Industries Qatar (IQ or the Group; QE Ticker: IQCD), yesterday reported a net profit of QR3.5bn for the six-month period ended 30 June 2021, representing an increase of 391% compared to the same period last year.
The economic momentum built upon effective ongoing vaccination campaign and ease of lockdowns in major markets allowed sequential recovery and led to a stronger consumer demand and rising oil prices. In addition, industry supply constraints and global logistical bottlenecks remained evident throughout the period across industrial sectors, especially for petrochemicals and fertilizers. These macro imbalances enabled positive trajectory of commodity prices and led to margin improvements.
The Group’s operations continue to remain efficient with Group’s share of production for the six-month period ended 30 June 2021 reaching 7.8 million MTs, marginally down by 6% versus H1-20. This was primarily driven by Group’s strategic decision to mothball part of its steel facilities since April’20, commercial shutdown at the MTBE facilities during Q1-21 and a planned shutdown during Q1-21 at certain fertilizer facilities. Plant utilization rates for H1-21 reached 98%, while average reliability factor also stood at 99%.
Compared to Q1-21, the Group revenue improved by 17%, while the net profits improved by 42%. EBITDA for Q2-21 reached QR2.5bn, up by 29% versus the previous quarter. The improved quarter-on-quarter results were primarily driven by continued cyclical macroeconomic tailwinds echoed from Q1-21, while supply remained pressured and pushed product prices higher. Although, petrochemical prices have started to soften specifically in the later part of Q2-21 following improved supply, but the overall price trend remained buoyant. Sales volumes have improved marginally due to improved production.
The Group’s financial position continue to remain robust, with the liquidity position at the end of 30 June 2021 reaching QR11.1bn in form of cash and bank balances, after accounting for a dividend payout for the financial year 2020 amounting to QR2.0bn. Currently, the Group has no long-term debt obligations. Group’s total assets and total equity reached QR37.5bn and QR35.3bn, respectively, as at 30 June 2021. During the period, the Group generated positive operating cash flows of QR3.7bn, with free cash flows of QR3.4bn.
For the first half of 2021, the Group recorded a net profit of QR3.5bn as compared to QR0.72bn for H1-20, up by 391%. The Group revenue also improved by 69% to reach QR 9.2 billion as compared to QR 5.4bn for H1-20 (assuming proportionate consolidation). Earnings per share (EPS) amounted to QR0.58 for H1-21 versus QR0.12 for 1H-20. EBITDA increased by 188% and reached QR4.5bn for H1-21 in comparison to QR1.5bn for H1-20.
The Group’s financial performance for H1-21 versus same period last year was largely attributed to several factors, including -
Improvement in product prices: Blended product prices at the Group level, increased by 35% compared to H1-20, translating into an increase of QR3.1bn in Group’s net profits. Price increase, mostly linked to market prices, was noted across all the Group’s segments, with fertilizer’s segment reporting a contribution of QR1.4bn, while petrochemicals contributed QR1.3bn towards the overall growth in profitability compared to H1-20. The steel segment’s contribution amounted to QR0.5bn towards current period’s earnings growth versus same period of last year.
Improvement in sales volumes: Sales volumes increased by 40% versus H1-20, driven by multiple factors, including additional sales volumes relating to Qafco trains 1-4 reported as part of H1-21 volumes, whereas the same were not reported in H1-20, as the trains operated under a temporary gas processing arrangement for the first seven months of 2020.
OPEX: Group operating expenses increased by 17% versus H1-20. This increase was attributed to higher variable cost on account of increased sales volumes. The Group also continue to benefit from the additional layer of cost optimization initiatives implemented in the second half of 2020.
The petrochemicals segment reported a net profit of QR1.5bn for H1-21, up by 383% versus H1-20. This notable increase in profitability was primarily driven by improved product prices owing to improved macro environment and supply shortages. Profit improvement was also partially aided by the return of MTBE production, which was on a commercial shutdown during most of Q1-21.
Blended product prices for the segment rose by 69% versus H1-20, with polyethylene (LDPE) prices showing a marked improvement of 75%. Sales volumes marginally up by 8%, compared to the same period last year, on account of improved production levels. The growth in product prices coupled with inclined sales volumes led to an overall increase in revenue by 83% within the segment, to reach QR3.1bn for H1-21.
Fertilizer segment reported a net profit of QR1.5bn for H1-21, with an increase of 314%, versus same period of last year. This increase was primarily driven by growth in revenues which increased by 99% in H1-21, to reach QR3.8bn. Selling prices improved by 55% versus H1-20, which reflected positively on the segmental performance and led to improved EBITDA margins. Supply bottlenecks, together with strong global coarse grains demand led to a record high crop prices, improving farmers’ affordability for fertilizers and supported strong price trends for nitrogen-based fertilizers.
Sales volumes increased during 1H-21 in comparison to H1-20 by 85%, as volumes relating to Qafco trains 1-4 were recorded as part of H1-21 sales volumes. Production within the segment was marginally down by 3% versus H1-20, as Qafco trains 1-4 underwent higher number of days of planned maintenance during the current period, compared to the same period last year.
The steel segment continued its profit-making trajectory, after having a difficult first half of 2020 and following strategic restructuring initiatives implemented last year. Net profit for the current period amounted to QR496m versus a net loss of QR1.4bn in H1-20.
Industries Qatar will host an IR Earnings call with investors to discuss the results, business outlook and other matters on Tuesday, August 10, 2021 at 1.30pm Doha Time. The IR presentation that accompanies the conference call will be posted on the ‘financial information’ page within the Investor Relations section at IQ’s website.
