ADNOC Distribution Reports Strong Q2 2024 Performance with Double-Digit Growth

Abu Dhabi National Oil for Distribution : ADNOC Distribution Q2 2024 Press Release - English - 8 August 2024

Excluding the impact of the UAE corporate tax, net profit would have increased by 24.5% YoY to $187 million. Strong financial performance in Q2 2024 was driven by higher fuel volumes, increased contributions from international operations, and growth in the non-fuel retail business. The Company's non-fuel retail gross profit increased by 13.5% YoY in Q2 2024 to $56 million, driven by contributions from the expanding car wash business, supported by new initiatives such as tunnels and upgraded automatic car washes, as well as enhanced convenience store offerings and other car services. Growth was further supported by higher inventory gains and significant progress in cost optimization, with $10 million in like-for-like OPEX savings achieved in H1 2024. Eng. Bader Saeed Al Lamki, CEO of ADNOC Distribution, said: "ADNOC Distribution continues to achieve strong financial results. The strong Q2 2024 results, marked by double-digit growth in EBITDA and net profit, highlights our effective pursuit of the Company's five-year strategy, focusing on domestic growth, international platforms, future-proofing the business, and investing in convenience and mobility. We are well-positioned to build on this momentum in the second half of the year, leveraging our increasingly diversified revenue streams to continue delivering value to shareholders." "To constantly meet changing consumer demands, we are committed to the pursuit of pioneering AI, technology, and innovation-enabled growth to continuously unlock value. To that end, we are embedding AI within our operational framework, developing wide-ranging digital solutions, yielding significant and measurable efficiencies." The Company generated a strong free cash flow of $330 million in Q2 2024, a 7x increase compared to Q2 2023. In H1 2024, the Company's free cash flow stood at $488 million, representing 46.7% YoY growth, while maintaining a robust balance sheet with a net debt-to- EBITDA ratio of 0.53x as of 30 June 2024. This strong financial standing positions the Company favorably for future growth and shareholder value creation. The H1 2024 dividend of $350 million is expected to be distributed to shareholders in October 2024, subject to the discretion of the Board of Directors. This is in line with the Company's approved five-year dividend policy that sets an annual dividend of $700 million (20.57 fils per share), or a minimum 75% of net profit, whichever is higher. This policy ensures long-term visibility of shareholder distributions, reinforcing ADNOC Distribution's commitment to consistent shareholder value. Operational Performance ADNOC Distribution demonstrated strong performance in Q2 2024. The Company's non-fuel retail business continued to perform strongly during the quarter. By focusing on improved customer experience, enhanced products and services, and the deployment of new standalone convenience stores and car wash tunnels, non-fuel transactions increased by 8.9% YoY in H1 2024, with growth accelerating to 10.9% YoY in Q2 2024.

Exclusive: Bader Al Lamki discusses ADNOC Distribution's double-digit growth and future plans

Image credit: Supplied ADNOC Distribution, the UAE's largest fuel and convenience retailer, announced robust financial results for the second quarter of 2024. The company reported a 15 per cent year-on-year (YoY) increase in Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) to $267m, and a 12.9 per cent YoY rise in net profit to $170m. Excluding the impact of the UAE corporate tax, the net profit would have increased by 24.5 per cent YoY to $187m, as per the official release. This strong financial performance in Q2 2024 was driven by higher fuel volumes, increased contributions from international operations, and growth in the non-fuel retail business, the report noted. The company's non-fuel retail gross profit increased by 13.5 per cent YoY in Q2 2024 to $56m. This growth was driven by contributions from the expanding car wash business, supported by new initiatives such as brand new wash tunnels and upgraded automatic car washes, as well as enhanced convenience store offerings and other car services. Further growth was bolstered by higher inventory gains and significant progress in cost optimisation, with $10m in like-for-like operating expenses savings achieved in the first half of 2024. The company generated a strong free cash flow of $330m in Q2 2024, a sevenfold increase compared to Q2 2023. In the first half of 2024, the company's free cash flow stood at $488m, representing 46.7 per cent YoY growth, while maintaining a robust balance sheet with a net debt-to-EBITDA ratio of 0.53x as of June 30, 2024. The H1 2024 dividend of $350m is expected to be distributed to shareholders in October 2024, subject to the discretion of the Board of Directors. This is in line with the company's five-year dividend policy that sets an annual dividend of $700m (20.57 fils per share), or a minimum of 75 per cent of net profit, whichever is higher. Bader Al Lamki, CEO OF ADNOC Distribution spoke to Gulf Business about the results and the energy distributor's long-term strategy. Read excerpts of the conversation below: Q. To what factors do you attribute ADNOC Distribution's current financial success? ADNOC Distribution is a 50-year-old company, and we've recently achieved a significant milestone. We delivered on our commitment to reach a $1bn EBITDA within five years of our IPO, which we accomplished in 2023. Our strategy, unveiled in February, is based on three pillars. First, maximising value from our existing assets. We have 847 stations in the UAE, Saudi Arabia, and Egypt, and we're focused on utilising our land more effectively by adding services like car washes and quick service restaurants. This approach aims to transform our service stations into destinations and enhance their relevance to customers. Second, we're growing internationally. We're pleased with our investments in Saudi Arabia and Egypt and plan to continue expanding inorganically into new markets. Third, we're future-proofing the business. The sector is evolving rapidly, with non-fuel businesses becoming crucial. We're integrating AI, technology, and data to enhance our services, and we're also focusing on sustainable mobility options, including electric vehicles and hydrogen. Since implementing this strategy, we've seen impressive results. In Q2, we achieved an EBITDA of $276m, a 15 per cent increase from last year, and a net income of $170m, up nearly 30 per cent. These results indicate that our strategy is working well. I'm very pleased with the progress and confident in our future direction. Listen to the full conversation on the Gulf Business Spotify channel: Q. Could you tell me some highlights from the first half of this year that surprised or pleased you? Bader Al Lamki: One area I'd highlight is our non-fuel revenues. This includes our convenience stores, ADNOC Oasis, car wash facilities, vehicle inspection centres, car care services, property management, and quick service restaurants (QSRs). Over the past five years, we've been upgrading our convenience stores, introducing new F&B products like croissants, pizza, hot dogs, and specialised coffee. We've also focused on our car wash services, upgrading centres and introducing new tunnel car wash models. This year, we're rolling out six tunnel car washes, which offer a faster and more enjoyable experience, allowing us to wash more cars compared to traditional methods. Additionally, we've introduced new international QSR brands at our stations, such as Burger King, McDonald's, and Al Baik, and matched them with suitable locations. This strategy is already yielding results. Our goal is to transform service stations from traditional fuel points into destinations offering multiple services. One key metric we're proud of is our conversion rate, which measures how many fuel customers also use our non-fuel services. Currently, our conversion rate stands at 26 per cent, the highest in four years and above the industry average. This success is supported by data -- 220 million data points annually -- which allows us to customise targeted marketing campaigns. Overall, I'm very pleased with the progress on the non-fuel side of our business. There's significant innovation happening, and it's proving successful. When travelling from Dubai to Abu Dhabi, many choose specific stations for their QSRs, showing the appeal of our enhanced services. Q. Could you tell us more about how you're using AI at ADNOC? We've seen some viral videos about your innovative approaches. Bader Al Lamki: Yes, indeed. We handle 220 million data points, which provide a wealth of knowledge and insights. We use this data to personalise our services and communicate with our customers in a relevant and impactful way. One way we use data is through segmentation. While 80 per cent of our offerings are standardised, we tailor additional services based on the location of the station and the specific customer behaviours there. For instance, a service station in Jumeirah might offer different products compared to one in Jebel Ali or the Musaffah industrial area. We also use data to optimise our operations. From our stations to the fleet of trucks transporting products, data and predictive analytics help us optimise the supply chain, forecasting around $30m in operational savings over the next five years. AI is also enhancing customer experiences. We use smart cameras and licence plate recognition to personalise services upon arrival. If you are registered with our ADNOC Wallet, we recognise you, greet you by name, and provide pre-set services like fuel and coffee without interaction, all from the comfort of your car. We have 20 use cases being developed to enhance customer experience and operational efficiency. These innovations demonstrate how AI and data can significantly improve our services. Q. As you approach the 2030 mark, how does decarbonisation fit into your long-term strategy? Bader Al Lamki: Sustainability is crucial to ADNOC Distribution's strategy. We've pledged to achieve a 25 per cent reduction in our carbon footprint by 2030 and aim for carbon neutrality by 2050. We're installing solar panels at our stations to offset electricity use with renewable energy. Additionally, we're using biofuel for our fleet, which is more eco-friendly than traditional fuels. We're also focusing on energy efficiency by introducing electricity and water management systems to optimise consumption. Our social responsibility programmes include planting mangroves and setting up vending machines to collect and reduce plastic waste. Read: ADNOC Gas awards $550m contracts to expand UAE gas infrastructure