Hello, everyone. I'm Saleh Alghamdi, Investor Relations Manager at Luberef. It is my pleasure to welcome you to today's audio webcast, where we will be discussing our performance for the first quarter of 2026. I'm also pleased to be joined today by our President and Chief Executive Officer, Mr. Samer Al-Hokail, and our Chief Financial Officer, Mr. Saud Kamakhi. Our session will begin with a presentation highlighting Luberef's performance for Q1 2026, followed by a Q&A session. Please note this webcast is being recorded for future reference. Before we dive into the presentation, I would like to draw your attention to our cautionary statement. During today's presentation, we may make forward-looking statements that refer to estimates, plans and expectations. Actual results and outcomes may differ materially due to factors stated on this slide.
With that out of the way, I will now hand over the call to our CEO, Mr. Samer Al-Hokail.
Thank you, Saleh, and good day, everyone. Welcome to Luberef's first earning call for 2026, and thank you for joining. We value your participation today and look forward to sharing an overview of our financial results and strategic progress. This quarter delivered strong performance for Luberef and marked a key milestone in our strategic expansion into high-value GCC markets, which offer attractive netbacks and reinforce our regional positioning. Amid a challenging geopolitical environment that disrupted base oil supply chains, we demonstrated agility by working closely with our regional partners to bridge supply gaps across India, Asia, and Africa. Our ability to respond effectively was further supported by our contracts of affreightment, which provided a shelter against elevated shipping costs and ensured reliable delivery to our customers. Building on this performance, we continue to uphold the high standards of operational excellence and safety.
We maintained a total recordable incident rate of zero and surpassed 43.9 million man-hours without a lost time injury. These outcomes reflected the strength of our safety-first culture. We remain steadfast in our commitment to safeguarding our people and protecting our critical assets, ensuring the continuity and resilience of our operations in these challenging times. Turning to our strategic initiatives, we continue to make meaningful progress across key priorities that support our long-term growth and positioning. Discussions around the feedstock supply agreement for Jeddah facility are progressing well and are now in their final stages. This remains an important development as the role of the Group I production continues to play a major role with supply tightening at a faster pace than demand, reinforcing the strategic relevance of the facility. In parallel, the slating program of Group III is advancing positively and is also approaching its final stages.
We are encouraged by the progress achieved to date. We are currently in advanced discussions with the leading additive companies to secure the necessary OEM approvals, which are critical to the commercial readiness of our Group III base oils. Turning to Growth II project. This project remains a cornerstone of our long-term strategy, strengthening our position in high-value segments and supporting our future growth ambitions. During the first quarter, we incurred a capital expenditure of SAR 77 million, reflecting continued progress across key work streams in line with project budget. Major equipment deliveries remain on schedule with arrival expected throughout the second quarter of 2026. Construction activities are advancing steadily, bringing overall project completion to approximately 71%. We remain on track commissioning in the second half of 2026. We are confident in the project ability to deliver attractive value upon completion.
During the quarter, rising feedstock costs driven by the geopolitical environment, combined with more gradual adjustment in product prices, resulted in a temporary pressure on our margins. Despite this pressure, Luberef was able to deliver strong performance supported by favorable by-product crack margins. This underscores the resilience and flexibility of our business model across volatile market conditions. Our priority is clear: to maintain strong operational momentum, respond decisively to market shifts, and continue building a business that is more competitive, efficient and future-ready. With that, I would like to hand it over to our CFO, Mr. Saud Kamakhi, to walk you through the financial performance. Thank you
Thank you, Mr. Samer. It's a pleasure to welcome you all today. I'm pleased to present our financial results for Q1 2026 and to highlight Luberef's key financial results this quarter. Starting with our financial performance, Luberef delivered a strong set of results for the quarter, with net income of SAR 258 million, reflecting an increase of 16% year-on-year despite a 12% decline in sales volumes. During the period, base oil crack margins experienced a temporary compression of approximately 14% as a result of an increase in feedstock prices, reflecting the impact of evolving geopolitical conditions. This was effectively offset by a significant improvement in byproduct margins, especially diesel, driven by the ongoing dynamic in global energy markets.
Overall, these results highlight the strength and resilience of our portfolio as well as our ability to adapt to changing market conditions and sustain profitability. Turning to cash flow, free cash flow saw some compression during the quarter, primarily driven by higher capital expenditures associated with increased growth-related spendings as well as remaining costs linked to the recently completed turnaround. This was further impacted by working capital build-up after startup of Yanbu refinery. Looking ahead, we expect cash flow generation to improve in the upcoming quarter, supported by a more favorable crack margin environment and normalization of the working capital cycle. Overall, we continue to maintain a strong financial position with a return on average capital employed of 23%, reflecting the efficiency of our asset base in generating returns and a negative gearing of 12%, underscoring our disciplined capital structure and financial flexibility.
Comparing our year-on-year performance, net income increased from SAR 222 million in Q1 2025 to SAR 258 million in Q1 2026, despite a 12% decline in base oil sales volume, highlighting the flexibility of our operating model in navigating changing market conditions. This performance was driven by a strong improvement in by-product margins, and this was further supported by our contracts of affreightment, which contributed SAR 21 million in freight cost savings and reinforced our cost efficiency. OpEx and other expenses saw an increase primarily due to higher depreciation of approximately SAR 11 million, in line with the continued expansion of our asset base under our growth strategy.
Turning to our cash position, we began the year with a robust cash balance of SAR 1,373 million, providing a strong foundation to support our strategic priorities. During the quarter, capital expenditures amounted to SAR 153 million, in line with our guidance and aligned with our growth ambitions, of which 50% was growth related. We closed the period with a cash balance of SAR 1,397 million, reflecting strong cash generation. Moving to the guidance, we have revised our full-year sales targets to approximately 1.15 million metric tons, reflecting the impact of the current geopolitical environment on market dynamics and trade flows in the first quarter. Remaining turnaround expenses to be paid this year are expected to be around SAR 90 million-SAR 100 million. All other guidance remains unchanged.
In summary, the quarter reflects the strength of our financial position and the disciplined execution of our strategy. Despite a dynamic market environment, we have delivered solid profitability, maintained a robust balance sheet, and continued to invest in our growth priorities. We remain focused on operational efficiency, capital discipline, and value creation, and we are confident in our ability to navigate near-term uncertainties while positioning the company for sustainable long-term performance. We will now move on to the Q&A session, which will be moderated by Saleh.
Thank you, Mr. Saud. We will begin our session for today. As usual, please state your name, your company and your question. Mr. Taha Javed. Hello, Mr. Taha. Mr. Taha, do you hear us? I will temporarily move to Ms. Silvia Richards from Morgan Stanley, then coming back to you, Taha. Silvia, please step forward.
Hi, can you hear me?
Yes, Silvia. Loud and clear. Hello.
Hi, this is Silvia Richards from Morgan Stanley. Thank you for taking my question. I have two questions. The first being, given that base oil crack margins are a little weaker than expected this quarter, can you please confirm whether this was because of a lag in the increase of base oil prices versus your feedstock costs? If so, how do you see this evolving in Q2? Should we expect base oil prices to catch up and margins to be much stronger next quarter? My second question is on by-product margins. Given that they were the key driver for performance this quarter, can you please just elaborate on what they were for Q1, and if you have the breakdown to hand, what they were quarter to date?
Okay, Silvia. Let me just repeat your questions to make sure I grasp the idea correctly. The first one was related to the base oil crack margins, the performance in Q1 and the forecast in Q2. The second question was about the dynamics or the behavior of the by-product crack margin. Do I get you correctly?
Yes, that's correct.
Thank you. Mr. Saud?
Thank you, Silvia, for this great question. I think this is yes, we noticed that lower crack margin. However, as you mentioned, the lag time between the increase in the feedstock and the time that the base oil prices capture, that is there are two, three months lag period between these two changes in the prices. As we note, you know, this may be in our website, we posted our prices in April, where we show that also April prices are higher than previous quarter. Which indicates that in the upcoming quarter, there will be improvement in the crack margin. That is for the first question and for the forecast for the next quarter.
For the second part of your questions is the crack margin of by-product. Yes, we have saw an improvement on that, especially on products such as diesel that impacted positively on our our market our quarter one results. We can see that we are, we can say around $70 per metric ton for our by-products this quarter.
If I may quickly add, Silvia. This is CEO, Samer Al-Hokail. Crack margins of by-products such as diesel, others, are heavily correlated with highly correlated with crude oil prices and the feed itself, which is highly correlated with the fuel oil itself. It moves faster on a sudden movement and volatility of the markets when it comes to by-products. Whereas base oil is different. It takes longer time because it's a different market. It has a different dynamics, in fact, and the customers are very different on that. The lag is there on that. As a forecast, the forecast of course is gonna be only a forecast for both by-products and then base oil. Depends on all the geopolitical situation and the supply demand within the region.
Thanks to our President and our CFO. Moving now to Asset Management from Derayah. Could you please step forward?
Hello. Am I audible?
Hi. Yes, you are. Please.
Yes. Thank you very much for the call and also taking our questions. I have several questions. The first one is with regards to your volumes. This quarter you have done around 240,000 tons. Still it's sort of below your optimum level of around, because in some quarters you do close to 300,000, 325,000 tons. Just wanted to know what the reason is. If I'm not mistaken, there were no shutdowns in the first quarter, so why these, the volumes were a little bit, you know, lower than the optimum level? Since this crisis started, how has your markets, that is the geographies, the geographical areas in which you sell most of your products, how has that changed? Are you selling to new markets?
The third one is, I mean, with regards to the prices, I mean, they are at very high levels currently, the base oil prices. Are you getting any pushback from your clients that, you know, they are not willing to purchase at these prices?
Okay.
Those are my three questions.
If I may repeat your questions. The first one was related to the capacity that is produced Q1.
Yes.
The second one was related to any new markets or what is the change in our-
Yes
traders at the moment.
Yes.
The third one, if there is any pushback related to the prices. Am I correct?
Yes. Yes, correct.
Let me try to tackle few of those good questions. On the first, in terms of the sales and production, that's related to production. The We have just come from a huge, the longest turnaround in Luberef history in December, and we started around end of December. Usually any, the nature of the business itself and the kit, be it a refinery or a base oil, it does take time for it to produce on spec product because our operations are in batches. You would probably lose from the quarter, two weeks to 20 days. Roughly two weeks of production. Real production. That's probably the answer of that.
This will answer, of course, the free cash flow, of course, question that is probably anticipated because the tanks are not full on that area. That drops off. On the prices, no, we haven't had any pushbacks from customers at all on the recent changes in prices. It's all accepted because I'm not sure why they not, but the customers would probably pass through these increases to the market itself. The last question, or at least the mid one, was related to the market itself. We were able to deploy some of the tons to different markets. Same markets we operate in, but India, Pakistan, and some in Africa as well.
Also utilize our storages across the four corners of the world, be it in South Africa or in Antwerp or in the U.S. as well, to deploy that base oil to customers.
Also, if I may add something related to the operation. Further highlighting what Mr. President mentioned. By batch operation, we mean that we are producing 4 different products from the same production train. It takes some time to change conditions back and forth. Given also that some of the catalysts have been changed for the first time since 2019. All of this was taken into consideration in stabilizing the refinery following the turnaround. Moving next to Mr. Aakarsh Tomar. Could you please step forward?
Hi. Thank you very much. This is Aakarsh Tomar, from SICO Investment Bank, Bahrain. Congratulations on a good set of results. My question is a follow-up to the previous question. I mean, I understand you gave a fairly good idea for as to why the volumes were low in the 1st quarter. The reason for the revision, it's kind of a confirmation. If the reason for revision, revising down the guidance. Earlier it was 1.25 million tons, and now it's 1.15 million tons. Is that purely have to do with the 1st quarter, or do you expect some kind of volumes loss in the next three quarters?
You're absolutely correct, Mr. Tomar. This is the main reason. We do not anticipate any change in the production going forward. The change in guidance was mainly driven by the events of the first quarter.
Thank you. Just second question. Thank you for that. In terms of your operations, because you're based on the West Coast, I'm assuming you're not facing any issues with the logistics. Just wanted to get an idea. Is there any kind of disruption that you are facing from the current ongoing geopolitical situation? Any way it is impacting your business?
I think, thanks for the question. On the geopolitical situation, from sales perspective, we are increasing our local sales a bit. Our UAE tankage mainly are at low level, but we're utilizing Al Fujairah tanks, so we're able to sell from there a quantitative amount as well. Then as well from the west region of Saudi Arabia, we're selling to markets in Africa and in Europe alongside. More of local sales a bit, not something that is very significant, but it does help.
If I may add to that, especially that subject. I think all the plans and preparations and things that Luberef was done in previous period in order to have any mitigation plan to maneuver during any situation like this, that helped us by achieving new markets previously now that we can utilize different outlets for our products. That was the time where we can test the agility of the company and that help us during these conditions.
Well, thank you very much. All the best for the future. Thank you.
Thank you, Mr. Tomar. Moving forward to Mr. Ildar Khaziev from HSBC. Could you step forward?
Yes. Thank you so much. This is Ildar from HSBC. I have a few questions, please. First, on the export strategy. I know that in the past, a big chunk of your volumes used to be used to go to UAE. Obviously these had to be rerouted. Did you have to find vessels for this? Was there any input from the surge in the freight costs, especially as we go into the second quarter? Do you expect any cost inflation because of that? Secondly, was there any impact on the domestic premium due to the disruption in the first quarter? Lastly, my question is about quality of the feedstock.
There have been some profound changes in terms of how Aramco is moving its crude now from west to east. Was there any impact on the quality of the feedstock you're receiving at the moment? Thank you.
Okay, Ildar. I will repeat your questions for the sake of clarity. Number one is related to the selling exporting base oils to different markets. How well we did with others. The third question was related to the feedstock quality. Could you repeat the second one again? Sorry.
Yeah. Well, did you, did you observe any changes in the domestic premium during the quarter? Was it kind of moving in line with the previous periods? By the way, on my first question, it was rather about the impact of very high freight costs because you obviously did not have enough of vessels.
Yeah
the, you know, to target other locations. Did you have to search for vessels? Were you exposed, or are you exposed at the moment to the very strong freight rates? Thank you.
Ildar , thanks for the questions, as usual. For the vessels, Luberef was able to reduce spot shipping through securing three long-term contract shipping agreements with Singapore Shipping Company, Uni-Tankers and Bahri. That kind of became like a hedge to what happened during. That we've secured that long before the war has started. As a result of these agreements, freight costs have been reduced by approximately 25% in terms of $/metric ton around Q1 2026 compared to the same period in 2025, following signing these freight agreements. Of course, the UAE was important market for us but as I mentioned, we now go through Fujairah as well, utilizing some of our partners. We've also trucked to Oman in a way accordingly.
Of course, we ship from Yanbu and Jeddah globally. The spot market, of course the shipping spot market has increased, therefore our freight agreements will serve as a shield, honestly, to what has taken place. On the local premiums, I will have the CFO to shed light on that.
For the premiums, what we are sharing before even on the guidance. It's stabilized the premium prospective side. However, the prices usually moves, we do a review from time to time to the prices. We need to look at that with the moving also of the prices on the export side for our external customers. With that, we are moving on the same guidance of, from premium perspective. However, we make sure that also we cover all the feed cost first.
With of course, Ildar, with the mindset of customers. I know the hike took place in a parabolic fashion and we're not gonna move that fast as well. At the end, this is a relationship and a market that we value this. We're not gonna move prices swiftly on customers, but rather in a very agreed fashion. Because when the tide is short, you know, things can move differently and I'm sure we will ask for their assistance going when this time comes maybe in five, six, seven years as well. It's a moderate move, honestly, striking a balance.
Wow. The last question, Ildar, was related to the feedstock quality, the RCO that we are currently receiving. Generally speaking and historically also, there were times where feed's quality changed temporarily for some time, either for technical reasons or change in composition in the past. It does not upset or completely restrict the production of base oils, but certain changes could be observed over some time, both from mainly operational changes.
Thank you so much. May I ask one more question, please, about pricing of exports? I know that the spot trade has nearly disappeared in Asia since March, just because of the way prices reacted. How do you price your cargos, you know, these days? What kind of benchmarks are you using? I mean, what I know it's different between the contracts, have there been any sort of difficulties in terms of setting the prices and agreeing on prices with the customers?
If I may take that question, Ildar . Our prices are already contracted with those customers, we already signed supply agreements with those customers, where they located where depends on the index that we are using. Difficulty in pricing those products with the customers, I can say that there is none from that perspective. However, we have already agreed with the customer with a formula that depends on the prices of those indices, and that is important for us at Luberef where we secured that, these agreements, beginning of each year so we can have.
Discussed
already take care of without having any difficulty in pricing during these changing of circumstances.
That's great to hear. Lastly, is there any interest from customers maybe to engage in, you know, sort of longer-term agreements whereby the price is set, like, for the next few quarters rather than being linked to, spot and short-term?
So far we are working with a supply agreement with the spot prices. I think it's usually better for us and for our customer. You know, those, the base oil, our market and the quantity is very smaller comparing to other fuel and other products where hedging is being done there, here and there. I think it's current operational requirements for those products and this market is important to have that flexibility and to be indexed on the spot on the spot market instead of fixing it for any reason.
Thank you very much.
Thank you.
Next, Mr. Abdullah Alwehaibi, could you step forward please?
Abdullah, do you hear us?
Yes. Hello. Am I audible?
Yes, you are.
Yes. This is Abdullah Alwehaibi from MEFIC Capital. I just have two question on my side. You mentioned that base oil volume has declined by 12%. I just want you to know what was the volume of byproduct this quarter. Has it declined by the same amount? The second regarding the base oil prices. We see a quite a hike in April prices. I just want to hear your thoughts about the prices going forward, and how is it as of May now. Thank you.
Abdullah, thanks for the question. Let me answer the second question and give a maybe a framework on the way we think this through. Given the high crack margins of diesel, kerosene and fuels, and given the fact that base oil producers are mainly predominantly linked to refiners, there are only few. In fact, maybe I could only think of Luberef as a pure play, and the rest are all refiners. Refineries will probably pivot to higher crack margins and fuels. It's a much liquid market. Their collection will be faster and quicker, therefore, on the expense of base oil volumes. Therefore, supply of base oil becomes less globally as a result of that, therefore, you would have a hike in the prices. That's the definition of the lag that takes place.
Some people say it's a month, some people two months, three. It depends how you model it in your models on that. That's the thinking on that. Therefore, the prices are dependent on the refiners that are shifting from base oil to fuels, diesel, and more. In your view on the geopolitical situation, if this is gonna continue, then yes, crack margins will be higher and diesel and U.S. gasoline as well and therefore base oils will follow suit in a lagging fashion.
For the first question, if I may answer your questions. Yes, we have noticed a decline, as you mentioned, in our base oil during the first quarter. Typically, there is like, our byproduct quantities comes in almost double of what our base oil quantities in a specific production period. Typically, if our base oil production declined during that period, that would have the same impact of decline in byproduct. However, that is ratio is still there. Ratio has not been changed. We have not noticed any unusual change in our byproducts production comparing it to base oil. As we are focused on base oil production, our production is based for both base oil and byproducts are healthy during the first quarter.
It's fair to assume that by-products also declined by 12% this quarter?
We can have the same assumptions. Maybe we can give more details.
No, no. The ratio is different, Abdullah. Not 12%. If base oil is 12%, the byproduct will be something else. The ratio is maintained on both.
Abdullah, if I may add, like Mr. Saud mentioned, and also Mr. President, usually a byproduct production during a quarter is twice as much base oil. In this quarter, we have 240,000 metric ton of base oil production. It is safe to assume that twice as much, which is 480 or 500. That's a typical byproduct production during the quarter.
Oh, okay. That's great. Thank you.
This assumption could be carried on moving forward. There could be some minor changes or some specific changes on quarterly basis, but it's give or take twice as much base oil production. That's the byproduct assumption.
That's clear. Thank you. Thank you, Manager.
Okay. I will temporarily go to Mr. Taha Javid because he has been waiting for some time now. Mr. Taha, are you audible? Do you hear us?
Can you hear me?
Yes, Mr. Taha. Yeah.
Thank you so much. I think just picking up from the last question, you mentioned that it's the byproducts are roughly double the base oil production. Roughly, just to understand, if byproducts were roughly around 400,000, 500,000, like, what would be the constituents of the byproducts? Like, I think diesel, asphalt. Like how much in terms of percentage of byproducts, how will you quantify the volumes?
In a typical production year, the, you know, from 50% to 60% of the byproduct pool mainly is represented by asphalt and marine heavy fuel oil. If you are focusing on the currently lucrative byproducts that are the diesel and naphtha, they represent close to 15%-20%. This is a good assumption to look at it this way. You can also verify the figures by the annual production reported in the 2025 annual report as well.
Okay. Diesel and naphtha combined 15%-20% or each 15%-20%?
No, no. Combined.
This will be like 60% is asphalt and marine heavy fuel oil. 60 and 20, let's say, diesel and naphtha. What is the remaining 20%?
The remaining consists of other by-products such as wax, extract, and aromatic stream we produce from Yanbu facility. There is also sulfur, both solid and liquid. Yeah.
Heavy oil.
Heavy oil already mentioned it. These are the typical by-products produced from Luberef, from both facilities of Luberef.
Okay, got it. Thank you. Obviously, as you mentioned, the ones that obviously carried this quarter mainly a higher pricing from by-products would be, I guess, diesel, naphtha, right?
Diesel-
change in asphalt and marine heavy fuel oil.
Diesel, naphtha, and drilling oil, which we refer to them in our annual reports as the white products. Those are the ones to answer your questions that you put it in a good way, carried the quarter.
And, and if I-
Yeah, please.
If I may add to that, Saleh, that you mentioned it very right in a way that where Luberef's operation is that also benefits from that perspective. In case, it's like a hedge also for our by-products that help us sometimes in the time where difficulty, for example, in reduction in the crack margins and vice versa. We are protected by our business operation model is good from that perspective.
Certainly. Certainly. Just my second question was around, like I think I felt that there was a bit of contradiction that you mentioned that there was no pushback from clients on the higher prices, but then there was a certain statement that because of the parabolic rise, we'll pass on the pricing gradually so just wanted to confirm on do how you.
Yeah
Think on those things.
No. Taha, correction. Correction. I'm saying that, let me maybe be clear. I'm perceiving that the customers in the market are passing through the high prices to the consumer themselves, which is a typical area. I don't know that for sure. I'm just perceiving that that's why there isn't a pushback highly. No, there's no, there isn't a huge pushback as because we are approaching this from a balanced perspective. We're not hiking the prices suddenly in a parabolic fashion or an accelerated fashion. We're doing it actually, we're putting a cap on some of them. Therefore, just for continuing that relationship and the lifting. At the end, we don't wanna have a demand destruction, of course.
Mm. But-
That clear?
Yeah. I think partially. Like in the way that, again, in terms of your ability to produce, you think you'll be able to sell this year even with the higher pricing?
Clarify the question.
Okay. Like, right now you're obviously expecting 1.15 million base oil production. Roughly you think you'll be able to sell whatever you produce despite the higher pricing in a way?
Of course. Yeah. We're going to be able to produce and sell.
Like there is no demand destruction that you see that, you'll have to give some discounts to make the sales?
No, no. No discounts to make the sales. There are areas to explore markets. There are agreements in the contracts that gives in a way people to lift even more depending on the price. There isn't yet a push. We don't foresee that. Honestly, I don't think the crack margins also will sustain till Q2, Q3, Q4. They will change. They'll need to stabilize.
Yeah, definitely. Obviously, if things normalize, then sure, normalize. Yeah.
There you'll have just a noise, a spike in one quarter or maybe a quarter and a half, then it should normalize.
No worry. Thank you so much. Best wishes for the remainder of the year. Thank you.
Thank you, Mr. Taha. Moving to Mr. Fawad Khan. Please step forward, Mr. Fawad.
[Non-English content]
Hi.
Thanks a lot for giving me the opportunity to ask you questions. I have four questions. One is basically the question that I have carried on, the three are kind of follow-up. A question that I have is basically on the shutdown, which was primarily planned for August, third quarter. With this even happening in first quarter and the second quarter, are we expecting any change in timeline for the shutdown for the linkup of the Growth II facility?
Okay. Your first question is related to the shutdown in August, which we communicated in the guidance of the annual production. So far, there is no change in plans. We expect it to take place as is, and we are monitoring the situation closely with our growth projects team.
I mean, given the margins where they are you not looking to kind of delay it, the shutdown and benefit from the higher margin environment currently?
Um-
You take decision once you reach there and you could decide on the shutdown?
Okay, Mr. Fawad. Just let me maybe carry on from what Mr. President said a couple of minutes ago. What is currently taking place in the market is quite the opposite. There is a shortage of supply that Luberef was able to benefit from due to being a pure play base oil producer. However, if we look at the forecast, because it is the best judgment that we have on the table currently. Mr. President also highlighted this. It's not You know, it's being updated as we go, but the current forecast is expecting some sort of normalization after Q2. That's another factor that we take into picture in maintaining our current plans for the shutdown.
Of course, if the crack margins continue and, you know, we're not gonna be married to this date, but at least we will be agile and flexible, try to create and capture value during these volatile market dynamics. We will make that decision very in the maybe coming a month or two to really have a better understanding if it's, if August is go time, which is per the plan, or not.
From, if the company decide to basically delay the shutdown, so in terms of the coordination with your parent company for the feedstock, would it be obviously the angle to look at or would be the decision factor? The company can decide on its own to just delay the shutdown and Aramco can take care of the whatever feedstock would be available to perform the shutdown?
No. If that's gonna be the case, we'll update our guidance accordingly on that or give out a more of a clarification on the shutdown date going forward. In terms of the feed supply agreement with the parent company, our parent company is very flexible. And as well has a lot of redundancy as well in their system, so it shouldn't be an issue for us.
In the latest guideline, we're presenting suggested the progress on the Growth II projects is 71%. Is it possible to complete remaining 30%, 29% of the project in the next four months or so? Assuming that the guideline is based on from March 31st.
If you're asking about the project completion percentage, I would say the project nature and acceleration of the percentage as a project nature requires a shutdown. For example, we were able to execute during the past shutdown major project equipment, major components of the project in very high percentages in a month, which is unusual for a project progress. The nature of it is you require a shutdown for it to progress.
Yeah
find, you would probably find us maybe 80%, and then we'd need a shutdown to do the remaining, the 20%. Something like that, around that. You would need a shutdown for it to progress heavily per the framework of the scheduling we have.
Okay. Second area to explore is basically the volume. The guidance was 1.25 million tons at the start of the year. Now we have 1.515 million tons as a guidance. I'm just curious whether the cut down in the production guidance just based on the performance of the VDU or the overall facility post turnaround time, or it's also there are some more component like supply of the other, we call it, VDU or some other component feedstock, which has impacted the overall guidance for the production for 2026.
Okay, Mr. Fawad Khan. If I understand your question correctly, you're asking which unit, if possible, was the main contributor to this stabilization?
No.
Sorry?
What has led to the drop in the production guidance?
Yeah
for 2026? Whether it's just the, post turn-on issues, technical issues or there are some other issues that we should be aware of?
The main contributor was the first that you mentioned. We just came back from a turnaround, the biggest in the company's history. The first one since beginning of 2019, where major scope was carried to change different catalysts in different units, such as the isodewaxer , sulfur recovery, hydrogen manufacturing, et cetera. That in addition to completing other scopes in different units. Typically, it took some time to get the refinery up and running again. And usually in such times, no one, I mean, from an operational perspective, can give a guarantee how long it will take to stabilize everything post the turnaround. That was the observation that we received. Coming to the second point, which is the change in quality.
Like I said to Mr. Ildar from HSBC, it's not a fixed stream in the sense that it's like a crystal clear. We get some changes. We had some changes in the past due to different characteristics. The most important thing is that we have a secured stream to produce base oil. Different changes are usually overcome and compensated by changing the refinery conditions internally, such as pressure, temperature, et cetera. Such changes take time depending on the change or the expected change in the feedstock quality. The main reason is the major one, which is coming from the turnaround.
Okay. Thank you. Thank you. One last question is on the export prices. Just kind of a follow-up question on the previous question. You mentioned on your website, the prices for the month of April were updated even before the close of the month of April. I mean, there were still three, four days left before the prices were updated. I'm curious if the average prices used for the export are based on, let's say, 15 of last month or 15 of current month, or is how do you actually place your export cargo? Is it based on some kind of average 15 days of average 30 days? That would be my question.
Well, if I can take that question. That depends on the agreement between customer to customers. In general, it's a mean of average of 1 of the month. However, maybe some customer have different way of agreement, this is the general idea, yes. We take the mean or the average of certain indices as upon agreed with the customer on that. It's not like one day specifically, it's of the period of the sales.
Of course the period, I mean, period is, I mean, past 30 days or out of 45 days or just last for the month of let's say if you are pricing export cargo in, on the 1st May. The price would be based on the April average or there would be some other agreement?
It depends on the agreement with customers. It is difficult to disclose that for every customer or of now. Depends on the agreements. In general statement, it is the average of the month of the sales.
Okay. Okay, thank you. Thanks for the answers.
Thank you, Mr. Fawad Khan. Moving to a written question by Mr. Faisal Al Jerait. I apologize if I mispronounced the name. The question goes, "Regarding the by-products components, which was the main reason to have good results in Q1 2026 year-on-year, where crack margins of base oil was declining? How much contribution of your by-products sold at market price or at cost to Aramco because the support from the by-products was impressive?
Again, as we mentioned earlier, that some of the we compare our byproduct during the first quarter with the previous quarter or even with the similar quarter last year or even with the total average of the byproducts last year. All of that we see an incremental and increase in our byproduct. Yes, it played a major role in our posted result during Q1. We had comparing to around $70 per metric ton during first quarter. That has helped much in that area. Most of our product, it depends on the nature of their product. Each product have its own pricing. It is that the average byproduct that helped us during that quarter.
If it is part of the guidance you, yes, we look at byproducts, but I mean, the whole thing because it was impressive because the sudden movement that took place in the oil market and the diesel and the cracks are high, very high. I mean, they went quite substantial. By the way, at times, we have negative crack margins on byproducts such as, I think it was Q4 in 2025, it was negative. We've announced that. 12 months of 2025 is also around negative crack margins. That's why you don't rely on the byproducts tremendously. We're a base oil company, and we focus on that. That's why our guidance stick to the base oil crack margins. It's just I think it's just better for the forecast.
Of course, you would have to factor in if these sudden movements are frequent and now geopolitically, of course, yes, you'd have to factor this into your models.
By this, we conclude the written question. Back to Asset Management Derayah. Asset management Derayah.
Hello?
Hello. Yes, please.
Yeah. Yes. If I may just have one follow-up question. This is just a further clarification on something you mentioned earlier. You have said that you do not want to cause any demand destruction and, you know, you are only going to pass down the increase, this is moderately, and you even talked about putting a cap. Does it mean that perhaps you will may not realize the prices as what is suggested by perhaps the indices against which your contracts are linked?
No, no, that's not the. The contracts have already been signed. What I meant is this weekly thing, we have to, when we sit down and discuss and have a judgment on the prices, we don't want to go extremely high. When I say a cap, I say cap some of these products because we know these dynamics of that product is for that month only or for that couple of weeks, two weeks only. We would go and post a different price. As you can see, and you could look at our posting prices, the roll has been increasing. It could have been, yes, you could argue saying, "Yeah, you could have cracks increased more and more." Yes, that's true. We could have or reduced less.
I don't think that's the nature of the business. It's a relationship business, and going forward, you need to maintain these relationships.
Okay
you don't wanna go and hugely increase for any demand destruction going.
Okay. Basically what we see on your website is a fairly good reflection of the actual prices that you are going to realize eventually.
Oh, yes, yes.
Okay.
Of course, that's part of the transparency we've done. That's why there's a good proxy or indicator as you look at the website. If changes do take place, you could factor them in your model.
If I may add.
Okay.
I may, if I may add one thing here in this context, that, also we have, noticed that our whatever we are producing, we are selling. The demands of our products are there. We at Luberef, especially in Q1, we didn't see any pushback. We have managed to sell our production, which means and translates that also our pricing mechanism, was, correct pricing mechanism that do not push the customer for other markets or other products from other, supplier. That help us also to continue our, pricing for those products.
Okay. Thank you very much.
Thank you. There are no further questions available at the table. We thank you for your participation today, both verbally and the written terms. Please note that investor relations team at Luberef is available. For this week Inshallah, we will upload all the documents to the website as usual, and we are available for any follow-up calls and meetings. Thank you