Doha: Industries Qatar (IQ), one of the region’s industrial giants with holdings in petrochemicals, fertilizers and steel producers, yesterday reported a net profit of QR951m for the nine months period ended September 30, 2020, with a total Group revenue of QR8bn.
Business performance of the Group during the year, was marked by the challenging macroeconomic conditions witnessed amid slower economic growth, weaker crude oil prices, trade conflicts, lack of infra-structure investments, continued negative consumer sentiments and stiff competition.
The negative macroeconomic environment got further worsened due to the outbreak of COVID-19 pandemic, which had a material unfavorable effect on consumer and industrial demand due to lockdowns affecting the global GDP growth. This led to increased pressure on IQ’s product prices in various markets, which negatively affected the Group’s year-to-date financial performance.
However, the Group weathered the extreme external adversities by leveraging its competitive advantages including its relatively low operating cost base; long-term access to feedstock; stronger financial position; diversified product range including its efficient and flexible production facilities; wider global presence; and a dedicated marketing and sales partner; thereby limiting the impact of such vulnerabilities.
The Group’s operations remained robust and resilient with production across the Group remaining stable. Total production for the nine months period reached 12 million MT’s, down on last year by 6 percent. This marginal reduction was mainly driven by periodic planned maintenance, unplanned shutdowns and moth-balling of certain steel facilities. This was partially offset by the additional production volumes related to Qafco’s 25 percent stake acquisition, effective January 1, 2020.
There were no major plant stoppages due to any demand related reasons, except for a planned shutdown of MTBE facilities for 57 days during Q2-20, due to commercial reasons. The MTBE facilities is now back in operations, where, the impact to the Group in relation to temporary shutdown of MTBE facilities has remained immaterial, considering its overall contribution to the Group volumes.
The Group’s average reliability factor remained at 95 percent , amid focus on preventive maintenance. This level of reliability is an indication of Group’s commitments towards improving asset quality and sustainability.
H E Eng. Saad Sherida Al Kaabi, Chairman of the Board of Directors and Managing Director, said: “As an immediate priority, following the unprecedented headwinds affecting our business, we further emphasized our optimization drive across the segments and implemented new optimization measures during the year.”
“In response to COVID-19, the Group companies continue to monitor the business conditions and manage the threats posed by the spread of the pandemic, with specific focus on protecting our employees, assets and operations. Our marketing partner diligently monitored the evolving situation in our key markets and acted prudently to minimize the disruptions.”
“The Group also successfully concluded the acquisition of 25 percent stake in Qafco, for a purchase consideration of $1bn.
The acquisition of the Qafco’s minority stake is consistent with IQ’s strategy to build its presence and create value across the downstream hydrocarbon chain, spurred by synergistic opportunities. This acquisition would not only provide efficient and effective use of excess cash available at the Group level, but also provide us with 100 percent control over the world’s largest single-site Urea producer, along with new favorable commercial terms.
Going forward, the Group’s competitive advantages together with our flexibility in operations and diversified portfolios, would remain critical to the Group’s response to these external challenges.”
The Group recorded earnings per share (EPS) of QR0.16 for the nine months period ended 30 September 2020.
In line with the requirements of IFRS, 25 percent of Qafco’s net profits during the third period have been reported directly as part of the Group’s retained earnings, instead of reporting the same as part of Group’s net profit (attributable to equity holders of the Parent) within the consolidated income statement.
When considering the profitability of the Group including 25 percent of Qafco’s profits for the same period, the net profit (normalised profits) for the period would reach to QR1.1bn, down by 48 percent, as compared to QR2bn for the same period last year. EBITDA for the period reached QR2.6bn, compared to QR3.2bn for the same period of last year.
The adverse conditions directly translated into declining commodity prices, where blended selling prices declined by 10 percent versus last year, translating into a reduction of QR0.9bn in Group’s earnings (normalised). The major reduction was noted in the petrochemicals segment which accounted for QR0.6bn, while fertiliser segment accounted for QR0.3bn of the total reduction.
Group sales volumes declined by 20 percent versus nine months period of 2019, driven by a combination of reasons including weaker demand, lower production on account of facilities’ mothballing in the steel segment and periodic planned and unplanned maintenance.
The Group’s profitability was also impacted due to booking of one-off impairment loss amounting to QR1.2bn recognised in relation to mothballing of certain Qatar Steel’s production facilities and QR153m of impairment loss booked in relation to QMC facilities, as the melamine prices continue to remain under pressure.
These one-off impairment losses were partially offset by a fair value gain recognised amounting to QR1.2bn in relation to 75 percent stake in Qafco, as the Group now controls the company.
Compared to the previous quarter of 2020, the Group revenue and net profit (normalised) increased by 22 percent and 50 percent respectively. The recovery was mainly attributed to the improved product prices in the current quarter.
The Group’s financial position continue to remain robust despite several macro-economic headwinds, with the liquidity position at the end of the third quarter reaching QR8.8bn in cash and bank balances, after accounting for a QR2.4bn dividend payment for 2019 and cash paid for the Qafco transaction. Currently, the Group has no debt obligations. Group’s total assets and total equity reached QR35.2bn and QR32.9bn, respectively, as at September 30, 2020.
During the period, the Group generated positive operating cash flows of QR2.5bn, with a free cash flow of QR2.1bn.
Ahmed Abdulqader Ahmed Al Ahmed has been appointed as the Chief Executive Officer (CEO) of Qatar Fuel Additives Company (QAFAC) with effect from November 1, 2020 and Abdulrahman Ali Al Abdulla has been appointed as the CEO of Qatar Steel with effect from January 1 , 2021, along with the appointment of each of them as a member of Industries Qatar’s Board of Directors with effect from the date of their appointment.
