Doha: Qatar Aluminum Manufacturing Company Q.P.S.C. (“QAMCO” or “the Company”; QE Ticker: QAMC), a 50 percent joint venture partner in Qatar Aluminum Company (Qatalum), yesterday reported a net profit of QR93m for the three-month period ended 31 March 2023, with an earnings per share (EPS) of QR 0.017.
During the first quarter of 2023, the macroeconomic context for the aluminium markets remained volatile. Several factors affected the commodity markets, which cascaded down to the supply-demand dynamics of aluminium and led to volatilities in prices.
Demand for aluminium was overshadowed by China’s slow paced post-COVID recovery phase, coupled with persistent weakness in the Chinese construction sector. In parallel, high inflation and monetary tightening by most of the Central Banks continue to weigh on industrial demand for most of the commodities, including aluminium.
On the other hand, operating rates for European smelters improved following a recent fall in natural gas prices. However, geo-political tensions on account of Russia-Ukraine conflict continue bring an additional layer of uncertainty to the commodity markets.
On an overall basis, aluminium prices for 1Q-23 demonstrated declining trends versus 1Q-22, amid macroeconomic headwinds. However, aluminium prices remained essentially stable versus 4Q-22.
QAMCO reported a net profit of QR 93m for the three-month period ended 31 March 2023, as compared to QR240m for the same period of last year, with an earnings per share (EPS) of QR 0.017 versus QR 0.043 for 1Q-22.
Share of JV’s revenue declined by 23 percent to reach QR736m for the current period, as compared to QR950m for 1Q-22. EBITDA declined by 38 percent and reached QR223m in comparison to QR361m for the same period of last year. However, EBITDA margin for 1Q-23 remained at 30 percent compared to 38 percent for 1Q-22.
QAMCO’s financial results for the current period versus same period of last year, were largely attributed to an overall decline in average realized selling prices.
Average realized selling price witnessed a decline of 18 percent during 1Q-23 versus 1Q-22 to reach USD 2,704/MT amid macroeconomic headwinds and impacted QR 166 million to the net profit for three-month period ended 31 March 2023 versus the same period of last year.
Production levels slightly inched higher with an increase of 2 percent was noted in the production volumes for the current period versus 1Q-22. However, sales volumes declined by 6% versus 1Q-22, due to relatively lower sales of extrusion ingots versus last year. Decline in sales volumes impacted QR 49 million to the net profit for three-month period ended 31 March 2023 versus 1Q-22.Cost of goods sold for the current period declined versus the same period of last year, mainly on account of lower raw material costs coupled with higher closing inventory, as production volumes remained higher than sales volumes.
On overall basis, the decline in cost of goods sold contributed QR 60 million positively to the net profits for the three-month period ended 31 March 2023 versus same period of last year.
Compared to 4Q-22, QAMCO’s net profits for 1Q-23 declined by 20 percent. A key contributor towards this negative movement in profitability was mainly due to lower sales volumes reported during 1Q-23 versus 4Q-22, which declined by 24 percent on quarter-on-quarter
basis.
Decline in sales volumes was mainly attributed to exceptionally high sales volumes reported for 4Q-22, due to carry over of inventories from the previous quarter coupled with certain volumes which were affect due to timing of
shipment.
This decline in sales volumes contributed QR230m negatively to the bottom-line profitability for three-month period ended 31 March 2023 versus 4Q-22. Selling prices on the other hand remained stable versus 4Q-22, in line with global aluminium prices.On the contrary, net earnings were positively impacted due to lower cost of goods sold reported during 1Q-23 versus 4Q-22, mainly linked to favorable inventory movements on account of lower sales volumes reported during 1Q-23. This decline in cost of goods sold contributed QR179m positively to the bottom-line profitability on a quarter-on-quarter basis.
QAMCO’s financial position continued to remain robust with the liquidity position at the end of 31 March 2023 reaching QR1.66bn in form of cash and bank balances (including proportionate share of cash and bank balances of the joint venture). During the period, QAMCO’s JV generated share of operating cash flows of QR290m, with a share of free cash flows of QR245m.
QAMCO’s JV continue to maintain high efficiency and cost competitiveness in terms of its production and operations. Health and safety measures continue to remain a priority to ensure reliability of assets, while achieving operational excellence. CAPEX projects were conducted as planned and in line with the operational requirements.
QAMCO will host an IR earnings call with investors to discuss its results for 1Q-23, business outlook and other matters, on Tuesday, 9th May 2023 at 1:30pm Doha time.
