Doha: Qatar Aluminium Manufacturing Company (QAMCO), a 50 percent joint venture partner in one of the world’s most efficient, low-cost smelters that produces premium high quality aluminium products, yesterday reported a net profit of QR95m for the year ended December 31, 2020, with an earnings per share (EPS) of QR0.017.
Financial performance in 2020 witnessed unforeseen operational challenges and market volatilities due to ongoing global pandemic. These uncertainties reflected on the lowest selling prices, imbalances in demand and supply cycle, apart from hampered global GDP growth. All of which weighed on QAMCO’s performance for the year 2020.
“QAMCO’s net profit stood at QR95m, with QAMCO’s share of the joint venture’s EBITDA at QR652m for the year 2020, compared to net profit of QR96m and share of EBITDA of QR668m for the year 2019. QAMCO’s share of revenue for the financial year 2020 amounted to QR2.2bn, down by 11 percent compared to last year,” said the company in a press release.
Sales volumes for the year were marginally higher than last year, as QAMCO’s JV swiftly shifted the production to standard ingots (SI), as the demand for value added products (VAP) and alloys used by various industries declined during peak of pandemic due to lockdowns and lack of industrial activity. The channeling of production volumes swiftly from VAP to SI supported in ensuring achieving maximum sales volumes. Though, lower VAP volumes resulted in lower realized LME premiums. On the other hand, given the demand for VAP showed signs of recovery, especially towards end of Q3-20, QAMCO’s JV successfully shifted the product mix back to VAP from SI in Q4-20, resulting in higher premiums and better margins for the quarter.
Commenting on the financial and operational highlights, Abdulrahman Ahmad Al Shaibi, Chairman of the Board of Directors, QAMCO, said: “Despite momentous macroeconomic headwinds since the outbreak of COVID-19 pandemic, QAMCO continued to rely on its solid strategic foundations of cost efficiency, operational excellence and flexibility, with a firm commitment to HSE and managed to maintain same levels of production and sales, in a market where some of the global aluminium players continued to depict sluggish trends due to disruptive environment apart from stymied demand and declining prices of aluminium.”
“The potential threats of COVID-19 pandemic on joint venture’s operations and business continuity were successfully contained by proactive measures in relation to supply chain activities and safety. Our sales and marketing partner, worked diligently and acted decisively to achieve sales volumes as last year, while our resilience remained in our flexibility towards the product mix,” he said.
“Going forward, banking on the efficient operational excellence in all key business areas will successfully safeguard against market volatilities, while ensuring our flexible approach towards our supply chain and marketing capabilities, to better position us for our long-term goals,” he added.
During the year, profitability remained under pressure mainly on account of lowered revenues from declining selling prices, which declined by 12 percent year-on-year basis and contributed QR289m negatively to the net profits for the year ended December 31, 2020, as compared to last year. This was partially offset by the sales volumes, which positively contributed QR10m to net profits for the financial year 2020, as compared to last year.
However, during Q4-20 a significant recovery of 16 percent in selling prices was noted, compared to Q3-20, on the back of improved macroeconomic sentiments while most of the economies were easing out lockdowns coupled with unprecedented stimulus announcements and vaccine optimism, created a surge in demand from construction and automotive sectors, which immensely contributed towards posting the best quarterly profits amounting to QR82m since QAMCO’s incorporation.
The overall cost of goods sold remained lower on account of declining raw material prices, energy costs and cost optimization initiatives helped to realize savings in staff costs, plant maintenance and technical services costs. On overall basis, decline in cost of goods sold contributed QR255m positively to the net profits for the year 2020, as compared to last year.
QAMCO’s total assets as at December 31, 2020 stood at QR5.8bn against QR5.7bn as at December 31, 2019. QAMCO’s share of net debt in the JV increased marginally by QR5m during 2020, to reach QR1.9bn as at December 31, 2020, after considering share of cash and bank balances amounting to QR332m. Share of debt declined by 8 percent on account of repayment of principal debt amounting to QR222m.
QAMCO’s financial position continued to remain robust despite several macroeconomic headwinds, with the liquidity position at the end of December 31, 2020 reaching QR740m in cash and bank balances (including proportionate share of cash and bank balances of the joint venture, after excluding restricted cash balance pertaining to dividend payable).
During the year, QAMCO’s JV generated positive share of operating cash flows of QR684m, marginally down by 1 percent compared to 2019, with a share of free cash flows of QR226m.
Given the financial performance of the Company which was broadly affected by the macroeconomic conditions throughout the period, and pressured the overall performance of the Company, the Board of Directors proposed a dividend distribution of QR195.3m for the year ended 31 December 2020, representing a payout ratio of 206 percent of 2020’s net earnings, equivalent to a dividend of QR 0.035 per share i.e. 3.5 percent of the nominal value of the shares.
QAMCO will host an IR earnings call to discuss the results, business outlook and other matters on February 17 at 1:30 pm Doha time.
