Doha: Qatar Aluminium Manufacturing Company (Qamco), a 50 percent joint venture partner in a successful smelter that produces premium high quality primary aluminum products in Qatar, reported a net profit of QR10.7m for the three months period ended 31 March 2020.
The financial performance of Qamco during first quarter of 2020 has continued to be impacted by external macroeconomic factors beyond the Company’s control, which weighed on the Company’s financial performance since 2019.
During the period, Qamco’s earnings per share (EPS) stood at QR0.002. Qamco’s share of revenue for the financial period amounted to QR565m, down by 14 percent, compared to Q1-2019 , as the pressure continued on the global aluminium prices and uncertainty building supply surplus on account of decreased global demand.
Qamco’s share of joint venture’s EBITDA stood at QR166m for the three months period ended 31 March 2020, down by 11 percent, compared to Q1-20191, but the EBITDA margins remained resilient in the current turbulent market conditions and stood at 29.4 percent, as compared to 28.2 percent of Q1-2019.
Qamco’s average selling prices during Q1-2020 fell by 14 percent, compared to Q1-2019, which is largely driven by the decline in global market prices for aluminum.
Commenting on the financial and operational highlights, Abdulrahman Ahmad Al-Shaibi, Chairman of the Board of Directors, Qamco, said: “Although the macroeconomic environment was challenging since the start of 2020, the Company managed to demonstrate its underlying strength as a key investor in one of the world’s lowest-cost, most-efficient aluminium smelters. During the period, in an adverse market, Qamco’s JV managed to continue with profits in the face of falling aluminium prices and unprecedented headwinds of COVID-19 pandemic.
In response to limit the spread of COVID-19 pandemic and ensure our operations remained resilient, our joint venture implemented several measures to ensure safety of employees and business continuity. Our sales and marketing partner, is diligently monitoring the market position, as the pandemic evolves, and acting effectively to minimize the risk of disruptions to the supply chain activities. Going forward, adaptation to ever evolving market forces will allow us more flexibility and better position the Company for long-term future growth and maintain its market standing as one of the world’s lowest cost aluminium smelters.”
The Company’s JV was able to successfully contain cost of goods sold, comprising of lowered raw materials and energy consumption. However, this was negatively offset primarily by the decline in realized average selling price.
Qamco’s share of debt in the JV declined by 7 percent to reach QR2,236m as at 31 March 2020, compared to the balance as at 31 December 2019, on account of principal repayment during the quarter amounting to QR222m. Qamco’s JV concluded refinancing of its outstanding loan amounting to $1.3bn during the first quarter of 2020.
The refinancing of Qamco’s JV’s debt will boost free cash flows to the extent of $1.3bn over the new tenor of 5 years, as there is no obligation to pay any recurring instalments unlike the previous loan, with the entire loan amount will be payable in form of a balloon payment at the end of the new tenor. The Company’s JV is also relieved from the compliance of stringent financial covenants previously required as per the old terms. This refinancing deal is not only expected to bring free cash flows to the JV, but also will provide new avenues of growth and flexibility to endure the market volatilities, which in turn is expected to maximize shareholder value. Qamco’s JV is well prepared to implement pro-active measures for optimizing its production cost, corresponding to the declining sales price. Nonetheless, Qamco’s JV continued to remain profitable, compared to the other peers in the industry, which are currently struggling to maintain their production capacity and profit margins in these challenging macroeconomic circumstances. This is a testament to the JV’s efficient cost base, mainly due to its lower input cost elements, including the power costs and long term raw materials agreements.
Qamco will host an IR earnings call to discuss its first quarter 2020 results, business outlook and other matters with investors on 05 May 2020 at 1.30pm Doha Time. The IR presentation that accompanies the conference call will be posted on the publications page of Qamco website.
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