DOHA: Industries Qatar (IQ), one of the region’s industrial giants with holdings in petrochemical, fertilizer and steel producers, reported a net profit of QR2.6bn for 2019.
IQ’s business performance in 2019 reflected the challenging macroeconomic environment that prevailed in 2019, which was marked by weaker global demand, lower global GDP growth, trade conflicts and overcapacities.
This led to increased pressure on the prices of our product portfolio in various markets, which negatively affected the financial performance. The Group responded to these external pressures by leveraging its competitive advantages such as long-term access to feedstock and a relatively low-cost operating infrastructure. In addition, the Group’s partnership with Muntajat, a leader in marketing and distributing chemicals, fertilizers and steel products aided to maintain the sales volume at 9.5 million MT per annum, down by 2 percent, compared to last year, and improved IQ’s access to global markets.
Commenting on the financial and operational performance for 2019, H E Saad Sherida Al-Kaabi, Chairman of the Board of Directors and Managing Director, said: “Despite a difficult business climate, our operations were resilient and responded effectively to regional and global market challenges. Efficient, reliable production was maintained without sacrificing on our strict health, safety and environmental (HSE) standards. Cost containment progressed, while we put emphasis on the quality of our supply chains and marketing activities. Operational excellence, cost efficiencies and a relentless focus on HSE will be key going forward towards maintaining a lean organization that continues to preserve shareholder value.”
Compared to QR5.0bn net profit posted in the year 2018, IQ’s 2019 full-year net profit is down by 49 percent, while total revenues declined by 16 percent to reach QR13.7bn (assuming proportionate consolidation) as compared QR16.3bnn for 2018. The Group recorded earnings per share (EPS) of QR0.43 for the financial year 2019, as compared to QR0.83 for last year.
Financial performance in 2019 was largely impacted by external macroeconomic factors that were not within the Group’s control. These adverse conditions directly translated into declining commodity prices and caused product prices to fall across the Group. Average selling prices declined by 14 percent year-on-year, which contributed to a decrease of QR 2.0bn in the Group’s net profits for the financial year 2019 as compared to last year.
Group sales volumes were also affected by macro imbalances in supply and demand, which were also influenced by lower production due to planned and unplanned maintenance shutdowns. Sales volumes for the Group declined by 2 percent year-on-year, which contributed to a decline of QR641m in the Group’s net profit for the year. The Group’s production volumes as well fell by 1 percent as compared to last year, amid the shutdowns.
In the fourth quarter, total Group revenue declined by 2 percent to reach QR3.5bn compared to the third quarter of 2019, while net profit declined by 7 percent compared to the third quarter to reach QR539m, owing to the deteriorating macro-economic conditions which led to a decline of 11 percent in Group’s average selling prices. The decline in profitability was slightly offset by impairment reversals from an investment in an associated company.
The Group’s financial position remained robust, with the liquidity position at the end of the year reaching QR10.7bn in cash and bank balances, after accounting for a QR3.6bn dividend paid for 2018 during the year. IQ Group’s net cash and bank balance including proportionate share of joint ventures reached QR12.4bn as at 31 December 2019. This is a testament to the Group’s efficient and effective cash-flow generation capabilities, which provide confidence and sustainability in turbulent times.
At the end of 2019, the Group was able to settle its entire debt obligation, making the Group debt-free. Group’s total assets and total equity reached QR35.9bn and QR34.2bn, respectively, as of 31 December 2019.
After reviewing the year’s financial performance in light of macroeconomic conditions, the Group’s liquidity position, and taking into account future investing and financing needs, the Board of Directors proposed a total annual dividend distribution for the year ended 31 December 2019 of QR2.4bn, equivalent to a payout of QR0.40 per share and representing a payout ratio of 94 percent.
Profits in the Petrochemicals segment remained under pressure, with net profit declining by 47 percent in 2019 compared to year 2018, to reach QR1.3bn. This was mainly due to softening demand for petrochemical products in key markets, excess capacities, new environmental regulations in selected economies and declining prices.
In the Fertilizers segment, net profit declined 37 percent from 2018 to reach QR873m, largely as the result of an overall decline in selling prices of 9 percent, amid supply-demand imbalances. This led to a decrease of 9 percent in the segment revenues compared to the last year.
The Steel segment reported revenue of QR 5.1bn, a reduction of 12 percent from the previous year.
Aggressive international competition and weaker local demand adversely affected financial performance within the Group’s steel business, which reported a net profit of QR36m, a decline of 95 percent compared to the previous year. On a positive note, the steel segment’s associate investments performed well versus the previous year.
IQ will host an IR Earnings call for its full-year earnings with investors to discuss the results, business outlook and other matters on Thursday, 13 February.
