Hello, everyone. Good afternoon.

My name is Saleh Al-Ghamdi. I'm the Investor Relations Manager at Luberef.

It is my pleasure to welcome you in today's audio webcast where we will be discussing our performance for the first half of 2026. I'm also pleased to be joined virtually by our President and Chief Executive Officer, Mr.

Samer Al-Hokail, and here with me in Jeddah, our Chief Financial Officer, Mr. Saud Kamakhi.

Our session will begin with a presentation highlighting Luberef's performance for H1 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 in the slide. With that out of the way, I will now hand over the call to our President and CEO, Mr.

Samer Al-Hokail.

Hey, everyone. As-salamu alaykum jami'an.

Welcome to Luberef's second earning call for 2026, and thank you for joining. We value your participation today and look forward to sharing an overview of our business highlights, strategic progress, and financial results.

This year marks a significant milestone for Luberef as we celebrate our 50th anniversary. Over the past 5 decades, the company has built a strong track record of operational excellence, safe and reliable operations, and disciplined execution.

As we celebrate this milestone, we remain focused on building on that legacy, keeping the world in motion and positioning Luberef for its next phase of growth. Building on this strong foundation, the second quarter recorded another notable milestone for Luberef as we delivered one of the highest net income and crack margins in the company's history.

This achievement reflects strong operational performance and our ability to capitalize on favorable market conditions. Safety remains our highest priority throughout the quarter.

We sustained a total recordable incident rate of zero and surpassed 44.4 million man-hours without a lost-time injury, wa lillahil-hamd, while maintaining mechanical availability of 100%. These results underscore the strength of our safety-first culture and disciplined execution of our operating model.

The company advanced its localization effort by signing an agreement with APAR Industries Middle East Limited to supply base oil for its manufacturing operations within the LubeHUB Value Park in Yanbu. The agreement represents an important step in enabling APAR manufacturing transformer oils and a broad portfolio of specialty oils within the Kingdom, reinforcing the LubeHUB's position as a catalyst of downstream industrial development while contributing to local value creation and strengthening the Kingdom's industrial ecosystem.

Building on that commitment to enhancing local content in the Kingdom, we launched ASASNA program, which is the name of the program, which aims to promote local sourcing, strengthening the supply ecosystem, and develop national capabilities across our operations. The program embedded local content as a strategic pillar across Luberef's value chain, advancing Saudi localization agenda while fostering long-term partnerships within the Kingdom suppliers, reinforcing our contribution to the Kingdom's Vision 2030.

Furthermore, we signed a Memorandum of Understanding to explore carbon-related initiatives, supporting carbon market development and emissions reduction in line with the sustainability ambition of Saudi Green Initiative. We continued to optimize the value chain of export through ongoing logistic initiatives.

These efforts enhance supply chain efficiencies, strengthened our competitive cost position, and contribute to improved profitability. As a result, our board of directors has approved an interim dividend of 4 Saudi riyals per share for the first half of 2026, in line with Luberef's dividend policy, reflecting the company's strong financial performance and commitment to delivering shareholder returns.

Our commitment to transparency and corporate excellence was recognized during the quarter as Luberef received the Investor Relations Program of the Year 2025 Mid-Cap Awards for the second consecutive year. This achievement is a testament of our continued focus on maintaining the highest standards of investor relations and fostering open and consistent engagement with the investor community.

We remain confident in Luberef's strategy and our ability to execute it while fortifying the company's long-term competitive position. Growth II reached 73% overall completion.

Building on this progress, procurement activities accelerated during the quarter to sustain the project execution phase. The current favorable pricing environment and feed stock supplier presented an opportunity to create additional value; accordingly, we rescheduled the planned shutdown to October, enabling us to extend production during a period of strong base oil pricing and market dynamics.

During the fourth quarter, both shutdown and ongoing activities are expected to increase the project's progress by 10%, driving the total percentage to 83%. Construction scope related to vacuum distillation unit will be subject to completion in the first half of 2027, followed by the project commissioning.

Our base oil crack margins for the first half of 2026 reached 2,732 riyals per metric ton, the highest level in Luberef history. This reflects an exceptionally strong market environment, with crack margins increasing by 49% compared with the same period last year and standing 52% above the 10-year historical average.

Supported by strong performance and disciplined execution, these healthy market conditions enable us to deliver record financial results during the period. With that, I will now hand it over to our CFO, who will be walking us through the financial performance, and I'm looking forward for the Q&A session.

Thank you, Mr. Samer.

I extend a warm welcome to you all, and I'm delighted to guide you through our H1 2026 financial results and provide insight into the guidance for remaining financial year. During the first half of 2026, the company delivered an exceptional financial performance, supported by a favorable market environment and strong pricing dynamics.

This strong performance was underpinned by a record high base oil crack margin of 2,732 Saudi riyal per metric ton, representing an increase of 49% compared with the same period last year. The significant expansion in margins provided a solid foundation for the company's earning growth during the period.

As a result, EBITDA reached to 1,184 million Saudi riyal, representing an increase of 94% year-over-year, while net income amounted to 992 million Saudi riyal, with an increase of 113% compared to the same period last year. These results demonstrate our ability to capture value different market conditions and reflect the resilience and strength of our operating model.

Our capital program continues to focus on supporting the company's strategic growth priorities, with total spending of 302 million Saudi riyal, of which 119 million was allocated to the Growth II project, while turnaround commitments contributed to 133 million Saudi riyal. Despite these continued investment, the company generated strong cash flows during the period.

Supported by favorable working capital movement, free cash flow increased by 346% compared to the same period last year, further reinforcing the company's strong financial position and financial flexibility. Supported by this strong cash generation, the company closed the first half with a robust financial position, maintaining a negative gearing ratio of 20% while delivering a 33% in ROACE.

Together, these metrics reflect the efficient utilization of our asset base, a disciplined capital structure, and a resilient balance sheet that provide a solid foundation for future growth. Net income for the first half of 2026 reached to 992 million Saudi riyal, compared to 467 million for the same period last year, representing the 113% year-on-year increase and the highest value in the company history for 6-months period.

The strong performance was primarily driven by higher base oil crack margin as Luberef successfully capitalized on market conditions through effective operational management and strong safety and reliability performance, enabling the company to benefit from the higher market prices and strong crack margins. Turning to our cash position, we began the year with a cash balance of approximately 1,373 million Saudi riyal and generated 1 billion riyal in free cash flow during the first half, reflecting the strength of our operating performance and disciplined working capital management.

During the period, we invested 302 million Saudi riyal in capital expenditures to support our strategic growth initiatives, while returning 589 million Saudi riyal to shareholder through dividends for the second half of 2025. As a result, we closed the first half of 2026 with a cash balance of 1,750 million Saudi riyal, maintaining a strong liquidity position and the financial flexibility to support both our growth strategy and shareholder returns.

As we move forward, base oil production for the year is still projected at 1.15 million metric ton of base oil. In line with the recent development in Bab-el-Mandeb, export sales have been diverted to alternative routes, and Growth II shutdown is rescheduled to October in order to capture the current attractive business environments, while the range of CAPEX guidance remains the same.

Reflecting our strong financial performance and healthy cash generation, our board of director has approved an interim dividends of 4 riyal per share for the first half of 2026, according to the Luberef's dividends policy. Other guidance factors stated in the slide remain valid, including premiums and prices indices.

This quarter demonstrates the resilience of our business and the strength of our financial and operational performance. Despite the evolving regional environment, we remain confident in our ability to adapt, execute our strategy with disciplined, and capitalize on opportunities.

We are well-positioned to sustain strong profitability, maintain a healthy balance sheet, and continue investing in our long-term growth priorities. With that, we move to the Q&A session that will be moderated by Saleh.

Thank you, Saud. We will now begin our Q&A session.

As usual, kindly start by introducing yourself and your place of work, followed by the question, whether it is verbally or by type. I see Mr.

Iyad Ghulam from SNB Capital. Could you please step forward?

As-salamu alaykum. Congratulations on the very strong results.

I have 2 questions. The first one is regarding the current situation of Bab-el-Mandeb.

I know things are still evolving and it's not very clear, and you mentioned, Saud, that there is rerouting to other destinations. I just want to understand how is the picture of or the ability to export volumes.

The second question is about the by-products crack margins. Last quarter, it was really strong, but apparently this quarter it was a drag on the earnings.

How should we think about it, and what was the reason behind the weak numbers in Q2?

Eyad, let me,

if I may, Saleh, take this on Bab-el-Mandeb. Thanks for the question, Iyad.

Tab'an, on Bab-el-Mandeb, it still remains very continuous in terms of heightened and regional tensions. We do have several alternative, it is part of our enterprise risk management that we review on a monthly basis, and the alternatives are different routes, some of which are the Cape of Good Hope, which are in action as we speak.

We would actually truck even more locally and sell locally, and this should offset it now. Nevertheless, ships are moving through the Bab-el-Mandeb, our ships are being nominated and accepted as well in the recent few days, but it is fluid and it evolves as we speak.

On the second question, I think maybe Saud can handle this, please. Tayyib.

Thank you, Iyad, first of all, for your attendance. Yes, I think from by-product perspective, in second quarter, it was lower, and as you know that those are related also to the fuels prices and the drop also that happened in our feed stock and crude, which our by-products, such as diesel, also followed the same trend.

Therefore, yes, we enjoyed a high margin during quarter 1, but quarter 2, maybe we became back to the regular situation in normal years where we have lower margin in the by-product, so that is have one impact on our margin, but not that much impact compared ya'ni for our final results.

If I could just jump in here, Saud. You mentioned how do you want to think about it.

I think the way is, ya Iyad, is the effect of crude oil prices and fuel oil prices to by-products is much quicker and faster, and it's a linear relationship, in a way, in the market than your base oils. The base oils tend to lag.

If those prices are reduced, then the by-products are swinging as well.

Clear. Thank you so much.

Appreciate it.

Thank you, Iyad. I see next on the table, Mr.

Ricardo from Morgan Stanley. Could you please step forward?

Hello. Good afternoon.

Can you hear me?

Yes, you're audible, loud and clear, Ricardo.

Perfect. Thank you very much.

A couple of questions, if I may, more on the marketing side of things. When you mentioned some of the logistics issues that you're facing right now, could we expect any changes on the end markets that you're selling to, a change on the exports on the destinations, and also on the usual mix between domestic and exports?

Then the second one, just given the current base oil prices, when we look at the normal premium that you can sell your products at the domestic market, have you seen any changes on the second quarter and in July, meaning, because of prices being much higher than the usual prices, are you charging a lower premium compared to that $150 through the cycle? Thank you.

I will repeat the questions. The first one is related to any change in the destinations we are selling to, basically the split between the destination and export.

The second question is related to the premium that we apply locally. Mr.

President?

Yes. Exactly.

Tayyib. Okay.

Ricardo, good to have you always, and good questions as well. On the split, we try to maximize local, given what's happening.

As you are aware, local has just a cap of demand. As long as we can create demand, then that's there.

We kind of fill that bucket as much as we can, then we try to export. Yes, we are always in search for new destinations, far destinations as well, be it Europe or even the Americas.

Our usual suspect destinations are the Far East and the AG, some of which are going through the Cape of Good Hope, which requires maybe a working capital kind of arrangement with the customers, some of which have offered to pick up actually the extra freight on that, and some we can negotiate in between, and this is the nature of the industry. On the premiums, maybe I'll have this with the CFO.

Let me know if I answered the question fully, Ricardo.

Tayyib. Thank you, Mr.

President. For the second question, Ricardo, what ya'ni mentioned by our President and CEO right now is keeping that mix as a continuous target for Luberef.

We're gonna maximize the local, and with that, we are also within the range of our premium that we always share. We did not see any major changes within that premium, despite the prices maybe higher during that quarter comparing to the previous one, but the premium is within that range where we're trying to also ensure that our product availability for our local customers is there, and we are keeping and maintaining also the mix of 70/30% during the period.

That was super clear. Thank you.

If I may just follow up on one of the points about the Cape of Good Hope, what have been the incremental cost per ton on shipping via there versus just the normal Red Sea route?

So...

I don't have it on top of my head, but maybe CFO, but definitely it is higher given what's happening now. I'm just looking at even freight rates in crude oil.

It just went tremendously high, not only double, but even more than that. In our case, I'll have the CFO to answer this.

As mentioned before, that there is an extra charges on that. We are looking at rates that maybe started $100-plus on the freight rate per metric ton.

It depends on its destination and other logistic factors. However, that is being now looked at with the customers, and we will see how that will impact.

Maybe a delay in reaching to the customer 30 days or so, but at the end, we will try to ensure activate all our mitigation process that we already have in place to reach to our customer anywhere, insha'Allah.

Okay. Thank you very much.

You're welcome, Ricardo. Good always to have you.

Next, we have Mr. Mohammed Al-Ghanias, apologies if I mispronounced the name.

Mr. Mohammed, could you please step forward?

As-salamu alaykum wa rahmatullahi wa barakatuh. No, بالعكس, you spelled it very very right.

الله يعطيك العافية. Thanks, Saleh.

الله يحييك. حياك الله.

Thanks, Mr. Samer, Mr.

Saud, for the call and for Rajhi Capital, and congratulations for the great results. If you could please shed some light on the Jazan projects, الفئة الثالثة?

I know it's still, ya'ni, very initial phase, but, ya'ni, I would really appreciate if you can just give us an update on that. Also, on second question that I have, on dividend distribution, mashallah, profitability has been very strong, and historically, ya'ni, profitability of the company, Luberef, has been strong, and as you showed, ya'ni, gearing is negative 20% right now, you have a lot of cash, you have, mashallah, very strong or I would say, ya'ni, excess capital giving, ya'ni, the asset-light, ya'ni, business model that you have compared to, ya'ni, other normal, prevalent refineries.

Doesn't this, ya'ni, give you some room to increase really payout and increase dividend somehow to make capital more efficient and also increase return? Because, as tab'an, as, mashallah, you grow on earnings, you will, ya'ni, accumulated capital, which could شويه push returns lower.

Ya'ni, at the end of the day, mashallah, البنوك, ya'ni, فاتحة أبوابها. I'm sure they would be really happy to finance Luberef growth plans at very decent, ya'ni, spreads.

Thank you, Mohammed. I'm just going to make sure I repeat the questions for the sake of our audience.

The first question is related to the status of project Jazan, which is to produce Group III+, I believe this would best be answered by the President and CEO. The second question is related to the why or what dictates the range of payout in relation with dividend policy.

Mr. President, would you like to step forward?

Sure. Thank you, Saleh, and thank you, Mohammed, for the question and the convincing argument you're putting through on the dividends, which will be hopefully entertained through this Q&A.

Tab'an, we have a MOU signed with Aramco to study the facility of and producing Group III+ in Jazan. The unconverted oil, that is the feed going for that facility, and it will upgrade a low-value product to a very high-value product.

This whole thing is expected to have an FID sometime in 2027, first half in 2027, not sometime, but definitely the first half of 2027. Currently, we are in the pre-FEED, which is the pre-engineering capability.

We're looking at not only the economics, we're looking at utilities, we've done the feasibility of locations. Then the nature of these projects, which are quite intensive in engineering, front-ended, it takes 6 months for that to be done, then maybe another year after the FID for it to be engineered, then perhaps a year and a half for construction and procurement, if all is okay and Bab-el-Mandeb is good and everything is in a good shape.

Of course, given what's happening geopolitically, things do kind of delay, but it should not delay on the engineering side. The expectation is first half of 2027, and we will provide guidance on that.

On your second question, I agree with you. Yes, there is a good gearing, good movement of cash, cash conversion is high, and what have you.

The policy is from 60% to 80%. We could always give more, but also we need to manage expectations and also the CAPEX that will be spent in the future on those projects.

We could also lever up, it gives us optionality on that fable ability. Maybe Saud can even elaborate more on that end.

What you have mentioned, Mr. President, is right, and thank you, Mohammed, for that question.

This is one of the things that we always evaluating at Luberef here. Future project is also important to consider because they play a role, as we have low gearing right now.

Opportunities are always there, and with moving of future project, those projects will be assessed on debt-to-equity basis, based on that environment and interest rate and all of other factors that will help us. With a low gearing ratio, we have a room there to leverage, and we're always going to keep you posted once we have more information about that and moving forward to that direction.

Yes, we have that opportunity so far due to our current robust balance sheet.

Thank you. Thanks.

Thank you, Mohammed. We have 2 questions that are being typed.

I will take them right now. The first one from Mr.

Imad from Basrah, Germany. Actually, Imad has 2 questions.

I will read them out loud. One: "You called it a record crack margin.

An investor seeing a record will assume it cannot last and eventually the share price will fall. What would you want them to understand?"

Second: "You moved the Growth II shutdown to October so you could keep selling at those margins. If margins are still strong in October, would you look at that timing again?"

Maybe I can take the first question, or did you want to...

Proceed. That's fine.

For the first question, Imad, yes, we mentioned that is a record crack margin because this is the current environment. However, we always refer back to the historic crack margin that we have.

I think the share price, this is something that will be determined by the market, is not by the company. I think here, we do not advise to any direction here in our share sales, but this is all that shares will be evaluated not only due to this current market environment, but also for our future project that we are looking to invest in and expected in the future.

This is what we want to maybe answer this question by that. For the second question of moving the shutdown to October and if these margin

keep... Yes, we'll do.

Back to the margins, Imad, thanks for the question. I think, yeah, it's always the case when margins are low, they're not going to be always at the high side, they will go down.

If they went down, on the lowest, the market would turn at some point. What's important here, Imad, is management involvement to keep the facility up and running and reliable and safe, we can enjoy good margins when the market turns, but also sustain cash flow even if the margins are low.

The share price is always just a by-product of that activity. Whether we're able to or whether we kind of think of delaying the shutdown in October or not, I think part of that is being an agile organization by creating value and capturing value during volatile markets, in volatile conditions.

I think we've demonstrated doing that. If the opportunity presents itself to do so, I think part of the agility and to move fast as an organization, we've demonstrated that that might be an option on the table.

It would be on the expense of something else. We'll have to weigh it and analyze it and make a strategic decision.

I'll have to make that decision going forward, by a consensus with the management team. Of course, we have obligations with our customers, with their nominations, with their orders.

We'll have to put all that into consideration. Thank you,

Mr. President.

There is another typed question from Mr. Naif Bin Ghaith: "Congrats on a strong quarter.

I have a question on the turnaround. Did Aramco go through with their planned shutdown, and do you see room to move the turnaround to 2027?

The second question is: What drove the decline in Group I assume, Naif, you're referring to Group I compared to Group II prices, given that during the crisis they were closely aligned?" Question number one is about the turnaround schedule.

The second one is related to the market dynamics. Mr.

President, would you like to answer?

You can take this, Saleh.

Thank you, Mr. President.

Naif, to answer your question, we are not in a place to speak on behalf of Aramco in regards to this, whether they change their schedule or not. Do we see room to move the turnaround to 2027?

I believe this is repeated from Mr. Imad from Basrah, and the President covered this part.

Moving to your question related to the market dynamics, if we take a step back in Q1, both groups were closely aligned due to the fact that the whole market suffered from a shortage in base oil supply. As we moved further into quarter 2, some normalization happened in Group I.

Group II, on the other hand, is mostly still strong, that demand is strong there due to the fact that it is partially compensating for the severe shortage in Group III. Mainly that is what is keeping the Group II prices relatively stronger during the period, while Group I started to normalize.

I hope I answered your question. Now moving again to the live participants, Mr.

Taha Javed, please step forward.

Thank you so much, management. A couple of questions.

One was around this Group II split shutdown in October, or whenever you feel it's more feasible, but just the timing of it, how long or how many days will this shutdown last? The remaining CAPEX that will go into this, I think in the slide you showed 300 to 350 million riyals.

Is this the remaining CAPEX that is left regarding the expansion?

Okay. The questions, number one is a straightforward, the shutdown duration is a 1-month period, insha'Allah, the same duration that was moved from August to October.

Coming to the CAPEX question...

For our CAPEX, Mr. Javed, as we mentioned that we spend by the end of Q2 around 119 million Saudi riyals allocated for this project.

That would bring the total CAPEX amount since we begin is around 384. As you know that the budget for that project is around 750.

What we saw in the slide earlier that the guidance for this year is around between 300 to 350, where we are expecting to be within that guidance during the next period. We are talking about remaining in the second half from 180 to 230 million.

That would close that additional amount, maybe we left with maybe around 100 to 150 for the next year. I hope that answered your question.

It does. Thank you so much.

Just on the by-products, obviously Q2, I guess, declined a lot. What are the trends for July, because diesel prices are up a lot in the recent month?

If you can just guide a little bit on how you see by-products for Q3?

Could you please repeat the question, Mr. Taha?

Your voice is a bit far away.

Apologies. Just wanted to know, I think by-products pricing for Q2 was on the lower side.

Any trends that you're seeing for Q3, like July, I think diesel, at least, is up a lot in recent prices. How do you see Q3 by-products pricing moving forward?

Ya'ni, if we look at it in general, Mr. Javed, that this is a very volatile market, especially on those type of by-products.

Giving future direction or expectation is not an easy way to do it right now. However, we see that movement of those by-product usually go with the oil prices, where there's a lot of relationship between them.

We saw some volatility on that, but for future perspective, maybe it's not our role here to give that at this point. This is at least how we see it in the next quarter.

Thank you so much, and best wishes for the year. Thank you.

Thank you, Mr. Javed.

Moving to Mr. Nawaf Al-Enezi.

Mr. Nawaf, please step forward.

Mr. Nawaf?

I will come back to you later, Mr. Nawaf.

Moving to Mr. Ildar Khaziev, HSBC.

Mr. Ildar?

Yes, thank you so much, and congratulations on very strong numbers. I have a question about the volatility of the HSFO prices.

In the past, when we have seen this happening in the market, you have reported inventory revaluation gains and losses. Can you tell us whether there have been anything like this in 1Q and 2Q, and if yes, could you possibly quantify those gains and losses?

Thank you so much.

Mr. Khaziev, I believe you're referring to the inventory evaluation in the financial statements.

I leave it to Mr. Kamakhi to answer this.

Tayyib.

Thank you, Mr. Ildar, and thank you for your great question.

Yes, we have been noticed that during end of quarter 1, feed stock prices have increased dramatically during March after all the geopolitical events that happened starting 28th of February. That during second quarter, we have noticed also a dramatic normalization of that feed prices during Q2.

Comparing between 2 quarters, yes, there have been already impact of the inventory revaluation because of the drop of that feed stock. I don't have a current figure right now in front of me exactly, but we expect that between $40 to $50 million maybe impact, and that where you can see a little bit difference that from net income perspective comparing to our sales.

Thank you very much. Should I assume that there was a similar opposite impact in 1Q of a similar magnitude?

There was an impact, but maybe not that with the same value, but there was an impact.

Okay. Thank you so much.

Thank you.

Thank you, Ildar. Always good to speak with you.

Mr. Abdullah Al-Wohaibi.

Mr. Abdullah, please step forward.

Yes, hello. Am I audible?

Yes, Abdullah. Loud and clear.

Thank you, management, for the presentation and for the opportunity to ask questions. I have 2 questions on my side.

The first one is regarding the rerouting from Bab-el-Mandeb. Do you expect this to affect your volumes sold in the second half, and how much do you expect the logistic cost to affect your crack margin?

Second is it would be really informative if you could give us some color on the crack margin of Group III and how much it differs from your current portfolio of base oil. For the last 5 or 10 years would be I believe this would be really important to understand how much Group III differs in terms of profitability.

Thank you. That's my question.

Thank you, Abdullah. The question one is related to the Bab-el-Mandeb situation, how much if quantifiable, how can it affect our performance?

The second question is about the spread of Group III relevant to the other groups of base oil. Mr.

President, would you like to answer?

Oh, yes. Thank you, Abdullah, for the questions.

Ya'ni, maybe probably help you think through this, it's a longer route. On your models, probably you want to add an additional 45 to 60 days.

That's a good way to calculate, and then maybe calculate way back on how that affect the crack margin. At the end, it's a working capital.

The freight, as I mentioned, is negotiated between the both. Some will actually pick up the full freight, some will just negotiate on that, you could put that assumption there in the models and work your way through on the cracks on that.

That answers the question itself. I don't foresee a huge change, but definitely there is a change because it's a longer route.

How long that will stay for, you could assume maybe I'm not sure how we're not really vested in the geopolitics, and nobody knows. It's almost like a crystal ball.

Every day is evolving. You could put that as well in the model for that.

On the crack margins on Group III, yes, it's usually Group III is sold higher than 1 and 2, but sometimes the market really rewards bright stock even higher than Group III in Europe, and it happened. I've seen it actually, and it's an interesting market condition.

I'll leave that more with the CFO on how would you want to think about Group III. I think we will be giving guidance very soon on the production of Group III in all the groups, or at least the production on the facility itself.

Thank you, Mr. President.

I think yes, and Abdullah, for your question for the first one, also some of our customers starting to pick up the product as a FOB, so that is also a realized gain immediately even without taking that. We have that rerouting option and also pick up from our port.

For the second question, I really see that 2 different views, by the way, here. If we are talking before the geopolitical tension escalation, we usually see that crack margin have a $200 to $300 per metric ton premium.

In the last few months that we saw that number have been increasing dramatically, where at certain point it reached around $1,000 over Group II, if we are talking here. That because of the limited supply in the market.

We can have around 2 million in nameplate capacity in the supply perspective. That impacted also the availability of that product, and the demand was higher on that area.

That we see that the difference gap in Group III+. I hope that answered the question, Abdullah.

That's clear. Thank you.

Thank you, management.

Thank you. I'm going to take one written question and then move on to the next live audience.

A question by Mr. Abdullah Al-Hakami: "Given that Jeddah is now extended, do you think you will be able to reach 1.6 million base oil production capacity in Yanbu?"

Another I think sub-question: "Would you be able to give an update on Jazan potential project, and what kind of CAPEX are you looking at?" I can answer this question if you like, Mr.

President.

Yes, Saleh. Proceed, please.

Okay. Abdullah, in terms of nameplate capacity, the estimated total production including Jeddah and Yanbu after Growth II is going to fall in the range of 1.5 to 1.55 million metric tons, give or take.

Keep in mind that, and I'm sure that you are familiar with this, we don't maximize the Group I production out of Yanbu. This would leave theoretically the production a little bit beneath 1.5 million metric tons of base oil, with a split of approximately 78% to 80% of Group I, 10% Group II, 10% Group III.

That is what the ultimate composition would look like, give or take. Related to Jazan, Mr.

President shed the light on this, the project is currently at pre-engineering phases, meaning that all of the product deliverables are within plus-minus 30% or even 40% numbers. There is not a structured CAPEX or capacity identified yet.

It's still being subject to engineering evaluation before taking the project to the next phase, and we are happy to discuss this further if you wish after the earning call. Moving back again to the live audience, we have Mr.

Iranjan from Derayah Financial. Mr.

Iranjan, could you please step forward?

Hello.

Hi, Mr. Iranjan.

Am I audible?

Yes, you are.

Just if I may ask a couple of brief questions. The first one is on your alliance sales, just wondering if these logistical challenges had any impact on those sales.

The second one is once again on diesel, I was just wondering whether there was any changes in the volume sold during Q2 versus Q1.

Iran Jan, I did not get the second question. Let me repeat the first one, then I would like you please to repeat the second one.

The first one, you're talking about the alliance sales and whether or not they were impacted, but could you please repeat the second question?

The second question is regarding the diesel volumes, whether those volumes, there was a big change in Q2 versus Q1, or was it similar? Okay.

For the first question...

You can take this, Saleh, if you want.

Tayyib. Sorry, for the first question, that challenges that we face during the current situation, as we mentioned that earlier before, we have the mitigation plan.

That we go a different routing, and we do not see that much impact on that in our next quarters, that huge impact, because we already started to activate these plans.

Thank you, Mr. Saud.

For the second question, typically diesel quantities do not change much month to month due to it's the nature of the refinery. You have a cap or a typical production quantity or percentage of diesel.

You do not get that flexibility to severely maximize that on the expense of base oil. The typical guidance quarter-to-quarter on diesel terms does not change significantly.

Okay. Regarding coming back to the diesel spreads, perhaps do you enjoy the same spreads, maybe your counterparts in the West enjoy when it comes to diesel?

Because in those regions, there's a big shortage of diesel. Here, I believe your diesel is indexed to more regional indices.

Therefore, do you enjoy the same sort of very high spread some of the refiners in the West enjoy, or is it much more smaller spread?

Mr. Iranjan, this is a good question.

Our sales of diesel is also follow the indexes that we are having related to our customers and the sales in the region. That margins, as we saw in the first quarter, has been captured due to the higher prices in those indices, follow the prices of diesel globally also.

Thank you.

Thank you. Moving to Mr.

Aakarsh Tomar. Mr.

Aakarsh, could you please step forward?

Hi, thank you for the opportunity to ask the question, and thank you for the detailed presentation. This is Aakarsh Tomar from Seco Investment Bank, Bahrain.

Congratulations on a great set of results. My question is broadly on the shutdown, but it has parts to it.

Firstly, I wanted to understand you had a shutdown last year in fourth quarter as well, and then 1-month shutdown is planned for the remainder of the year. After this shutdown, once this is done, the 1 month in October, when is the big shutdown which is of similar scale of a month?

When can we expect the next shutdown to come? That's the first one.

Secondly, earlier it was expected that this shutdown will kind of coincide with the new Growth II commissioning. The plant will not remain closed for the commissioning of the new growth phase.

Now that phase has been delayed to 2027, do we expect some closure of the plant in 2027 for the new capacity to come online? These two.

Just to make sure I address your question, allow me to do some differentiation here. The shutdown is basically a general terminology, but let me walk you through the details a bit.

The shutdown that took place in end of 2025, that's what we operationally refer to as a turnaround. It's an event that takes place every 5 to 6 years, a typical practice in refineries where the whole plant is taken into shutdown, no production, no intermediate stream, nothing.

This is the event that took place. Despite whether we have a growth or not, we have to go through that exercise every once in a while.

The shutdown that we are referring to in this context that was rescheduled from August to October is to address the scope that is related to the expansion project, which is mainly in three units: in vacuum distillation, hydrocracker, and isodewaxing unit. Due to multiple decisions, one of which was addressed by the President, is to capture the current favorable market environment, the shutdown was rescheduled to October, in which we will address the scope of the hydrocracker and isodewaxing unit.

Then next remains the scope related to the vacuum distillation unit, which will take place sometime in H1 2027. I hope I addressed your question.

You did mention something related to when will the big shutdown happen again. I want to go back to my first idea.

If you're referring to a turnaround, a turnaround is an event that takes place every 5 to 6 years, and this will happen, you can take it for granted, that's my point. The shutdowns that we are talking about in today's earning call's context are specifically for the Growth II project.

I hope I answered your question.

Thank you so much. That makes it perfectly clear.

If I may, on that turnaround, what we mean by turnaround is test and inspection. We'll have to test all the equipment and inspect them.

One also thing is when we have an equipment with catalytic reaction, then this will have to go down every 2, 2.5 years, just to change the catalyst as they get consumed through the reaction. That's also well known in the industry.

We try to time them together every other batch. If it's every 5 years, we do 2.5 years, maybe for 2 weeks, 3 weeks, it depends what is the scope, then the major one later on.

Thank you very much. That's very helpful, and that makes it very clear.

If I may follow up on this, for expansion-related turnaround that you mentioned, one is the upcoming one in October, and then one you said in first half of 2027, so that will again be a month or so, or is that in a different... Basically

more guidance will be cleared later in the year. Currently there are some scenarios to be discussed.

We don't have a clear picture of what is the timeframe or the details of the H1 2027 highlights.

Thank you very much. That's very helpful.

I have one more question, if you will allow me, I'll ask now or I'll get back in queue.

Please step forward, yeah. What do you have?

Thank you so much. Just on one follow-up to the previous questions.

As of Q1, generally by-product margins are very low, as we have discussed in the past on these calls. Q1 was an exception where your crack margins were $70 per ton.

Can you give us the number for the second quarter?

For the second quarter, it's -$12 per metric ton. That's the by-product crack margin.

Thank you very much. That's very helpful, and all the best for the future.

You're most welcome. Mr.

Fawad Khan in ANB Capital, could you please step forward?

As-salamu alaykum. Can you hear me?

Wa alaykumu s-salam. Sorry for keeping you waiting.

As-salamu alaykum.

No worries. Wa alaykumu s-salam.

Thanks a lot for the opportunity to ask question, and many congratulations on a strong set of results. I have 3 questions.

Number one, relating to the shutdown, effectively are we expecting the Group III production to start sometime in October-November with the shutdown of 1 month, or we should expect Group III production to start sometime in first half 2027 whenever you have the vacuum distillation unit expanded?

Okay. That's the first question.

Second question is on the inventory revaluation. You have mentioned during the call that it was around US dollar 40 to 50 million impact.

Would there be any impact in third quarter just because of the inventory write-down at the end of the second quarter? Secondly, which product, whether it's by-product or feed stock revaluation, this revaluation exercise refers to?

Okay. The third?

Third is basically a more kind of a general question, how should we look at the crack margin for the rest of the year. Let's assume if the situation remains like this, and let's suppose in the scenario the situation improve from here on, how should we see crack margin normalizing into the 2027 or 2028?

First question is related to the shutdown in October and whether or not Group III production would follow. Mr.

President, would you like to answer this?

That's right.

Right.

Very well. That's an important part of our growth story, is to produce Group III, then move to Group III+ and become niche and become a one-stop shop.

We aspire to do so in October. We'll give further guidance during that shutdown, or maybe before that shutdown, of course, about Group III production, and perhaps scale it up in H1 2027.

The nature of the business, again, just to help you think through this, it's not like a refinery where you're able to right away ramp up the refinery to produce fuels and sell it and trade it. It's just much liquid.

In our case, we have to line up our marketing plans, our customer plans, what they're able to lift and not. We can go a little bit spot, but the market isn't as liquid as the fuels.

A lot of planning that needs to be done. Therefore, scaling up Group III will take time to hit the nameplate, if any, if it would ever hit the nameplate in that area.

That's our aspiration. We've done that in the past, and I'm sure we could do it in the future.

For the inventories, I think I'll leave the CFO, and the crack margins as well, Saud, maybe you or Saleh can handle.

Thank you, Mr. President.

For the second question, the inventory valuation, the question was about any expected impact in Q3.

That's right. Since the inventory has been written down at the end of the second quarter, how should we see the third quarter impact?

Mr. Fawad, just to let you know that here we do that in monthly basis.

Our revaluation of our inventory happens during monthly basis, where we see that because of the changes and volatility, especially in our feed stock prices. Having mentioning that, as of July, maybe the volatility and the movement was not that severe comparing to the previous period, but it will depend on that movement if we see a huge increase to that or decrease from the current situation.

Based on the forecast that we see, we do not see that future impact is coming from revaluation of inventory similar especially to Q2, where we started the quarter with a very high prices and that has been dropped dramatically to the end of the quarter prices.

All right.

Hope that answered the question. Is anything else, Mr.

Fawad?

Not on the second one, but on the first one, I just need to ask the President, why the company not considering combining the two shutdown? Is it a technical requirement to go for the isodewaxing and hydrocracking changes first and then follow up with the vacuum distillation VDU unit, or there is some other consideration?

Yes,

no, no, there you're spot-on. There is a in general, there is a sequence that we need to follow for us to maximize it's more about capital efficiency and the way we will start up.

You're right, it is a sequence that we need to proceed with: hydrocracker, isodewaxer, there is also others within the technical term of hydrocracker and isodewaxer, then the vacuum comes in afterwards.

Sure. Thank you.

The last question from your side, Mr. Fawad Khan, which I will take.

Afterwards, we will have to end the earning call, but we would be happy to take the questions with you separately right after this one or over the course of the next week. You are asking about the crack margin nature or environment towards the end of the year.

Typically, Q3 and Q4, Mr. Khan, is times where seasonal demand starts to kick in, in reduction.

It's the holiday season, natural events in multiple locations around the world, which result in lesser demand. As a result, the prices do expect to reduce.

All of the forecasts that we are receiving is suggesting such a trend as well. However, given all of the events that happened from the beginning of the year, the end result in this forecast is expected to be still higher, insha'Allah, than the pre-war prices, or the pre-war forecast.

I hope by this, I answered your question.

Clear. Thank you, Saleh.

Okay. Thank you, Mr.

Fawad Khan. We apologize for stopping the call after this question due to the restrictions of time.

However, all of the gentlemen in the room, we would be very happy to take the questions with you separately right after this one or over the course of the next week. Appreciate your attendance and participation, and looking forward to seeing you soon.