Good afternoon, ladies and gentlemen. Welcome to Ma'aden Q4 full year 2022 earnings call, and thank you for joining us. My name is Abdulaziz AlNaim, Investor Relations Director at Ma'aden. All presenters or participants on today's call will be on a listen-only mode. We will open the floor at the end of the presentation for your questions. The presentation and all relevant material will be available on our website and on Ma'aden app. I refer you to the disclaimer on all of our disclosure made in today's presentation. I'm pleased to be joined today by Robert Wilt, Chief Executive Officer of Ma'aden, and Louis Irvine, Chief Financial Officer. They will take us through the company strategy, operations and financial performance. As usual, we'll open the floor at the end of the presentation, and we hope that we give we get as much as possible in today's--
This meeting is being recorded.
Today, but if you have any follow-up clarification, please email us. Now, I'll hand it over to Bob.
Thank you, Abdulaziz, and thank you to everyone for joining today's call. 2022 was a record year with improvements in all key metrics. Financial performance was extremely strong. Revenues grew by 50%. Net profit was up 87% year-on-year. We generated record levels of cash with operating cash flows up 71% year-on-year. As a result, we've continued to deleverage the business and strengthen our balance sheet. Most importantly, this was our safest year on record. We once again reduced our all-injury frequency reportable rate to record lows. In addition to the strong financial and safety performance, we made significant strategic and operational progress across the business. We launched our transformation program, we advanced key projects, and we added reserves. We'll touch more on these developments during the course of today's presentation. In previous earnings presentations, I've discussed our strategic enablers, which will unlock value for all shareholders.
This has been a busy year, and I'm pleased to report plenty of progress on these key areas. Let's begin with our growth initiatives. At the recent Future Minerals Forum in Riyadh, we announced a major new venture with the Public Investment Fund, Saudi Arabia's sovereign wealth fund. Together, we will establish a new company to invest in global mining assets, increasing our exposure to the metals of the future. New and additional partnerships with leading mining companies, Ivanhoe and Barrick, were signed to tap strategically important metals in KSA and aid on our exploration efforts here. We also advanced our exploration and development pipeline and achieved commercial production at Ammonia 3. We signed the EPCM contract for the first phase of our Phosphate 3 project, and we added over 3 million tons to our gold reserves and resources. Additionally, our business transformation is showing progress.
We reviewed our portfolio in 2022, and helped set the capital allocation framework to deliver this next phase of growth. I'll speak in more detail about this later. Internally, we have reorganized our business to improve decision-making and implemented several programs to upskill our staff, support our local communities, and enhance diversity and inclusion. Innovation is a key strategic focus for our business, and we signed 20 agreements with local companies. This slide demonstrates the range of partnerships we entered into this year and our commitment to innovation and technology leadership. To highlight just a few, we have embraced robotics and AI, working with Swarm Robotic Mining to improve our processes through automated excavation. We have partnered with Nokia to improve connectivity for our teams operating in remote and off-grid mines. On the exploration front, we are using drones for aerial inspection and developing detailed 3D models for analysis.
Our R&D partnerships have resulted in green breakthroughs. We are converting brine waste streams into useful minerals, developing patented technology to extract lithium from seawater, and reducing energy consumption through CO2 pulverization. These initiatives will improve the efficiency of our operations, reduce costs, and de-risk exploration and mining practices. They will also decarbonize our value chain and help unlock value from the kingdom's extensive mineral endowment. In addition to innovation, we are set to develop Ma'aden into a sustainable mining champion. In 2022, we accelerated investments to decarbonize our operations and became the largest certified blue ammonia supplier in the world. We secured export contracts and signed a 20-year agreement to take 300,000 tons of CO2 out of our facilities every year to be reused in the food and beverage industry.
To date, we've planted over 3 million trees as part of our commitment to the Saudi Green Initiative, which will see us plant 20 million trees by 2040. Ma'aden is also having a positive social impact in the communities where we operate. We launched our local content program in September, working with local partners to grow the Saudi economy in line with Vision 2030. We are also implementing programs to empower local communities and enhance female participation in the mining sector. A lot has been done, but there's still a lot more to do. The transformation program we initiated last year creates a stronger foundation for future success. We continue to roll out a range of measures to ensure operational excellence through our businesses. Safety still remains the heart of our operations.
Though 2022 was our safest year on record, we will continue to maintain this focus and drive further improvements in 2023. Our portfolio continues to evolve, making us more resilient to changing market conditions and needs. As discussed, we've initiated our joint venture with the PIF, and today we'll give you more details on our capital expenditure framework. Financial discipline will give us the flexibility to pursue growth opportunities and navigate challenges with confidence. I'll now hand it over to Louis to take us through the financials before coming back to unpack some of these important points in more detail.
Thank you, Bob, and thank you all for joining us today. Now turning to our financial results for the last quarter and the full year 2022. As Bob touched on earlier, we delivered a record financial performance in 2022. Full-year sales increased 50% to SAR 40 billion, with net profit and EPS both growing by 78%. Our operations continue to generate strong cash flows, allowing us to further de-leverage the balance sheet. Despite higher sales volumes, the final quarter of the year saw a softening of commodity prices and an elevation in raw material prices on a year-on-year basis, which partially offset our gains. Our fourth quarter profitability was primarily affected by a series of non-operational, mainly financial adjustments, particularly in the aluminum business. I will elaborate more on this in the upcoming slides.
Let's now turn to underlying consolidated EBITDA, which, on a full year basis, increased by 51% to SAR 18.7 billion. Our year-on-year performance was mainly driven by increased volumes, particularly in the fertilizer unit, and higher realized prices. These boosted EBITDA by a combined SAR 12.8 billion. As reported consistently throughout the year, raw material prices were much higher when compared to the prior year, led by molten sulfur, carbon materials, and caustic soda. This partially offset the positive commodity price effect. In 2022, our primary focus was to stabilize the business and lay the foundation for transformational growth. To achieve this, we increased our maintenance expenditure across all our operations, ensuring they continue to be well-equipped to meet our future growth targets.
As part of our commitment to attract and retain the best talent, we conducted a comprehensive review of our overall compensation structure, which led to an increase in personnel costs, and I will touch on that point when I cover each of the segments going forward. This investment in our workforce is vital to ensure we have the right people in place to drive the company forward. In addition, we reduced inventory levels and invested costs as part of our broader business transformation strategy. These initiatives will help us to deliver on a sustainable basis and realize more of the price and volume effects into EBITDA. Net profit increased by an impressive 87% in the year to over SAR 12 billion. We recorded slightly higher depreciation in 2022 due to the start of commercial production at Ammonia 3 and higher depreciation on right-of-use assets.
A minor impairment of SAR 90 million was recorded in our gold unit. The higher interest rate environment contributed to higher finance costs of SAR 308 million. However, income from term deposits of SAR 230 million broadly offset the increase in finance costs. The increased tax expense was in line with our increased profits. Overall, our record consolidated results were underpinned by our financial discipline. We delivered a record year of cash generation, with cash from operations up 71% year-over-year to SAR 16.2 billion. We reinvested SAR 2.5 billion back into our business through a combination of growth and sustaining capital e xpenditures. The fertilizers business received the lion's share at 53%, followed by base metals and new minerals at 33% and the aluminum business at 14%.
We continued to strengthen our balance sheet and made significant strides in reducing our debt burden with a total repayment of SAR 5.8 billion, of which SAR 3.1 billion was paid down through accelerated repayments. Overall, we increased our cash balance by 80% from December last year to close the year with SAR 16.4 billion in the bank. The impact of our debt repayments is clear to see on this slide. We have made significant progress in reducing long-term borrowings and net debt. As a result, our net debt to EBITDA ratio has been lowered to just 1.3x compared to 7.5x at the end of 2020 and 3.1x in 2021. The 45% increase in trade receivables is largely due to the higher year-over-year revenues due to increases in sales volumes and commodity prices.
I've previously said that improving the efficiency of cash conversion cycles is an important focus area, and we improved this by 35% in 2022. Days working capital also improved significantly from 73% to 50%, underpinning our record cash generation and capital discipline. We now move on to our business units, starting with our largest segment, fertilizers, where the stronger market environment was the key driver. This business unit continued to deliver outstanding results, with sales up 83% year-over-year and EBITDA up 128%. We also improved the EBITDA margin by 11 percentage points to 58%. The increased production profile was driven by the start of commercial production at our Ammonia III project in August 2022. We also completed remediation work at Wa'ad Al Shamal during the year. This helped to increase ammonia volumes by 77% year-over-year, with ammonia sales up 162% on 2021 levels.
DAP production and sales volumes in the year remained broadly flat. The strength of the fertilizer unit performance means that it contributed 66% of sales and 83% of EBITDA in 2022. This bridge breaks down the EBITDA performance in the fertilizer segment. We benefited from an increase in realized prices in 2022. Ammonia was up 86% per metric ton and DAP by 46%, partially offset by higher molten sulfur costs. We also saw the impact of commercial production coming on stream at Ammonia III as production volumes increased. This was partially offset by increased fixed and variable costs, including higher contracted services costs associated with the Wa'ad Al Shamal remediation and infrastructure projects. Higher personnel costs mentioned at the outset also contributed to higher fixed costs.
Turning to aluminum. Once again, we saw the benefit of commodity diversification within our business, as this unit was affected by higher costs and a number of one-off factors. These impacted both the fourth quarter and full year performance. Aluminum successfully delivered a 14% increase in revenues to SAR 11.3 billion. This was due to higher commodity prices across the year, despite a softening in the fourth quarter. However, we saw sustained higher raw material costs and certain one-off adjustments that impacted profitability, particularly in the second half of the year. I'll unpick these further in the next slide. Despite a decrease in production and sales volumes for alumina and aluminum, the unit was able to maintain overall production and sales volumes for the full year, with a noteworthy increase in flat roll products demonstrating the potential for growth in the segment. Turning to the breakdown of EBITDA.
The improvement in commodity prices was largely offset by higher raw material prices, particularly carbon materials, caustic soda, and alloy consumables. Throughout the second half of the year, we witnessed a reversal in LME prices, which had a notable impact on our EBITDA. This market-led factor saw LME-related adjustments for finished goods inventory. Furthermore, to balance smelter production, metal purchases were required, which was also impacted by the decline in LME. During 2022, we experienced higher maintenance costs across all three assets, personnel costs, and a release of working capital to the P&L. Finally, one-off events impacted the aluminum business by SAR 528 million, largely related to settlements and provisions raised on historical industrial utility contracts. Base metals and new minerals is currently a relatively small contributor to group sales and EBITDA. It will be a key focus for potential growth going forward.
Top-line performance was resilient. 2022 realized prices were broadly level year-on-year. EBITDA was down 27% year-on-year, where profitability was negatively impacted by higher exploration expenditure and personnel costs. On the EBITDA bridge, we can see how higher operating and fixed costs impacted profitability within the unit. EBITDA was offset by SAR 198 million from fixed and variable costs and SAR 170 million from others, including higher G&A and exploration expenditure. As we transition towards low cost, better quality assets and ramp up production over the coming years, we expect to improve EBITDA margin and profitability. I will now hand you back to Bob to take you through the capital allocation framework and outlook.
Thanks, Louis. I'm pleased to share with you our newly implemented capital allocation framework. Our goal is to deploy and invest capital for long-term growth. This framework is aligned with our vision to position Ma'aden as the leader in the metals of the future. Our commitment to Saudi Arabia is underpinned by organic growth initiatives and the development of near-term projects within the kingdom. We have a budget of around SAR 500 million set for exploration, in addition to roughly SAR 3 billion in growth and sustaining CapEx this year. Our strategic joint venture with the PIF forms another pillar of our capital allocation framework. In addition to sourcing critical future minerals, we ensure that all of our international investment opportunities are value accretive and earnings enhancing.
Finally, we remain fiscally disciplined, financially disciplined, will continue to reduce outstanding debt and strengthen our balance sheet with ambitious targets of 2x-3x in net debt to EBITDA and a 30%-40% debt to capital ratio. This makes the business agile even as we scale, allowing us to respond to challenges and capitalize on future market opportunities. As such, for now, there will be no cash dividends in the short term. We believe that this is a sustainable future-facing framework that will unlock maximum value for our shareholders over the long term. We will continue to deliver on our pipeline of new projects, which in the near term stretches through 2027. Mansourah Massarah is next to come on stream and will commence commercial production in the second half of this year, adding 250,000 ounces per annum.
By 2026, two more gold projects will be adding a further 400,000 ounces per year, totally reshaping our gold portfolio. On the fertilizer side, we recently awarded the EPCM contract for our Phosphate 3 project to Worley. That project will add 3 million tons per year when phase two of the project is completed. Aluminum will also receive a boost by 2027 through line expansions, adding an additional 90,000 tons. As mentioned, our international partnerships will also de-risk some of our growth and give us better exposure to global commodities. Turning to our outlook and guidance for 2023. Our world-class asset base, combined with our robust exploration program and focus on sustainable development, positions us uniquely going forward. The chart on the left highlights the opportunities of our extensive license portfolio.
This currently includes 21,500 sq km of exploration licenses granted in the kingdom, with an additional 65,000 sq km of licenses pending. A significant portion of these licenses are focused on base metals and new minerals, which represents a strategic area of focus for our company. As the map on the right indicates, we already have an outstanding platform for growth within the kingdom to build upon. We will now provide production and CapEx guidance for 2023. We are forecasting growth in production volumes across all our assets, except for our Aluminum business. In Aluminum, we are recovering from an upset condition at our smelter in November. This year, we will see a higher than normal pot reline rate, and we expect our pot complement to be back to full complement by the end of the first half.
In gold, we expect to begin initial commercial production at Mansourah Massarah in the second half. As you can see on the right, our sustaining CapEx is broadly in line with last year, while our growth CapEx is expected to be higher. Looking ahead to the market drivers in 2023. Certainly mindful of the uncertainty in the global environment, however, we believe that the long-term market fundamentals in our business are strong. Although the continued inflationary environment could impact manufacturing demand, the easing of COVID restrictions in China should nullify that and actually see demand add to the market. Turning to the commodity markets, we are seeing some pricing pressure on fertilizers, particularly for Phosphate and Ammonia. However, the lower price points could help stimulate a gradual demand and recovery from South Asia and Africa. Overall, we anticipate strong market fundamentals for our fertilizers business.
In the aluminum market, we expect prices to be range-bound this year as the supply-demand balance remains affected by geopolitical issues, resulting in higher input costs in certain regions, along with the hydropower situation in China. Finally, base metals and new minerals continue to operate in a low-growth environment, along with ongoing geopolitical tensions and softer monetary policy. On a positive note, we do anticipate that China's reopening will drive demand and support prices for base metals and gold. To conclude, I would like to remind you of Ma'aden's unique investment case and the reasons we remain so excited for the future. In 2022, we delivered record performance. We started our transformation program and laid the platforms for sustainable long-term growth. Today, we have a diversified portfolio of long-life assets that provide exposure to multiple commodity groups serving markets across the globe.
We are the global leader in fertilizer production with the world's lowest-cost integrated aluminum value chain. We are transitioning our metals and minerals business to lower-cost, better quality assets. With a five-year compound annual growth rate of 27%, we remain one of the fastest-growing mining companies in the world, actively developing the mining sector into the third pillar of the Saudi economy and pursuing global ambitions to be a leader in the metals of the future. We are building a sustainability champion. We are making progress on our commitment to achieve net zero by 2050 and deliver a positive social impact in our communities. With that, I'll hand it over to Abdulaziz for Q&A.
Thank you, Bob. Thank you, Louis, for the presentation. Now we'll open the floor for questions. Please raise your hand, introduce yourself, your organization, and ask your question. I have a couple of questions on the chat here. Louis, first of all, they want more clarification about your joint venture or Ma'aden joint venture with PIF. What are the strategic minerals that they are targeting on the long-term plans?
Yes, I'll take that. Yes, we've got a dual objective. One is to secure the downstream minerals required for the kingdom's development, mostly the EV metals, but also iron ore. We've got a select target list of metals we're looking for, investment opportunities where we take an equity stake in assets or companies globally. As I said, for Ma'aden, they've got to be earnings accretive. We're going to be very disciplined about it. We're taking global positions to enhance our brand, enhance our access to deal flow, but also de-risk by partnering with the sovereign wealth fund.
Perfect. Thank you, Bob. We have a question from Ashhar Saleem. Ashhar, now you are unmuted. Please unmute yourself, introduce yourself, and go ahead with your question.
Yeah. Can you hear me now?
Perfect. Go ahead.
Perfect. Hi. This is Ashhar Saleem from Yaqeen Capital. Thanks a lot for the call, guys. Congratulations on completing a great year. Definitely a great start to the new team. My question is about one of the announcement that was done by the Ministry of Industry regarding some special regulations for phosphate, tantalum, niobium. There were some five to six minerals that were mentioned, and it was mentioned that there's going to be a special regulation for this. Do you know something about it? Can you shed some light on what's going to change in this?
Are we expecting something different from Ma'aden as well, let's say, in the product portfolio as well? Are we expecting something different coming out of these change in regulations? That's one. Secondly, in the aluminum business, you've mentioned about a one-off item, I guess SAR 520, SAR 530 million. Can you just clarify exactly the nature of that? What was the main reason why we had this SAR 500 million one-off? Is it completely written off or we'll see some spillovers in the 2023 quarters as well? Thank you.
I'll take the first one. I'll turn the aluminum question over to Louis. Regarding regulatory changes, not aware of any impact on Ma'aden. Actually, not even aware of the regulatory changes you referenced. We will research it. Someone will inform me. We'll inform you. Then I'll turn it over to you for the aluminum question.
Thank you, Ashhar, for the question. You may recall, we touched on this point during the third quarter results initially, where we made reference to SAR 200 booked in that quarter. Then we've raised a provision of SAR 328 in the final quarter. There are two utilities essentially that we have dealt with here. One supplied gas to the company, and the other is a tri-party electricity agreement. The gas adjustment is final. That won't repeat. It pertained to 2018, 2019, 2020. It was a historical one-off adjustment. Then, we are still in discussions with the other parties, but we have raised the provision of SAR 328 at this point in time
Thank you, Louis. I have also a question in the chat. Are you keeping the better guidance of EBITDA being 8x-10x by 2040, Bob?
Absolutely. That's the strategic direction of the company to grow from 2020's EBITDA by 10x by 2040.
Perfect. Thank you. Now we have a question from Anup. Anup, you are unmuted. Please unmute yourself, introduce yourself, and go ahead. Sorry, Anna. Anna, we can hear you. Go ahead, please. You're unmuted.
Yes. Good afternoon, gentlemen. Thank you for the presentation. Anna Antonova from JPM organ. A couple of questions on the operations side, if I may. First, I have one question for each of the segments. Starting from the Fertilizers segment. Phosphate 3 with the recent award of the EPC contract, can we assume that the project has been fully green-lighted by the board? Can we expect it to enter from engineering phase into construction soon? That's the first question.
Okay. The answer is no, the project has not been fully green-lighted from the board. We anticipate taking it to the board for final approval in the second half of this year. We've got authorization from the board to begin engineering and design and to do the final feasibility. That's where the money will be spent this year, but we'll get final authorization to move forward by the end of the year.
Understood. Thank you so much. On the Aluminum business. Can we expect any incremental production capacity coming from the pot relining that will be done this year? Or is it purely maintenance that needs to be done every once in a while, as is usual with the smelting assets?
Purely maintenance this year.
All right, thanks. Finally, on the base metals segment, the question about the Mansourah Massarah. Can you perhaps shed some light on why the commercial production timelines have been shifted from H1 to H2 of this year, given that you've successfully poured the first gold? In the end of last year, I remember on the Q3 results call, you were guiding that the commercial production will be starting in the first half, and now we see that it's being delayed closer to the second half of this year.
Correct. It's actually slipped a couple of months, which puts it from the end of first half into the early second half. That's because this is the largest gold mine we've ever commissioned, and we want to make sure we're doing it right. The front end has had a couple of issues that we've needed to work through. Nothing major, no major delays, but we're being very precise as we bring this online. We want to do it properly because this is the first project that the new team has commissioned and this is one we want to get right. We've allowed ourselves some latitude, and we've pushed it out into the first part of the second half.
That seems prudent. Thank you for the comments. Finally, a general question on the recent announcements, especially on the announcement of bonus share issuance. Can you shed some light when can we expect the EGM to take place to approve this bonus share issue? Will it be Q1 or Q2 or summer? Even rough timelines would help.
Right. Obviously, there's some regulatory approvals we have to get and apply for. We'll get those done. If you recall last year when we did the share dividend, the EGM was held towards the end of May. I think that's a reasonable assumption, but we don't have it on the schedule yet.
Understood. Many thanks.
Thank you, Anna. I don't see any more questions. Thank you, Bob. Thank you, Louis, for the presentation. Thank you for all attendees, all material will be uploaded in our website and on Ma'aden app. You can access it. Please, if you have any follow-up questions, do not hesitate to contact us via invest@maaden.com. Goodbye, everyone.
Thank you. Bye.