Doha: Industries Qatar (“IQ” or “the Group”; QE Ticker: IQCD), yesterday reported a net profit of QR1.2bn for the three-month period ended 31 March 2023, representing a decline of 57 percent compared to 1Q-22.
Macroeconomic environment continued to remain challenging during 1Q-23, because of geopolitical uncertainty amid Russian-Ukraine conflict, recessionary fears on account of inflationary pressures and hawkish stance on interest rates by most of the central banks, which resulted in reduced demand for most commodities.
Specifically on the fertilizers sector, in contrast to 1Q-22 when fertilizer prices hit decade highs, the prices continued to fall during 1Q-23. This occurred amidst downward pressure on grain, energy, other commodity prices, and general inflation. Also, some European fertilizer production came back online following the capacity curtailments during the fall of 2022 owing to the energy crisis.
Similarly, petrochemical’s performance in 1Q-23 was dictated by market sentiments around China’s re-opening, oil price volatility and the uncertainty in the global macro picture. Although, prices for certain petrochemicals slightly improved versus 4Q-22, mainly on the back of the relatively better supply-demand dynamics.
Steel sector remained somewhat resilient internationally, as China’s slow paced post-Covid recovery phase started to take shape, however, sluggish phase in the Chinese construction sector continued since last year. The domestic steel market showed signs of recovery following muted construction activity since latter part of 2022.
Group’s operations continue to remain stable and strong as production volumes for the current period improved by 11% to reach 4.4 million MT’s versus 1Q-22. This improvement in production was largely driven by higher operating rates, and better plant availability across all the segments. Plant utilization rates for 1Q-23 reached 105 percent, while average reliability factor stood at 99%. This reflects the Group’s commitment to operational excellence, while ensuring plant reliability and unwavering importance to HSE.
Similarly, on a quarter-on-quarter basis, production volumes improved by 1% versus 4Q-22, amid improvement in production volumes noted for the steel segments. However, this was partially offset by slightly lower production reported within petrochemical segment.
Group reported a consolidated net profit of QR1.2bn for the three-month period ended 31 March 2023, with a decline of 57 percent versus 1Q-22. Earnings per share (EPS) for 1Q-23 was QR 0.19 versus QR 0.45 for 1Q-22. Group revenue for 1Q-23 declined by 32 percent to reach QR4.8bn as compared to QR7.1bn reported for 1Q-22.
Sales volumes increased by 3 percent versus 1Q-22, primarily driven by higher plant operating rates. Improved sales volumes contributed QR 199m in the overall growth of Group’s net earnings for 1Q-23 compared to 1Q-22.
Operating cost for 1Q-23 decreased by 14 percent versus 1Q-22. The decrease in the operating cost was primarily linked to lower variable cost driven by price-linked feedstock cost, partially offset by increased volumes and general inflation.
During 1Q-23, the Group’s net earnings declined by 34% versus 4Q-22, mainly due to lowered revenue where a decline of 15% was noted on a quarter-on-quarter basis.
Decline in Group revenue was mainly linked to lowered selling prices which declined by 22 percent versus 4Q-22, as the global economic context remained under stress due to recessionary fears and continuing geopolitical tensions and resulted in downward price trajectories for most of the commodities with fertilizer prices declining by more than 30% while petrochemical and steel prices have shown modest improvement. Lower selling prices contributed QR1.4bn negatively to the Group’s net earnings on a quarter-on-quarter basis.
On the other hand, sales volumes increased by 10 percent, linking to better production achieved on a quarter-on-quarter basis for steel segments, being partially offset by lower volumes reported for petrochemicals segment. This growth in sales volumes led to a positive contribution of QR0.6bn to Group’s net earnings for 1Q-23 in comparison to 4Q-22.
Group’s financial position continue to remain robust, with cash and bank balances at QR13.9bn as of 31 March 2023, after accounting for a dividend payout relating to the financial year 2022 amounting to QR6.7bn. Currently, the Group has no long-term debt obligations.
Group’s reported total assets and total equity reached QR39.1bn and QR36.5bn, respectively, as at 31 March 2023. The Group generated positive operating cash flows of QR1.2bn, with free cash flows1 of QR0.8bn during 1Q-23.
Petrochemicals segment reported a net profit of QR382m for 1Q-23, significantly down by 43 percent versus 1Q-22. This decrease was mainly linked to a decline of 26% reported in segmental revenues, which was affected by lower blended selling prices realized during 1Q-23.
On a quarter-on-quarter basis, segment’s net earnings declined by 2 percent being predominantly linked to segmental revenue which declined by 8% versus 4Q-22. This decline in segmental revenue was primarily linked to lowered sales volumes reported, amid lower production. However, on the other hand selling prices improved sequentially by 4%, mainly on the back of the relatively better supply-demand dynamics within polyethylene segment.
Fertilizer segment reported a net profit of QR510m for 1Q-23, with a decline of 71 percent versus 1Q-22. This decline was primarily driven by lowered segmental revenue. Segment’s revenue decreased by 44 percent for 1Q-23 versus the same period of last year, due to lowered selling prices. Selling prices declined by 45%, amid macro-pressures affecting fertilizer markets. Sales volumes marginally increased by 3 percent during 1Q-23, mainly due to improved production levels which increased by 11% on year-on-year basis, amid relatively lower shutdown days reported for 1Q-23 versus 1Q-22.
Earnings Call Industries Qatar will host an Earnings call with investors to discuss the latest results, business outlook and other matters on Monday, 8th May 2023 at 1:30 pm 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.
