 billion in cash from operations to bring our total cash on hand to over SAR 16 billion and reduce net debt by 4%. Initial construction on the first phase of Phosphate III Mega project has begun. In Mansourah Massarah, our largest and most technologically advanced gold mine has now commenced commercial production. The Central Arabian gold region is a key focus for us.
As you know, we are conducting one of the largest greenfield exploration programs in the world. We are now accelerating exploration at our recent discovery near Mansourah Massarah, which has the potential to become a world-class gold belt. In post-period, we announced updates to our strategic investments, including the completion of the Vale Base Metals acquisition to increase our exposure to green metals through Manara. In addition, we announced the acquisition of Mosaic stake in our MWSPC asset, bringing our stake in the venture to 85%. We continue to make progress on safety. Our all-injury frequency rate improved to 0.05, and the severity rate has also dropped to 0.06. We remain extremely focused on implementing more proactive measures and new metrics to strengthen our oversight of safety practices and prevent serious injuries.
Our approach ensures that we continue to maintain the highest safety standards for our business and simultaneously demonstrate care for our employees. We are building one of the world's largest mining companies, and our fast transformation is underpinned by our values and how they shape a strong culture. In addition to the four values of care, integrity, teamwork, and ownership, we recently added a fifth value of continuous improvement. For this presentation, I wanted to give you a real example of how living our values creates tangible results. Numu is the name of our transformation project, but it's not just a transformation, it's a fundamental shift in our organizational culture, embedding a continuous improvement process that consistently generates and executes new ideas within the organization. We have three pillars of this transformation, growth, core business performance, and people and culture.
With over 1,000 initiatives and plans to introduce more than 350 this year. Our new operating model has transformed our business operations, streamlining decision-making and enhancing accountability. It has proven effective in accelerating progress on key projects and initiatives towards achieving our strategic goals. Numu has substantially enhanced our business performance, achieving SAR 2.85 billion in value realization in 2023 compared to our 2021 baseline. This success spans across overall revenue and EBITDA performance and cost avoidance activities. Notably, a significant portion, 69% or nearly SAR 2 billion of this value is recurring, ensuring ongoing benefits, while the remainder represents a one-time impact and will position us as we continue to grow rapidly in the coming years. With that, I'll turn it over to Louis, who will go through our first quarter financial results.
Thank you, Bob, and good afternoon, everyone. We have delivered a robust performance in the first quarter of the year against the market backdrops, particularly the lower pricing environment and continued industry-wide cost pressures. While our revenue for this quarter stood at SAR 7.35 billion, down 9% due to lower prices, our EBITDA was up 31% year-on-year, supported by higher sales volumes in DAP and gold, cost benefits, and the impact of one off in 2023. I'm also pleased to report that our net profit reached SAR 982 million, and EPS was 27 halala per share, up both by 134%. Year-on-year, as we continue to improve our operating efficiencies, we successfully delivered higher overall volumes while lowering production costs. Turning to the EBITDA bridge for the first quarter.
Year-on-year, we achieved strong results through significant improvements in overall sales volumes. Notably, higher volumes in primary aluminum, gold, and ammonia contributed to a positive impact of SAR 593 million. We also realized significant improvements in our operating costs, which positively impacted cost of sales by SAR 493 million. This was further supported by lower raw material costs totaling SAR 349 million. This despite higher energy costs. While the lower overall commodity prices had a negative effect of SAR 827 million, this was more than offset by our strong operational performance and cost efficiencies, with quarter one EBITDA up significantly year-on-year to SAR 2.98 billion. We had a strong start to the year in terms of the operating activities, which generated SAR 2.23 billion for the business.
Capital expenditure for the quarter was approximately SAR 1 billion, including SAR 670 million allocated for growth. The majority of this was related to the completion of construction works at Mansourah Massarah and the commencement of the Phosphate three phase I project. Our cash position for the quarter stood at SAR 16.6 billion, up 6% from 2023. Our balance sheet remains strong. During the quarter, we refinanced a portion of our debt at the aluminum business unit at very competitive terms, which allows us to partially reprofile our debt and thereby improving liquidity. Our long-term borrowings remain stable and net debt decreased by 4%, reflecting our higher cash on hand. Our cash position improved by 6% in quarter one, supported by strong operational cash flows and improved profitability.
We continue to see the benefits of our deleveraging strategy, which has reduced our long-term borrowings by 23% and decreased net debt by 51% since 2020. Our net debt to EBITDA improved to 2.1x and remains well within our guided range of 2x-3x . Looking ahead, we anticipate a temporary increase in our leverage ratio as we recently announced the completion of the 10% acquisition in Vale Base Metals post-period. This investment of approximately SAR 4.9 billion aligns with our long-term growth strategy. While it may impact our short-term leverage ratio, it positions us strongly for future growth and value creation. As we continue to deleverage our balance sheet, we will also continually look at opportunities to reprofile our debt to support our growth strategy while maintaining our investment-grade rating. Turning our attention to the phosphate business unit.
The business unit continued to be supported by strong DAP volumes, with production up 14% and sales volumes up 7% quarter-over-quarter. Phosphate prices remained stable in quarter one. However, the return of Chinese supply may pressure prices in the second and third quarters. Ammonia production in quarter one exceeded the same period last year by 10%. However, we saw a significant drop in ammonia prices this quarter, primarily due to improving production availability following maintenance-related shutdowns towards the end of last year. Overall, the BU maintained a healthy EBITDA margin of 48% in the first quarter, supported by lower operating costs and stable production year-over-year. Turning to the phosphate EBITDA bridge. Year-over-year, the lower DAP and ammonia prices resulted in an impact of SAR 672 million on EBITDA.
That said, despite higher energy costs, the BU benefited from overall lower raw material costs, which partially offset the price pressures by SAR 58 million. Overall operating cost improvements positively impacted cost of sales by SAR 255 million. Transitioning to the quarterly bridge, the lower ammonia prices and higher energy costs impacted EBITDA performance quarter-over-quarter. As a result, EBITDA for the first quarter stood at SAR 2.1 billion. In the aluminum business unit, we delivered a robust performance. We saw significant improvements in our margins, both on a quarterly and year-on-year basis, driven primarily by improved raw material costs and lower operating costs. Year-over-year, we achieved higher aluminum production and sales volumes following the successful completion of the pot relining program, which impacted 2023.
Lower aluminum sales volumes quarter-on-quarter reflected the higher base due to the runoff of inventories in quarter four last year. Flat-rolled product continued to be impacted by the weaker can market, although this remains a small part of the mix in the aluminum business unit. We expect further recovery in pricing in the second half of this year, which will support the overall performance of the business unit. Turning to the breakdown of this quarter's EBITDA. Higher volumes and lower operating costs resulted in a significant year-on-year improvement to SAR 581 million. Overall volumes benefited from the higher primary aluminum sales, which more than offset lower sales volumes in alumina and flat-rolled product. Cost of sales was significantly improved, mainly due to the non-recurrence of the industrial utility charge from the previous year.
We also benefited from a successful insurance claim totaling SAR 199 million. Although lower prices impacted EBITDA by SAR 228 million year-on-year, primarily due to primary aluminum and FRP, this was more than offset by improved major raw material costs, particularly caustic soda and coke. Quarter-on-quarter, the improvement in EBITDA is attributable to lower costs, with sales volumes coming off a higher base from quarter four. As a result, our EBITDA stood at SAR 581 million. Moving to our base metals and new minerals business unit. As Bob mentioned earlier, Mansourah Massarah is now fully operational, which contributed to a significant increase in gold production to 127 million ounces in this quarter. We will benefit in this current financial year from a full year of production from Mansourah Massarah, our largest gold mine to date.
Higher volumes and prices resulted in an 84% increase in sales year-on-year and 11% increase quarter-on-quarter. This resulted in a 138% increase in EBITDA to SAR 565 million at a 57% margin. Onto the EBITDA bridge of the business unit. Higher sales volumes and the improved gold price supported the strong performance in this quarter. This was partially offset by higher costs associated with higher production and accelerated exploration efforts. As a result, EBITDA for this quarter was SAR 565 million. On a quarterly basis, the continued uptrend in prices and sales volumes, as well as lower costs, positively impacted EBITDA. I'll now hand back to Bob to take us through the outlook.
Thanks, Louis. Now let's talk about the outlook. As Louis mentioned, one of the key drivers behind our increased gold production is Mansourah Massarah, which we completed at the end of last year, commenced commercial production this quarter, and expect a significant contribution to our full year output. We've broken ground at Phosphate three, as we mentioned, and early construction works are underway. We will provide regular updates on this project ahead of phase I completion in 2026. We are progressing on the aluminum recycling facility and have completed the final phase of front-end engineering design by 2024. This plant will contribute to the circular economy in Saudi Arabia and will produce approximately 400,000 metric tons annually. Further out, we continue to explore a brownfield expansion of our aluminum smelter, which will add 90,000 metric tons annually, as well as two additional gold mines.
Our total CapEx spend for 2024 remains on track between SAR 8.1 billion and SAR 9.6 billion, the majority of which will be growth CapEx, a large part of which will be attributable to Phosphate 3. We continue to guide growth CapEx below SAR 8.5 billion per year over the next three years. Following a year of exploration success in 2023, we've been very busy in the first quarter of 2024. We are progressing one of the largest greenfield exploration programs globally with more than 100,000 kilometers drilled in Q1. The Typhoon geophysical surveying system is being deployed at scale, and a third system is currently being mobilized under our joint venture with Ivanhoe Electric. Exploration is currently focused along a 100-kilometer stretch south of Mansourah Massarah.
Parallel structures are now being drilled to further define the extent and quality of the mineralization there. We believe this has the potential to become a world-class gold belt and will continue to explore at speed and scale. Jabal Sayid, our underground copper mine, operated in partnership with Barrick, continues to deliver. We produced over 19 million pounds of copper in Q1, and joint exploration is continuing around the existing mine to further expand our copper production. In summary, it has been an encouraging start to the year with improved profitability and commodity prices stabilizing. We are making continuous improvements across the business to position Ma'aden for sustained growth. We are on track to deliver our full-year production targets and maintain our CapEx guidance for the year. In terms of near-term priorities, we are continuing to progress the early construction works at Phosphate three.
We are moving forward to complete the acquisition of Mosaic's 25% stake in MWSPC later this year. This transaction, which was announced last month, will increase our stake to 85% and significantly expand our marketed phosphate volumes. Exploration remains an important focus as we ramp up drilling at Uruq South and geological surveying across our areas of focus. This will ensure that we successfully meet our near-term forecast and deliver sustainable returns over the longer term. Through Numu, we are turning ideas and initiatives into action to deliver on our ambitious 2040 growth strategy.
Thank you, Bob. Thank you, Louis, for the presentation. We will now open the floor for your questions. I see a couple of questions in the chat box and a few hands raised. I'll start with Jason here. I'll unmute you. Please ask your question. Introduce yourself and ask your question. Jason, you are unmuted.
Yep. Good afternoon, gentlemen. Thanks for the presentation, and congrats on a strong set of results. It's really good to see the gold operations ramping up like that. Just a question on costs. It looks like this was a big beat versus everybody's numbers, mainly driven by costs. I guess my question is this permanently lower costs, or are there some funnies in here that we should think about? I mean, if this is the new level of cost, this is great.
Jason, hi, it's Louis. Thanks for the question. Yeah, we're very pleased with our cost performance, but there are two notable items in this quarter's result.
The first is the utilities charge that we picked up in the first quarter of last year, which didn't repeat this quarter, which was approximately SAR 493 million. Then we were also able to account for SAR 200 million in an insurance proceeds this quarter that didn't exist in the first quarter of last year. Yeah, those are the two our main changes, period on period.
Just so that I'm clear, Louis, the insurance claim, is it in one of the divisions or where is it?
Yeah, we include it in the segment result of aluminum. It's within the aluminum business unit segment result, as part of operating profit.
Okay, super. Thank you very much.
Okay.
Thank you, Jason. I have a few questions. I'll take one from the chat box. What about Mosaic acquisition? A question here about Mosaic acquisition and what's the impact for Ma'aden about on Mosaic?
Yeah, sure. I'll take that one. Good question. You know, we've got 11 affiliates as the company has grown over the last decade or so with Barrick, with Alcoa, with Mosaic. In our phosphate business unit we've got three significant assets. Ma'aden Wa'ad Al Shamal has three partners, Mosaic, SABIC, and us. The most technically advanced partner there is Mosaic. We actually count on Mosaic for their technical expertise, for access to research and development in the States, et cetera. We value their partnership, and we wanted to figure out a way that we could spread that technical expertise across all of the phosphate assets, not just Wa'ad Al Shamal. At the same time, we wanted to clean up our shareholding structure and simplify it at each of the assets. We're taking the.
We're swapping the Mosaic stake at Wa'ad Al Shamal. They're now 3% or so owner of Ma'aden with Ma'aden shares. We brought them to the top company level. They've got technical service agreement for all of the phosphate assets in the company. Their shareholders have better visibility of the value of their investment in Saudi Arabia, and we've got more marketed volumes and cleaner synergies at the assets.
Thank you, Bob. Now I'll move to Dalal. Please, Dalal, you are unmuted. Introduce yourself and share your question.
This is Dalal from Goldman Sachs. Just a quick one from our end. We've noticed that the depreciation expense has gone up a bit, versus last year. Maybe any thoughts you can share on the depreciation side, how to think about it for the rest of the year? Would Q1 be a representative quarter?
Sure. I think it's just the opposite. I hope it is because we've
Yeah.
Louis and the team have done a great job looking at asset values and useful life, so I'll let him explain.
Yeah. Thank you, Bob. And thanks, Dalal for the question. In fact, we're expecting depreciation to be lower year-on-year. I'm just having a look at the financials now to make sure that is in fact the case. Because we reviewed the useful lives of our assets and the residual values of those during the course of last year, and we booked the first adjustment in the fourth quarter. And we expect to be approximately SAR 200 million lower than the run rate that we had in the first three quarters of 2023.
Thank you, Dalal. Now I have a question from the chat box. It's about Manara Minerals. Someone wants a clarification about Manara Minerals and their contribution to copper mine in Pakistan.
As you recall, Manara Minerals is the joint venture between Ma'aden and the Public Investment Fund of Saudi Arabia. We're the majority owner. The mandate for Manara Minerals is to go out and take equity positions, minority positions in assets globally to provide feedstock for downstream development in the kingdom's burgeoning industrial base. The minerals we're focusing on are copper, iron ore, nickel, and lithium currently. We completed the first investment that was announced last summer with Vale Base Metals. We took a 10% stake in Vale Base Metals and closed that. We have a healthy pipeline of further initiatives we're looking at, and any announcements about what those investments might be will be forthcoming.
Just follow up question on the same about Manara Minerals and their joint venture with Vale closing the transaction. Someone want to know more information about it.
Yeah. You know, we valued our stake and, well, took 10%, got through all the regulatory approvals, closed the deal end of April. We're already engaged with management there. We've had the first board meeting. We've got active dialogue going on with the management and the board of Vale Base Metals so that we can actually help drive decision-making and value creation with that, with that great business.
Is it gonna affect the P&L of Ma'aden?
We will account for our investment in Manara on an equity accounted basis. Manara would have to account for its investment in Vale Base Metals separately. How that then results in their results would have an impact on ours going forward.
Thank you, Bob and Louis. Anup, I'll open the floor for your question. You are unmuted. Please introduce yourself and ask the question.
Congrats on a great quarter. My first question's on the gold business. I mean, if you could kindly update us on the different layers of taxation here. Basically, the royalty, severance tax and income tax, if any, and which of these are linked to the price of gold rather than, you know, pithead costs. That is question one. Second is on the aluminum recycling project. If you could give us some hint of what the CapEx for this 400,000 ton per annum project would be. Thank you.
Anup, thanks. Great question. I mean, I'm gonna get Abdulaziz to get back to you on the detail in terms of the layering of the tax. It's a bit detailed for the purposes of this call, but I'm happy to get back to you on that one specifically. With regards to the recycling, Bob?
Yeah, we're still in the pre-feasibility, so I wouldn't wanna comment on construction and capital allocation for that project quite yet.
Yes.
It's early days.
Great. I have a question also on the chat box about ammonia and why the sales decreases quarter-over-quarter.
The sales reduced quarter-over-quarter, and we basically, it's purely a timing difference. Two shipments were pushed into the second quarter of this year.
Clear. We have one more question on the Prateek, please ask your question. Introduce yourself and ask your question. You are unmuted at the moment.
I have just one on the phosphate business. Like, SABIC also has a stake in your phosphate business. What value does SABIC add into that? In future, would you look to acquire that stake? Thanks.
Well, they're a significant partner, so I, you know, have no plans at this point to clean up the shareholder structure to the point of doing anything with SABIC. They're a great partner in the kingdom, extract a lot of synergies, technical sharing, talent sharing. Very happy with that partnership. No plans otherwise.
Thank you, Prateek. I don't see any more questions in the chat box. Thank you all for attending this call. All material will be uploaded on our website and in Ma'aden app. If you have any follow-up questions, please do not hesitate to contact us via invest@maaden.com. With this, I'm going to conclude today's call. Thank you all for your time, and goodbye.