- 1Q-23 results impacted mainly due to negative movement in average realized selling prices, amid challenging macroeconomic context
- Group operations continued to remain robust as all the operational performance indicators improved versus last year, with plant utilization rates reaching 105%
- Earnings per share (EPS) of QR 0.19 for 1Q-23 compared to QR 0.45 for 1Q-22
- Liquidity continues remain robust with a total cash and bank balance of QR 13.9 billion, with a free cash flow generation of QR 0.8 billion during 1Q-23
According to the company’s website press release on May 7, 2023, Industries Qatar (“IQ” or “the Group”; QE Ticker: IQCD) reported a net profit of QR 1.2 billion for the three-month period ended 31 March 2023, representing a decline of 57% compared to 1Q-22.
Updates on macroeconomic environment
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 reopening, 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.
Operational performance updates
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%, 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.
Financial performance updates – 1Q-23 vs 1Q-22
Group reported a consolidated net profit of QR 1.2 billion for the three-month period ended 31 March 2023, with a decline of 57% 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% to reach QR 4.8 billion as compared to QR 7.1 billion reported for 1Q-22.
▪ Product prices
Blended average product prices declined by 35% versus 1Q-22 and reached USD 494/MT. Decrease in product prices contributed QR 2.6 billion negatively to the Group’s net earnings. The decline in product prices was mainly linked to downward trajectories noted across the Group’s basket of product amid macroeconomic headwinds carried forward from the last year.
▪ Sales volumes
Sales volumes increased by 3% versus 1Q-22, primarily driven by higher plant operating rates. Improved sales volumes contributed QR 199 million in the overall growth of Group’s net earnings for 1Q-23 compared to 1Q-22.
▪ Operating cost
Operating cost for 1Q-23 decreased by 14% 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.
Financial performance updates – 1Q-23 vs 4Q-22
Note: Revenue and EBITDA measures have been reported based on non-IFRS based proportionate consolidation
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% versus 4Q22, 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 QR 1.4 billion negatively to the Group’s net earnings on a quarter-on-quarter basis.
On the other hand, sales volumes increased by 10%, linking to better production achieved on a quarteron-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 QR 0.6 billion to Group’s net earnings for 1Q-23 in comparison to 4Q-22.
Financial position
Note: Cash and bank balances has been reported based on non-IFRS based proportionate consolidation
Group’s financial position continue to remain robust, with cash and bank balances at QR 13.9 billion as of 31 March 2023, after accounting for a dividend payout relating to the financial year 2022 amounting to QR 6.7 billion. Currently, the Group has no long-term debt obligations.
Group’s reported total assets and total equity reached QR 39.1 billion and QR 36.5 billion, respectively, as at 31 March 2023. The Group generated positive operating cash flows1 of QR 1.2 billion, with free cash flows 1 of QR 0.8 billion during 1Q-23.
Earnings Call
Industries Qatar will host an Earnings call with investors to discuss the latest results, business outlook and other matters on Monday, 8 th 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.
About Industries Qatar (IQ)
Industries Qatar Q.P.S.C. was incorporated as a Qatari joint stock company on April 19, 2003. The business operations of the company comprise the direct holding of shares in the following subsidiary and joint venture companies: (i) Qatar Steel Company Q.P.S.C. (“QS”), a wholly-owned subsidiary, engaged in the manufacture and sale of steel billets and reinforcing bars; (ii) Qatar Petrochemical Company Limited QSC (“QAPCO”), a joint venture owned 80% by IQ, engaged in the production of ethylene, low-density polyethylene (“LDPE”), linear low-density polyethylene (“LLDPE”) and sulphur; (iii) Qatar Fertilizer Company SAQ (“QAFCO”), a subsidiary 100% owned by IQ, engaged in the manufacture of ammonia and urea; and (iv) Qatar Fuel Additives Company Limited QSC (“QAFAC”), a joint venture owned 50% by IQ, engaged in the production of methanol and methyl-tertiary-butyl-ether (“MTBE”).
The operations of the subsidiary and joint ventures remain independently managed by their respective management teams.
For more information about the earnings announcement,
email iq@qatarenergy.qa or iq.investorrelations@qatarenergy.qa or visit www.iq.com.qa
DISCLAIMER
The companies in which Industries Qatar Q.P.S.C. directly and indirectly owns investments are separate entities. In this press release, “IQ” and “the Group” are sometimes used for convenience in reference to Industries Qatar Q.P.S.C.
This presentation may contain forward-looking statements concerning the financial condition, results of operations and businesses of Industries Qatar Q.P.S.C. All statements other than statements of historical fact are deemed to be forward-looking statements, being statements of future expectations that are based on current expectations and assumptions, and involve known and unknown risks and uncertainties that could cause actual results, operations and business performance or events impacting the group to differ materially from those expressed or as may be inferred from these statements.
There are a number of factors that could affect the realization of these forward-looking statements such as: (a) price fluctuations in crude oil and natural gas, (b) changes in demand or market conditions for the group’s products, (c) loss of market share and industry competition, (d) environmental risks and natural disasters, (e) changes in legislative, fiscal and regulatory conditions, (f) changes in economic and financial market conditions and (g) political risks. As such, results could differ substantially from those stated, or as may be inferred from the forward-looking statements contained herein. All forward-looking statements contained in this report are made as of the date of this document.
Industries Qatar Q.P.S.C., it’s Directors, officers, advisors, contractors and agents shall not be liable in any way for any costs, losses or other detrimental effects resulting or arising from the use of or reliance by any party on any forward-looking statement and / or other material contained herein. Industries Qatar Q.P.S.C., its subsidiary, joint ventures and associated companies are further in no way obliged to update or publish revisions to any forward-looking statement or any other material contained herein which may or may not be known to have changed or to be inaccurate as a result of new information, future events or any reason whatsoever. Industries Qatar Q.P.S.C. does not guarantee the accuracy of the historical statements contained herein.
GENERAL NOTES
Industries Qatar’s accounting year follows the calendar year. No adjustment has been made for leap years. Values expressed in US $’s have been translated at the rate of US $1 = QR 3.64.
Amounts relating to income statement, including revenue, net profits, production, sales volumes, have been computed and reported for the purpose of this press release on proportionate basis, based on the share of ownership of IQ in its respective joint ventures. Specifically, Petrochemical segment’s revenue is computed by taking the Group share of revenue in Qapco and Qafac. Qapco’s revenue is computed by taking the share of revenue in its joint ventures namely Qatofin, QVC and QPPC. This revenue may differ from the revenues reported in the consolidated financial statements.
DEFINITIONS
Adjusted Free Cash Flow: Cash Flow From Operations - Total CAPEX - Dividends • CAGR: 5-Year Compound Annual Growth Rate • Cash Realization Ratio: Cash Flow From Operations / Net Profit x 100 • Debt to Equity: (Current Debt + Long-Term Debt) / Equity x 100 • Dividend Yield: Total Cash Dividend / Closing Market Capitalization x 100 • DRI: Direct Reduced Iron • EBITDA: Earnings Before Interest, Tax, Depreciation and Amortization calculated as (Net Profit + Interest Expense + Depreciation + Amortization) • EPS: Earnings per Share (Net Profit / Number of Ordinary Shares outstanding at the year-end) • Free Cash Flow: Cash Flow From Operations - Total CAPEX • HBI: Hot Briquetted Iron • LDPE: Low Density Poly Ethylene • LLDPE: Linear Low Density Poly Ethylene • mmBTU: Million British Thermal Units • MTPA: Metric Tons Per Annum • MTBE: Methyl Tertiary Butyl Ether • Payout Ratio: Total Cash Dividend / Net Profit x 100 • P/E: Price to Earnings (Closing market capitalization / Net Profit) • Utilization: Production Volume / Rated Capacity x 100
