Dear Shareholders,

On behalf of the Board of Directors of Oman Refreshment Company SAOG, I am pleased to present to you the annual report and audited financial statements for the year ended 31st December 2010.

Business Environment

Omani economy gained momentum in 2010 with the increased & continued spending on various infrastructure, tourism projects and oil & gas sector activities by the Government of Sultanate of Oman. Oman Refreshment Company, since its inception, has been a leading player in the soft drinks & beverages business segment in Oman. The company’s products, backed by its well entrenched customer relationships, enjoy loyal consumer patronage.

While the food & beverages market in Oman continues to grow with the growth of local population and influx of expatriate manpower required for the growing economy, the operational environment poses some challenges such as the changing consumption habits, stiff competition in Juice, Water and Snacks product segments. Also, the operating margins are subject to tremendous pressure due to rising cost of input materials and employment. The commodity prices in the international markets are on continuous rise on account of series of natural calamities resulting in food crisis in many parts of the world.

Financial Highlights

Your company has achieved a net profit after tax of RO 3,357,752 on a total turnover of RO 45,116,922 for the year 2010 compared to net profit after tax of RO 2,139,332 on a turnover of RO 42,788,349 in 2009. The overall revenue has increased by 5% which together with the controlled operating costs, compared to the previous year, have contributed to overall growth in the top line as well as bottom line respectively.

During 2010, the sales volume of various products reached 19.96 million cases as against 19.95 million cases for 2009. The production volumes during 2010 reached 18.9 million cases as against 18.8 million cases in 2009, in line with the trend in sales volumes.

The Gross Profit margins rose from 25.6% in 2009 to 29.1% during 2010. Profit After Tax (PAT) ratio has also improved from 5% in 2009 to 7.4% in 2010.

There were no changes in the past year or expected in the next year to the financing structure of the company.

Operating Results

Operating profit before tax was R.O. 2.46 million compared to previous year’s profit before tax of R.O. 2.91 million, a decline of 15.4%.

Net profit after tax for the year 2009 was R.O. 2.18 million in comparison with R.O. 2.56 million of the previous year registering a decline of 15.1%.

Earnings per share declined to 0.725 bzs in 2009 compared to 0.931 bzs in the year 2008.

Internal Control System

The Board has reviewed the adequacy and effectiveness of the existing internal control system and found it to be satisfactory.

Dividend

In view of good performance of the Company during 2010, and after reviewing the company liquidity requirements, future earnings and shareholders interest, the Board is pleased to recommend a cash dividend of 100% (being RO 1 for each paid up share) and stock dividend of 66.66667% (being 2 fully paid up bonus shares for every 3 shares held currently) of the issued share capital for the year 2010. Furthermore, in the larger interests of the shareholders, the board is pleased to recommend share split by changing the nominal value of the share from RO 1 to 100 Baizas. Upon approval by the shareholders and the regulatory authorities, each shareholder will have 10 times the number of shares than held at present, but with each share having a face value of 100 Baizas.

Future Outlook

Your company is optimistic about the future prospects with the product expansion & diversification plans and renewed impetus on achieving higher production efficiencies.  However, the volatile global market of commodities and the rising prices of key input raw materials & packing materials may impact profitability of the Company in the near future. Your company is closely monitoring these prices and endeavors to minimize their adverse impact through forward purchase commitments for key raw materials.

Appreciation

On behalf of the Board of Directors, I would like to express my sincere appreciation for the outstanding performance of the employees and management of the Company. I also take this opportunity to thank our consumers, customers, PepsiCo International Company, other suppliers, bankers and Government authorities for their valuable support.

Further, on behalf of the Board of Directors & the management, I extend our sincere appreciation and gratitude to His Majesty Sultan Qaboos bin Said for his vision and support for private enterprise in the Sultanate of Oman, and pray to the almighty to shower his everlasting blessings on His Majesty for his good health and long life.

BUTI OBAID AL MULLA
Chairman.