Doha: Industries Qatar (IQ or ‘the Group’), yesterday reported a net profit of QR5.6bn for the nine-month period ended 30 September 2021, compared to QR1.2bn for the same period last year, representing an increase of 360 percent.
Group’s operations continue to remain resilient with production volumes for the nine-month period ended 30 September 2021 reaching 11.7 million MTs, with a marginal decline of 3 percent versus same period of last year. This was primarily driven by Group’s strategic decision to mothball part of its steel facilities since April’20, commercial shutdown at its MTBE facilities during Q1-21, coupled with planned & unplanned maintenance at fertilizer facilities. Plant utilization rates for the period reached 98 percent, while average reliability factor also stood at 97 percent.
For the nine months period of 2021, Group revenue also improved by 76 percent to reach QR14.1bn as compared to QR8.0bn for nine months of 2020. Earnings per share (EPS) amounted to QR0.93 for the period versus QR0.20 for the same period of last year. EBITDA increased by 161 percent and reached to QR7.0bn.
Group’s financial performance for the current nine-month period versus last year was largely attributed to several factors, including product price improvement and improvement in sales volumes.
Blended product prices at Group level reached to $541/MT, a 43 percent increase compared to the same period of 2020, translating into an increase of QR5.3bn in Group’s net profits. Price increase was mostly linked to elevated market prices across all the segments, with fertilizer segment reporting a contribution of QR2.8bn, while petrochemicals segment contributed QR1.8bn towards the overall improvement in profitability versus 9M-20. Steel segment contributed QR0.7bn to earnings growth versus same period of last year.
Sales volumes increased by 34 percent versus last year, driven by multiple factors, including additional sales volumes relating to Qafco trains 1-4 reported as part of 9M-21 volumes, whereas the same were not reported for the first seven months of 2020, as the trains operated under a temporary gas processing arrangement during that period. Nevertheless, improvement in the sales volumes were partially offset by reduction in volumes due to mothballing of steel facilities, commercial shutdown at fuel additives facilities and Qafco’s planned & unplanned shutdowns.
Group operating expenses increased by 25 percent versus 9M-20. This increase was attributed to higher variable cost on account of increased sales volumes and raw materials costs. On the other hand, the Group continue to benefit from the recent cost optimization initiatives implemented since the second half of 2020.
Compared to Q2-21, Group revenue and net profit remained relatively flat during Q3-21. The benefits captured from improved selling prices (8 percent) were almost offset by reduced sales volumes, amid lower plant operating rates especially within fertilizer segment and lesser steel demand domestically due to seasonal effects. EBITDA for Q3-21 improved marginally to reach QR2.6bn, up by 3 percent versus Q2-21.
Average selling prices improved by 8 percent mainly on account of higher urea and steel prices. Fertilizer prices continue to improve during the quarter against a backdrop of strong demand and higher natural gas prices coupled with supply constraints. While petrochemical prices were softened from last quarter’s peak on account of enhanced supply. Steel prices remained robust on account of persistent elevated steel prices internationally.
Group’s financial position continues to remain robust, with the liquidity position as at the end of 30 September 2021 reaching QR13.4bn 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 QR39.7bn and QR37.4bn, respectively, as at 30 September 2021. During nine-month period, the Group generated positive operating cash flows of QR6.2bn, with free cash flows of QR5.6bn.
Petrochemical segment reported a net profit of QR2.2bn for 9M-21, up by 248 percent versus 9M-20. This notable increase was primarily linked to improved product prices owing to better macroeconomic dynamics and supply scarcities. Profit improvement was also partially supported by the return of MTBE production to full scale, which was on a commercial shutdown for a certain period during the first half of this year.
Blended product prices for the segment rose by 62 percent versus 9M-20, with polyethylene (LDPE) prices showing a marked improvement of 67 percent. Sales volumes improved by 6 percent, compared to the same period of last year, on account of improved production levels which also increased by 6 percent. The growth in product prices coupled with inclined sales volumes led to an overall increase in revenue by 72 percent within the segment, to reach QR4.7bn for 9M-21.
Fertilizer segment reported a net profit of QR2.8bn for 9M-21, with an increase of 436 percent, versus the same period of last year. This increase was primarily driven by topline growth where revenue increased by 119 percent for the nine month period of 2021, to reach QR6.5bn. Selling prices improved significantly by 69 percent versus 9M-20, which reflected positively on segmental performance and led to improved EBITDA margins.
Sales volumes increased by 68 percent during 9M-21 in comparison to 9M-20, as full volumes relating to Qafco trains 1-4 were recorded as part of 9M-21, as against absence of volumes for the first seven months of 2020, amid temporary gas processing arrangement.
Q3-21 segmental revenue increased by 21 percent as compared to Q2-21, mainly on account of continued higher fertilizer prices, which on an average increased by 24 percent quarter-on-quarter basis. Growth in revenue led to a growth in segment’s net earnings which increased by 36 percent compared to Q2-21.
Following the strategic restructuring initiatives implemented last year, steel segment returned to profitability in 2021. Net profit for the current period amounted to QR629 million versus a net loss (including impairment) of QR1.4bn in 9M-20. This noticeable improvement was mainly due to many factors such as selling prices improvement, focused marketing. Selling prices improved by 31 percent compared to 9M-20, due to increase in demand linked to a rebound in construction activity. The Group now focus on selling in more profitable domestic and regional markets on its current reduced production capacity. Nevertheless, the Group also made few international sales on an opportunistic basis.
Industries Qatar will host an IR Earnings call with investors to discuss the results, business outlook and other matters on November 1, at 1:30 pm Doha Time.
