Hello, and welcome to Industries Qatar. Please note that this call is being recorded. You will have the opportunity to ask questions from our speakers later on during the Q&A session. [Operator Instructions] I'd like to hand the call over to our moderator, Bobby Sarkar. Please go ahead.
Okay. Thank you, Abigail. Hi, hello, everyone. This is Bobby Sarkar, Head of Research at QNB Financial Services. I wanted to welcome everyone to Industries Qatar's First Quarter 2025 Financial Results Conference Call.
So on this call from QatarEnergy's Privatized Affairs Group, we have Abdulla Al-Hay, who is the Manager for Privatized Companies Affairs; we have Rashid Al-Mohannadi, who is the Head of IR and Communications; and we have Saffan Mohammed, who is the Senior Financial Management Analyst.
So we will conduct this conference with management first reviewing the company's results followed by a Q&A. I would now like to turn the call over to Rashid. Rashid, please go ahead.
Thank you, Bobby. Good afternoon, and thank you all for joining us. Hope you are doing great. Before we go into IQ business and performance updates, I would like to mention that this call is purely for IQ investors, and only their representatives should be attending this call. Moreover, note that this call is subject to disclaimer statement as detailed on Slide #2 of the IR deck.
Kindly note that the MS Teams link is displayed on IR deck on screen. In case you want to participate in the Q&A session, you must dial in through the telephone lines on the phone number provided as part of the invitation.
Now we can move to the call. On Wednesday, 30th of April 2025, IQ published its results for the 3-month period ended 31st of March 2025. And today, in this call, we'll go through these results and provide you an update on key financial and operational highlights.
Today on this call, along with me, I have Mr. Abdulla Yaqoob Al-Hay, Manager for Privatized companies Affairs; and Mr. Saffan Mohammed, Senior Financial Management Analyst. We have structured our call as follows: At first, I'll provide you with a quick insight on IQ ownership structure, competitive advantages and overall governance structure; secondly, Abdulla will brief you on key macro economical updates and results; later, Saffan will provide you IQ financial performance matrices and update about segmental performance. And finally, we'll open the floor for the Q&A.
To start with, as detailed on Slide #5, IQ ownership structure comprises of QatarEnergy with 51% stake and the rest is in a free float held by various domestic and international corporates and individuals. IQ is a credit-rated entity by S&P with AA- and Moody's with Aa3 credit rating, both with stable outlook. These ratings were further affirmed by S&P recently.
QatarEnergy, being the main shareholder of IQ, provides most of the head office functions through a comprehensive service-level agreement. Operation of IQ group companies are independently managed by its respective Boards of Directors, along with senior management teams.
In term of the competitive advantages, as detailed on Slide #8, the group is well positioned with several competitive advantages within its domain strategically, operationally as well as financially. These strengths include an efficient and well-maintained asset base; a qualified, skilled and highly trained workforce; assured supply of feedstock and competitively priced energy sources; a lower and competitive operating cost; a dedicated team in the form of QatarEnergy Marketing to market the group petrochemical, fertilizer and greater global presence; reputable joint venture partner; and most importantly, a well-experienced senior management team.
As detailed on Slide #10, from competitive position and perspective, IQ ranks among the top-tier companies within the regional downstream space across most of the matrices. In term of the IQ code of governance, you may refer to Slide 51, 52 of the IR deck, which cover various aspects of IQ code of corporate governance in further detail.
I will now hand over to Abdulla. Over to you, Abdulla.
Thank you, Rashid. [Foreign Language] Thank you all for joining us. The macroeconomic environment in the first quarter of 2024 showed mixed signals after stabilizing through 2024. Global GDP growth was positive to moderate oil and inflation stayed moderate but above target level set by many central banks.
Despite uncertainties and geopolitical tension, economics in the U.S. Eurozone and emerging markets grew due to strong private consumptions and investment. Concerns over potential renewed tariff on U.S. imports added some uncertainty amongst most sectors. Regionally, ongoing geopolitical instability including Red Sea conflict, export restrictions on commodities like urea and lower production and larger facility affected supply chain, offsetting demand supply effects.
The Petrochemicals segment saw a notable fluctuation. A decline in crude oil prices led to lower feedstock prices such as ethylene and naphtha. Oversupply in Europe and Asia combined with moderate to weaker demand shifted the supply/demand balance, favoring buyers, contributing to lower prices. Lower shipping cost, also helped maintain competitive pricing, especially in the high inventory regions.
Fertilizer prices showed stability and some fluctuation. Nitrogen fertilizer prices stabilized after peaking in 2022. Balanced global demand and supply regionally production cut back export restrictions, lower energy prices and steady agriculture demand supply supported this stability. Less market volatility compared to previous year also witnessed in the recent quarter.
The Steel segment faced challenges with the prices declined compared to 2024. This was driven by weaker demand from key markets like China, increased global production capacity outpacing demand growing, and ongoing trade tensions and policy shift, notably, potential tariffs creating significant volatility in steel prices and uncertainty in the market.
I will hand over to Mr. Saffan to cover the financial performance of the group.
Thank you, Abdulla. As detailed on Slide 15, the group reported a consolidated net profit of approximately QAR 1 billion for the 3-month period ended 31st March 2025 with an earnings per share of QAR 0.16, showing a decline of approximately 22% compared to Q1 2024.
EBITDA for the period decreased by 3% to QAR 1.5 billion versus the same period of last year. And the group achieved an EBITDA margin of 36% compared to 42% for the same period of last year.
Group revenue for first quarter of 2025 also saw a slight decline of 3% compared to first quarter of 2024, reaching to QAR 4.1 billion. This reduction in revenue was mainly due to a marginal decline in sales volume which was partially offset by a marginal improvement in the selling prices.
Going through IQ's net earnings for the first quarter of 2025 versus first quarter of 2024. As detailed on Slide 16, Group's financial performance for the period was largely attributed to the following factors: firstly, the product prices. Blended average product prices marginally improved by 3% versus first quarter of 2024, reaching to USD 490 per metric ton, positively contributing to group's net earnings by QAR 120 million.
This improvement was primarily driven by improved nitrogen fertilizer prices. Fertilizer prices have started to stabilize in the recent quarters after experiencing some volatility during 2023.
This price stability was notably supported by supply bottlenecks driven by regional geopolitical uncertainty, export restrictions in larger producing economies like China and production shortfall in some other larger facilities due to facility shutdowns and other factors such as cost escalations.
On the other hand, demand for downstream products were mostly impacted by sluggish economic forecast in some other large key economies, monetary policies that remain moderate, limited domestic and regional demand.
The second point is sales volume. Sales volume for the first quarter of 2025 marginally declined by 6% versus first quarter of 2024 primarily driven by weaker demand due to subdued macroeconomic conditions, supply bottlenecks amid ongoing regional uncertainties, and timing of shipments within some of the operating segments.
Operating cost for Q1 2025 marginally increased versus the first quarter of 2024. This increase in the operating cost primarily linked to price-driven variable cost, fixed operating cost associated with unplanned shutdowns, adverse inventory changes and general inflation, partially offset by lower sales volumes.
Comparing IQ's net earnings for the first quarter versus fourth quarter of 2024. As detailed on the same slide, the group's net earnings marginally grew in first quarter of 2025 compared to the fourth quarter of 2024. The increase was primarily due to a 4% rise in average selling prices which was broadly offset by 3% lower sales volume, the absence of one-off nonoperating other income and lower income from the associate income. This was partially offset by a significant improvement in the operating expenses driven by lower sales volumes.
During the fourth quarter of 2024, the group recorded a nonrecurring other income of QAR 144 million related to a fair value gain on the remeasurement of previously held interest in a joint venture, which was QAFAC. On a comparable basis, after adjusting for this one-off nonoperating income of QAR 144 million, the adjusted net income for the current period has increased moderately by 20% versus the fourth quarter of 2024 despite a reduction in the sales volumes.
Revenue for first quarter of 2025 has marginally increased compared to fourth quarter of 2024 due to improved selling prices which was partially offset by a marginal reduction in volumes. Sales volumes have decreased sequentially amid market uncertainty, while marginal increase in production volume is noted during the quarter.
Production increased due to group having comparatively higher operating days and the operation of an additional facility. On the other hand, average selling prices have marginally increased within the Fertilizer segment compared to the previous quarter, driven by favorable macroeconomic sentiments.
Financial positions. As detailed on Slide 15, the group financial position continued to remain robust with proportionately accounted cash and bank balances of QAR 9.2 billion as of 31st March 2025 after accounting for a dividend payout relating to second half 2024 interim dividend of QAR 2.6 billion.
Currently, the group does not have any long-term debt obligations. The group reported total asset and total equity of QAR 40.7 billion and QAR 36.1 billion, respectively. As of 31st March 2025, the group generated operating -- positive operating cash flow of QAR 670 million, while invested QAR 640 million in capital expenditure.
Now we can move on to the segmental review. Petrochemicals segment reported a net profit of QAR 263 million for the reporting quarter of Q1 2025, down 26% versus the same quarter of last year. This decrease was mainly linked to lower revenue by 6% and the decline in gross margin attributed to an increase in the operating cost.
Revenue declined amid moderate decline in sales volume by 8%, while selling prices have marginally improved by 3% versus the same period of last year. Blended average selling prices for the segment marginally improved versus the same period of last year, but remained stable throughout the year on the backdrop of some easing of monetary policies, renewed consumer interest, balanced demand and supply, and somewhat favorable feedstock pricing.
On a quarter-on-quarter basis, segment's net earnings improved significantly by 31% on the backdrop of improved operating costs that declined moderately, ultimately leading into increase in the operating margin. Although the sales volumes have declined marginally by 9%, partially due to lower production within fuel additive segment due to unplanned shutdowns, the marginal increase in average selling prices by 2% together with reduction in operating costs have aided the segment to improve its profitability during the current quarter.
Moving on to Fertilizer segment. Fertilizer segment have reported a net profit of QAR 553 million with a moderate decline of 13% versus the first quarter of 2024. This reduction in net profit versus the last year was primarily driven by lower sales volume, which was down by 6% and a marginal increase in the operating cost that was primarily linked to price-driven feedstock costs and unfavorable inventory changes. Reduction in production on account of maintenance shutdown led to lower sales volumes.
Segment's revenue marginally increased in first quarter of 2025 versus the same period of last year due to moderate increase in selling price. Selling prices have inclined moderately versus the first quarter, and stabilized during the latter part of the year on the favorable macroeconomic fundamentals. Sales volumes were moderately decreased during first quarter of 2025 by 6%, mainly due to lower production and supply challenges.
The segment reported a total production of 2.4 million metric tons, marginally down amid stable operations. On a quarter-on-quarter basis, segment reported a revenue -- segmental revenue marginally increased by 14% versus the previous quarter owing to higher sales volume by 3% and higher selling prices by 11%.
Selling prices and sales volume have improved primarily owing to stable macroeconomic condition, including balanced demand and supply. Improvement in sales volumes were also supported by increase in production by 4% on account of higher operating days as the segment had higher facility maintenance days during the previous quarter. Segment's net profit for first quarter of 2025 increased notably by 32%, mainly owing to higher revenues on account of improved sales volumes.
Heading on to Steel segment. Steel segment reported a net profit of QAR 116 million, decreased by 26% versus the same period of last year. The reduction was primarily driven by lower revenue by 8% on account of combined effect of lower prices and volumes, together with reported earnings from its -- lower reported earnings from its associates.
The segment was also able to maintain gross margin at its previous year levels of approximately 12% to -- 11% to 12%. Revenue declined moderately by 8% due to combined effect of lower prices and volumes. Average steel prices declined marginally due to softening of demand across key steel markets, together with steel capacity outpacing its demand globally.
Construction demand also continued to remain subdued due to challenging macroeconomic environment with most central banks continue to maintain moderate but stricter monetary policies. Production, on the other hand, has improved moderately, and the segment has restarted some of its facilities, those were previously mothballed.
On a quarter-on-quarter basis, segment's profit showed a notable decline by 11% due to lower revenue by 9%, and lower net earnings from segment's associates. Revenue declined versus the last quarter, mainly on account of lower volumes. Segment's revenue for the current quarter has declined marginally due to lower sales volume by 11% and prevailing market conditions. Production improved moderately by 8% versus the previous quarter, and the segment restarted one of its steel melt shop that was previously mothballed.
With the conclusion of the segment analysis, we have reached the end of our presentation. I'll now hand over to Rashid to take over the floor for the Q&A.
Thank you, Saffan. Thank you, everyone. I think we are ready to start the Q&A session.
[Operator Instructions] So your first question comes from the line of Sashank Lanka with Bank of America.
I have three questions, if that is fine. The first one is just related to your volumes. I think this was the second quarter where we saw volumes are slightly weak. Q4 was weak as well. So just wondering how the outlook is for the rest of the year? That's the first question.
The second question is on the urea prices realized in Q1. Sometimes you do have a delay in shipments, which causes some of the higher prices to be realized in later quarters. So just wondering if there's any of that expected in Q2?
And the third one is since the last time we had the call, is there any new update on the blue ammonia project?
So with respect to the sales volumes, sales volume, as you know, it's driven by market. There -- as you know, we -- generally, what we produce is what we'll sell. Some of these volumes are driven by what you call, timing of shipments, but what is produced and what is not sold will be sold in the next quarter.
And the answer to your second question, there were nothing much left in inventory with respect to your urea question. So almost of what we produced have been sold. With respect to your question on QAFCO-7 or the blue ammonia, the project is on track. So it will be online as it has been announced.
Saffan, just following up on that. I think you had some planned and unplanned shutdowns. So my question is, in terms of that schedule, going into Q2, Q3, should we see some normalization there.
Yes, we had some unplanned shutdown. That was in a smaller plant in methanol, so that didn't have a major impact on your volumes. So we'll have -- in such large facilities, every year, you will have routine shutdowns. So your production volume, that will be a production and sales volume, which will be very, very routine, very similar to your previous year.
So your, what you call the baseline sales volume, which will remain as the previous years. Only thing you would see some additional volumes coming from Qatar Steel because they have started one additional facility. That's it.
Your next question comes from the line of Seki Mutukwa with Ashmore Group.
Possibly for you, Abdulla, just you talked about the sort of uncertainty globally, of course. I'm curious in conversations with QatarEnergy Marketing since the end of the first quarter, are they indicating better visibility, worse visibility than during Q1. Any sort of sense of what the underlying clients are sort of doing whether it's inventory buildup or holding off until later in the year? Just anything you can share would be useful.
Yes, thank you for your question. If we see there is supply and demand, it does not mean that we will not be able to sell our products. As you have seen, this is -- the uncertainty it was there for the last year and it was there forever. Usually, this is the market and our marketing team within QatarEnergy are working very hard to ensure selling all of our products at the maximum retail. So we believe that they will be able to achieve selling all of our products. So we shouldn't worry about it.
And also Seki, this tariff is a systematic risk. So all producers will be impacted. So -- and the advantage what we will have, we are one of the low-cost producers, right? So anyone who will have -- will be impacted, the countries with higher the tariff. So they will get out of the market first, so which will give some competitive advantage to producers like IQ.
And just one more, please. On the -- Saffan, you talked about the cost impact on the gross margins in Petchem. Just have we lapped whatever was causing that in 1Q? Or is that just a sort of general trend that you're seeing persisting?
It's mostly to, your cost is linked to your feedstock and pricing, right? So it gets adjusted, right? So that's why your cost impact comes through. But still, your margin still -- it still looks much higher. You have a 32% margin.
So your feedstock is a function of your product prices, right? So if the price goes up and part of that cost is coming in. And also, when you have an unplanned shutdown, unplanned shutdown cost is expensed into your P&L, not capitalized and depreciated. So that cost is charged to your P&L.
Okay. So assuming you're up and running, shutdowns are done, then you can then sort of pass that through.
You'd get normalized.
Your next question comes from the line of [ Nikhil Phutane ] with CBFS.
I think so quite a number of questions has been answered. But just on the urea prices, of late, we are seeing an upshoot in terms of the prices to a certain extent rallying. So do you see -- given the fact that you mentioned inventory has been quite flat, I mean in the first quarter, you've been able to produce and sell also.
So do you see that, as compared to the average run rate which we saw previously in 2024, we'll be able to meet that target along with the pricing increase which could support Fertilizer division in second quarter?
So you mean to say Fertilizer dividend?
Yes, I'm talking about the Fertilizer pricing in terms of urea and also along with volumes. Do we see any hint in the second quarter likely to improve as compared to the first quarter?
Yes. First quarter, we had some planned and unplanned shutdown. So basically, we'll get back to the de facto base operations, so that will improve your volumes.
And also the other point always we should remember, when we plan a shutdown, always we improve our -- we increase our volumes and we keep buffer inventory to sell and we do some preproduction planning, and we work with Muntajat and we identify which is the right period to build those inventories.
So obviously, if the market is doing well, so sometimes we do that. So obviously, there will be -- Q2, we expect to do better than Q1 in terms of volumes.
Okay. Coming to your Steel division, I mean, you mentioned about EFO plant, I mean, increase in billet production and synergies. So I mean, given the fact that your capacity utilization in that is -- and I assume is quite low, do you think so that could substantially change in sense that sales could improve in second quarter? Or it's just the synergies between your subsidiaries and your synergies, as you mentioned?
So we just started in mid-January. So over a period of time, that would start to operate, that will improve the EFO or the steel mill shop plant will start continue to produce, so that will start improving your utilization of that particular plant, which will also improve the synergies that will also help producing and selling within the group so that it's more than selling outside that would bring more synergies within the group so that there will be economies of scale, there will be synergies, there will be other benefits that would create within the Steel segment and within the group itself.
Okay. Can we see something tangible -- so any tangible benefit which you can see at the Steel division level, I mean, in terms of overall?
Most likely half year, third quarter [Foreign Language].
Your next question comes from the line of Abhinav Sinha with Lesha Bank.
I have one question. So as you pointed out in the net profit that the net profit benefited from higher prices but lower volumes but I had one question. Like despite the lower volumes, why was the -- like the gross margin down year-over-year? Because if I look at your Fertilizer segment, which is the high-margin business, so that has grown higher than the group in terms of revenue. So could you explain the reason behind that?
So the income from associate was down in the Steel segment. We have explained that in our press release as well, so in the Steel segment, so that was one of the contributor for lower bottom line or the lower margin.
And also the other reason is there are certain fixed costs, say, for example, the way the fixed cost is treated, for example, the unplanned shutdown cost is expensed rather than capitalized. So that is another reason. These are explained in our press release, if you go through it. So those were the two reasons why your margins are lower.
Okay. Because I was specifically referring to the gross margin.
Your gross margin is then part of the cost of good sold, right?
Yes. Okay, understood.
Your next question comes from the line of Faisal Al Azmeh with Goldman Sachs.
Yes. Most of my questions were largely answered. I'm just going to ask just a question on the buyback that you've announced recently. What drove that decision generally? Is it something that the company plans or intends to do more regularly and should we -- should the market start to price that into the name over time? Or do you think this is just -- this was just a one-off and is unlikely to happen again?
Yes, thank you for your question. This initiative was taken by the Board of Directors of Industries Qatar basically due to the beliefs of the strong financial of -- financial position of IQ where they believe that the share price is under valued and we can enhance the share price by taking such steps and this will have the benefit to all shareholders.
So we have announced that we're going to ahead to do the buyback strategy with a ticket value up to QAR 1 billion. So let's see how this would improve the share price, and we're going to work with the -- also with the adviser to advise on what would be the right bid price for IQ, when we need to either continue buying or we need to stop at which stage. So I hope I answered your question.
Your next question comes from the line of Rene Selouan with Jadwa Investment.
In fact, most of my questions were answered. But if you could give us a bit more clarity on the Fertilizer segment shutdowns, the planned ones in the remainder of the year for '25. And as I understood, there was a planned and unplanned shutdown in Q1 in the Fertilizer segment. And also on the share buyback, any additional clarity would be really appreciated.
In the Fertilizer, there will be -- the Q1, we had both planned and unplanned shutdown because we have 12 trains, right? Obviously, these planned shutdowns are essential to maintain those trains. Those are very essential to ensure that health, safety and the -- what you call, the reliability of those plants.
We'll also have one more shutdown coming either in the second or third quarter depending on the upstream shutdown of QatarEnergy who supplies the gas. But other than that, on the Fertilizer, we don't expect any more shutdowns.
But as I mentioned during the early part of the call, we -- the Fertilizer or any part of this downstream entities will plan with QatarEnergy Marketing to boost their production prior to the shutdown to minimize the impact on the production and sales volumes. So that will ensure that they will have minimized the volume impact because of these planned shutdowns.
Unplanned shutdowns can happen. For example, if they plan a 30-day shutdown, due to various reasons, it might become 36 days. That extra 6 days is considered unplanned in our terminology. Hope I answered your question.
Yes. Great. And on the share buyback, any more clarity?
Yes, if you can ask your question, specifically, what are you looking for because I just answered Goldman Sachs about the buyback strategy that we have already announced to do the initiatives with a ticket of QAR 1 billion -- up to QAR 1 billion. And we believe that IQ is capable to do such buyback until we believe that the share price is the reflection of the value -- the right value of IQ on the market.
And have you bought any shares until now? And for how long is this program open for? Is there a time...
Yes. Still, we have not started the program. We will announce at the first day of the program once we start the transaction. So still no transactions are done.
And is there like a time frame during which you have to buy or it's open-ended?
No. Definitely, there is regulation. The regulation gives us 6 months. This 6 months is extendable, if we write to the QFMA. So basically, from now, we have around maybe 5 months or -- where we can start the program.
Okay. And it would be another 6 months or it's a few months? Or it's like what...
We are not sure. We are not sure in the next 5 months we will be able to achieve our target. If we have not achieved the targeted share price, we might extend it for the other -- next 6 months as well.
Your next question comes from the line of Ricardo Rezende with Morgan Stanley.
If I may follow up on two questions on the turnaround, please. The first is on the one on Fertilizer that you mentioned could be in the second quarter or third quarter. Just how long would that turnaround be?
And then on the -- the other one is on the methanol unplanned turnaround. Is it already completed? Did it have an impact on the second quarter? And then when you mentioned how you -- if you qualify to whether a planned or unplanned turnaround, was that entirely unplanned or you had some planned turnaround for methanol and then it only lasted a little bit longer than what you expected?
Methanol turnaround completed. So just to answer your question, okay? And the turnaround for Fertilizer segment, depending on the plant, it's usually -- depending on the size of the plant, usually it goes between 24 days to 30 days, say if it's a smaller plant, and 32 days to 40 days, if it's a larger plant.
And in case if there are any complexity arises, there may be a couple of additional days goes in for unplanned shutdown, maybe another 6 to 8 days. So it varies between 30 to 45 days depending on complexity. These are, as we know, large complex trains, right? It's not a small machine. These are bigger industrial machinery. So we need to be mindful of that.
Yes, these kind of shutdowns are regular for such huge production units. So we have 6 train of urea and we have 6 train of ammonia as well. So this is a regular activity conducted every year to ensure the sustainability of the facility there. So we shouldn't worry about it.
Thank you, everyone, and that concludes our Q&A session for today. I will now turn the call back over to the moderator. Bobby, please go ahead.
Okay. Thank you, operator. So if these are all the questions for today, we can end the call. I want to thank Abdulla, Rashid and Saffan for taking the time to go over the presentation and answering all our questions, and we can pick this up next quarter. Thank you very much.
Thank you all. Thanks, Bobby. Thanks, everybody.
Thank you.
Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect. Have a nice day ahead.
