Tribune News Network
Doha
Industries Qatar (IQ) on Tuesday reported a net profit of QR3.5 billion for the nine-month period ended September 30, 2024, representing an increase of 7 percent compared to the same period of last year.
EBITDA for the period also improved versus the same period of last year. Group revenue for 9M-24 moderately declined compared to 9M-23. Reduction in revenue for the current period was primarily due to an overall decline in average selling prices.
Global economic growth is encountering challenges due to the lingering effects of tight monetary policies aimed at combating inflation. Although some central banks have started easing interest rates, the prolonged period of high rates continues to suppress industrial activities, particularly in advanced economies, and did not allow them to fully recover from the macroeconomic troughs. This has resulted in subdued global industrial production growth, with regional variations reflecting differing economic conditions. The regional instability also did not fully support the macroeconomic stabilization.
In the petrochemical sector, producers face notable hurdles due to accumulation of capacity expansion, especially in China, and relatively higher energy costs in Europe. These factors have led to depressed margins and necessitated consolidation and capacity rationalization among some companies. The outlook remains uncertain, with lower industrial production growth and consumption rates affecting supply-demand dynamics. For nitrogen-based fertilizers, urea prices have shown resilience and remained relatively stable due to tight global supply and steady demand. Meanwhile, the steel industry continues to struggle with overcapacity and muted demand both internationally and regionally, further exacerbated by high interest rates and slow growth in the construction sector globally.
Group’s operations continue to remain stable and reliable as production volumes for the current period marginally improved versus 9M-23. This marginal improvement was largely driven by marginally stable operating rates, andplant availability across all the segments amid planned and unplanned maintenance across most segments together with additional capacity in the steel segment on account of Al-Qataria acquisition. This reflects the Group’s continued commitment to operational excellence, reliable operations while ensuring unwavering importance to HSE, and selective investments when available for the Group.
On a quarter-on-quarter basis, production volumes improved versus 2Q-24 amid planned and unplanned shutdowns during 2Q-24. Production volumes broadly improved across most segments during the current quarter with facility reliability, availability, and utilization improving on the previous quarter.
Product prices
Blended average product prices marginally declined versus 9M-23 and contributed negatively to the group net earnings compared to the same period of last year. Despite prices being marginally down in 2024, it is worth noting that product prices have continued to stabilize over the last few quarters after peaking during second half of 2022. This price stability was supported by supply challenges arising from regional geo-political uncertainty, plant turnarounds, export restrictions in some of the larger producing economies, production shortfalls in some of the larger facilities, and fiscal and monetary policy revisions in some larger economies. On the other hand, demand for downstream products were impacted by muted economic forecast in larger economies, aggressive monetary policies, limited domestic and regional demand, while a positive trend was noted in the recent months on the backdrop of improved macro-economic fundamentals.
Sales volumes
Sales volumes for 9M-24 increased marginally versus 9M-23, primarily driven by stabilization of demand, resulting from gradual easing of macro-economic challenges and supply-bottlenecks. Despite ongoing regional uncertainties and variations in shipment timing across some segments, overall sales volumes improved. This positive trend was further supported by a year-on-year increase in production levels.
Operating cost
Operating cost for 9M-24 improved versus 9M-23. The decrease in the operating cost was primarily linked to lower variable cost driven by price-linked feedstock and raw material cost and favourable inventory movements, partially offset by higher general cost inflation.
During the current quarter 3Q-24, IQ’s net earnings inclined versus 2Q-24 to reach QR 1.2 billion. This improvement was primarily due to higher gross margins in the polyethylene and fertilizer segment owing to lower operating costs primarily cost of goods sold.
However, this improvement was partially offset by lowered non-operating income as the steel segment recorded one-off other income in 2Q-24 on account of reversal of previously provided bank guarantee to the one of the segment’s associates.
From a segmental perspective, Petrochemical segment’s performance improved notably versus the last quarter on the back of improved volumes as the segment polyethylene facilities were on maintenance during 2Q-24. Petrochemical prices broadly remained unchanged versus the previous quarter.Profitability in the fertilizer segment improved notably on the backdrop of increased revenue (due to higher prices), and reduction in operating costs mainly in direct costs. Product prices have improved marginally on the backdrop of steady demand and supply tightness.Steel segment’s financial performance for the current quarter was impacted due to absence of one-off as the segment recorded a one of income in 2Q-24 related to reversal of bank guarantee. Nevertheless, operating income remained relatively stable versus previous quarter with growth reported in the revenue.
During 3Q-24, IQ’s net earnings remained relatively stable compared to the same quarter last year. Despite an increase in the group revenue, supported by higher sales volume amid better market dynamics, this growth was offset by higher operating, resulting in a relatively unchanged overall profit margin. The increase in operating costs is mainly attributed to higher operating costs associated with increased sales volume, coupled with price-linked feedstock and raw material cost.
The EBITDA margin declined marginally, primarily due to the aforementioned increase in operating costs and lower other income. Similarly, the net profit margin for the current quarter decreased compared to the same quarter of last year for the same reason.
Group’s financial position continue to remain robust, with robust proportionately accounted cash and bank balances as of 30 September 2024, after accounting for a dividend payout relating to 2023 dividend of QR 4.7 billion and 2024 interim dividend amounting to QR 1.9 billion. Currently, the Group has no long-term debt obligations.
Group’s reported total assets and total group equity as per the table above. The Group generated positive operating cash flows[1] of QR 3.0 billion, with free cash flows1 of ~QR 1.3 billion during first nine months of 2024.
Earnings call
Industries Qatar will host an Earnings call with investors to discuss the latest results, on Monday, 4th November 2024 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.
