Industries Qatar Q.P.S.C. (IQCD) Earnings Call Transcript & Summary

Hello and welcome to Industries Qatar conference call. Please note that this call is being recorded. I would now like to hand over to our moderator, Bobby Sarkar. Please go ahead.

Okay. Thank you, operator. Hi, hello, everyone. This is Bobby Sarkar, Head of Research at QNB Financial Services. I wanted to welcome everyone to Industries Qatar's Fourth Quarter and Year-end 2024 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's the Head of IR and Communications. And we have Saffan Mohammed, who's the Senior Financial Management Analyst. So we will conduct this conference with the management first reviewing the company's results, followed by Q&A. Let me now turn the call over to Rashid. Rashid, please go ahead.

Thank you, Bobby. Salamu alaykum. Good afternoon. And thank you all for joining us. I hope you are doing great. Before we go into IQ business and performance update, I would like to mention that this call is purely for IQ's investors and no media representatives should be attending this call. Moreover, please note that this call is subject to the disclaimer statement as detailed on Slide #2 of the IR presentation. Kindly note that the MS Team link is to display the IR deck on screen only. [Operator Instructions] Now we can move into the call. On Sunday, 2nd of February 2025, IQ published its financial result for the year ended 31st December 2024. Today in this call, we'll go through these results and provide you with an update on key financial and operational highlights. Today on this call, along with me, I have Mr. Abdulla Al-Hay, Manager of Privatized Company 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's structure, competitive advantage and overall governance structure. Secondly, Abdulla will brief you on the IQ dividend and key macroeconomic updates. Later, Saffan will provide you with IQ financial performance matrices, with an update about the segmental performance. And finally, we'll open the floor for the Q&A. To start with, as detailed on Slide #5, IQ ownership's structure comprises of QatarEnergy with 51% stake; and the rest is in free floats 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 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; lower and competitive operating cost; a dedicated team in the form of QatarEnergy Marketing to market the group with petrochemical fertilizer product and greater global presence; a reputable JV 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 governance structure, you may refer to Slide 51 and 52 of the IR deck, which cover various aspects of IQ code of corporate governance in further detail. That concludes the introduction. I will now hand over to Mr. Abdulla Al-Hay.

Salamu alaykum. Thank you, Rashid. Good afternoon, and thank you all for joining us. I am pleased to announce that Board of Director proposed second half dividend distribution of QAR 2.6 billion, equivalent to QAR 0.43 per share, representing more than 120% of the net earning for the second half results. This brings the total dividend distribution for the year to QAR 4.5 billion, equivalent to a payout of QAR 0.74 per share, representing 100% of the net earnings for the year. During this year, the global economy faced challenges [indiscernible] from difficult conditions faced by global economies during the late 2022 and 2023. Elevated energy prices, geopolitical uncertainty, stricter regulatory requirements led policymakers to maintain tight monetary and fiscal policies to combat inflation. This approach, especially in the first half of 2024, prolonged the economic recovery and affected various segments differently. In 2024, the petrochemical sector faced demand challenges due to economic slowdown in China and Europe, high interest rates and reduced consumer affordability. Supply issues arose from oversupply, especially in olefin and polyolefins, due to capacity additions in China; low-cost ethane producers in North America and the Middle East increased supply; while regulatory pressure delayed sustainability investments. The fertilizer market was influenced by natural gas prices volatility, corn prices fundamentals, farmer affordability, trade policies and weather conditions. Natural gas prices declined from 2022 peaks too, as fertilizer production resumed after temporary closure. Now fertilizer price is within its historical long-term averages. The Steel segment saw volatility due to tightened monetary policies, leading to slump in construction activities and a downturn in real estate sector. However, regulatory intervention in the second half of the year, such as lowering lending rates and supporting infrastructure projects, helped stabilize the steel prices. I will hand over to Saffan to cover the financial performance of the group.

Thank you, Abu Yaqoob. Thank you all for joining the call. Continuing on the group's financial performance. The group reported a consolidated net profit of QAR 4.5 billion for the year ended 31st December 2024, with an earnings per share of QAR 0.74, showing a marginal decline of -- compared to the year ended 2023. However, EBITDA for the period was slightly increased versus the last year. Group revenue for year ended 2024 also saw a slight decline compared to the previous year. This reduction in revenue was mainly due to a marginal decline in average selling prices, which was nearly offset by a marginally improved sales volume. Now we can dive into financial performance as reported on Slide #15. Group reported EBITDA for the period is QAR 6.4 billion, with an EBITDA margin of 38%, compared to an EBITDA of QAR 6.2 billion for the last year, with a reported EBITDA margin of 37%. Group revenue for the period marginally declined by 1%, to reach QAR 16.8 billion, as compared to QAR 16.9 billion reported for the last year. Reduction in revenue for the current year was due to marginal decline in selling prices that was partially offset by a slight improvement in sales volumes. Going through IQ's net earnings for 2024 versus last year, as detailed on Slide #16. Group financial performance for the year was largely attributed to the following factors: Product prices. Blended average product prices were marginally declined by 3% versus year-end 2023, reaching to USD 457 per metric tonne, negatively impacting group's net earnings by QAR 635 million. Despite this, prices stabilized over the last few quarters after peaking in the second half of 2022. This stability was due to supply challenges from regional geopolitical uncertainty; plant turnarounds; export restrictions; production shortfalls; and fiscal and monetary policy interventions. Demand for downstream products was also affected by tepid economic forecasts, aggressive monetary policies and limited domestic and regional demand for certain products. However, some promising trends emerged recently due to improving macroeconomic fundamentals. Sales volumes. On the other hand, sales volume for the year 2024 improved marginally by 2% versus year-end 2023, owing to broadly improved production and stabilization of demand resulting from gradual easing of macroeconomic challenges and supply bottlenecks. Despite ongoing regional uncertainties and variation in shipping timing across some segments, overall sales volumes have marginally improved. Operating costs. The operating costs for the year ended 2024 marginally improved versus year ended 2023. This decrease in the year-on-year operating cost was primarily linked to lower variable costs driven by price-linked feedstock costs and raw material costs and favorable inventory movements, partially offset by higher general cost inflation. The group's current year financial performance was also impacted due to comparatively lower one-off nonoperating income, as the group recorded this year QAR 143 million pertaining to reversal of a bank guarantee that was previously provided to group's Steel associate, SOLB Steel, while in 2023 the group recorded QAR 610 million related to reversal of impairment of noncurrent asset and investment in associates within the Steel segment. The group also recognized this year QAR 144 million relating to fair value gain on remeasurement of previously held interest in joint venture QAFAC. Comparing IQ's net earnings of fourth quarter versus the previous quarter...

Q3.

3 quarter 2024, as detailed on same slide, the current quarter, fourth quarter 2024, IQ's net earnings declined moderately versus third quarter of '24, to reach QAR 1 billion. This decline was primarily due to lower sales volumes, primarily within the Fertilizers segment, owing to lower production, together with lower profitability within the Petrochemicals segment due to higher operating costs. From a segmental perspective, Petrochemicals segment's performance declined versus last quarter on the backdrop of heightened operating costs. Petrochemical prices broadly improved versus the previous quarter and helped to offset the impact of heightened costs. Profitability within the Fertilizers segment declined moderately on the backdrop of decreased revenue on account of lower sales volumes amid lower production. In line with the lower sales volume, operating costs do have improved versus the last quarter. Average product prices have marginally improved on the backdrop of enhancement witnessed in the fertilizer markets. Steel segment's financial performance for fourth quarter of 2024 moderately inclined on the backdrop of improved other income, including better associate performances. Nevertheless, operating income declined versus previous quarter due to increased operating costs linked to higher volumes. Financial performance. As detailed on Slide 15, group's financial position continued to remain robust with proportionately accounted cash and bank balances of QAR 11.4 billion as of 31st December '24, after accounting for dividend payout relating to the financial year 2023 and 2024 interim dividend. Currently the group has no long-term financial debt obligations. The group reported total asset and total group equity reached QAR 37.7 billion and QAR 42.4 billion, respectively as of 31st December 2024. The group generated positive operating cash flow of QAR 4.6 billion, with free cash flows of QAR 1.3 billion during the year. Now we can move to the segmental review. The Petrochemicals segment reported a net profit of QAR 1.4 billion for year-end 2024, showing a marginal improvement of 1% compared to 2023. This increase was primarily attributed to higher segmental revenue driven by improved volumes, while prices continued to recover and stabilize. Despite challenging macroeconomic conditions, the segment witnessed signs of recovery during the year. Effective navigation of market conditions, capitalizing on improved macroeconomic factors and maintaining operational efficiency contributed in maintaining segment's profit. This recovery was reflected in moderately improved sales volumes, although average selling prices were slightly lower than last year. Production improved, as fuel additive operations were on planned maintenance in the fourth quarter of last year, while -- reached a milestone by producing highest volume of MTBE since its inception. This segmental achievement was partially offset by few planned and unplanned shutdowns within other polyethylene facilities during the year. On a quarter-on-quarter basis, the segment's net earnings declined primarily due to lower operating margin on account of higher operating costs. Revenue marginally declined versus the previous quarter on the backdrop of lower sales volumes, while prices marginally increased. Production, marginally down versus the previous quarter due to few unplanned facility maintenances within the polyethylene segment. On an overall basis, lower sales volumes, together with an increase in operating costs, resulted in a quarter-on-quarter decline in the segmental net profit. Fertilizers segment reported a net profit of QAR 2 billion for year ended 2024, showing a marginal improvement versus year-end 2023. This moderate increase in net profit was primarily driven by reduced operating costs associated with reduced raw material, feedstock cost and favorable inventory changes. Despite an improvement in net profit, segmental revenue decreased marginally during the year compared to the previous year. This decline was due to a slight decrease in selling prices, partially offset by marginally increased sales volumes. Selling prices declined marginally versus year-end 2023 as nitrogen fertilizer prices have stabilized to their long-term averages since peaking during second half of 2022. Sales volumes remained relatively stable as the macroeconomic conditions in the Fertilizers segment have started to strengthen further. Production have also stabilized despite a few unplanned outages during the year in addition to the routine planned facility maintenance in the fourth quarter of 2024. On a quarter-on-quarter basis, segmental revenue declined versus the previous quarter, primarily due to moderately lower sales volumes. The reduction in sales volumes was primarily due to lower production amid planned shutdown during the current quarter. Selling prices improved slightly, compared to last quarter, and continued to trend of stabilizing towards their long-term averages. The segment's net profit for fourth quarter declined notably compared to last quarter, driven mainly by lower revenue resulting from lower volumes. Profitability, measured by EBITDA margin, broadly remained unchanged, in line with improved operating cost. Moving on to Steel segment. As shown on Slide 36, the Steel segment reported a net profit of QAR 565 million, notably lower versus the full year of 2024. This reduction in net profit was primarily driven by lower gross margin together with comparatively lower one-off other nonoperating income. Segment's gross margin, affected due to lower revenue driven by lower prices, together with marginal decline in volumes. Steel prices declined broadly on account of higher supplies and the softening of demand in both domestic and international demand. Simultaneously, sales volumes were also down due to challenging demand conditions. Construction demand continued to remain a key constraint due to macroeconomic environment prevailed mostly during the year, with most central banks continued to persist with their hawkish monetary policies, although conditions started to improve since second half of the year, second half of 2024, as a result of gradual global recovery. And particularly, China, a larger contributor to construction and real estate economy, has taken a series of policy measures to reignite the domestic construction sector. In year ended 2024, the segment recognized a one-off nonoperating income of QAR 143 million from the reversal of a bank guarantee previously provided to one of its associates. In contrast, year ended 2023 included a higher one-off nonoperating income of QAR 610 million from the reversal of an impairment of property, plant and equipment at Qatar Steel facilities, together with reversal related to an impairment of an investment in an associate. This movement was the main driver for the profit variance between this year and last year. On a quarter-on-quarter basis, segmental profit inclined significantly versus the third quarter mainly on improved income from share of associates. The operating income declined due to sequential increase in operating costs despite a marginal increase in revenue, resulting in lower operating margin. Segment's revenue increased marginally primarily due to moderately higher sales volumes. This improvement was largely attributable to enhanced production on account of better plant availability and reliability following the restart of DR-1 during the fourth quarter of 2024. Selling prices have declined moderately versus the previous quarter, reflecting relatively volatile state of the global and regional steel market. With that, the segmental and group performance review is completed. I will now hand over to Rashid.

Thank you, Saffan. That concludes our presentation. I believe we can open the floor for the Q&A.

[Operator Instructions] And your first question comes from the line of Abhinav Sinha from Lesha Bank.

I have a couple of questions. One is, are there any guidance in terms of -- while I understand it's commodity price-driven, but are there any guidance on the top line or are you -- on the bottom line? And second question is on the blue ammonia plant which is going to come in 2Q '26. Just wanted to understand. The 1.3 million tonne capacity, will it be majorly used for the urea like how it is done now? Or will it be sold more in like open market?

So the question on your prices and volume. Prices, generally we don't give guidance on prices because prices is more kind of related to market demand and supply. So our view, prices will be something like -- more likely linked to oil prices. And with so many things, so many moving parts across currently, we don't have long-term visibility on prices. Our view, fertilizer prices will stabilize with the second half of the year, once the policies got bettered; chemical, also on the same view. Probably with second half of the year, prices, those stability will start to continue. On urea, [indiscernible] what was your question?

Like, will the capacity be used majorly for internal purpose like how it is used now? Or will it be sold more like in an open market or something?

We already announced that ammonia 1 and 2 will be revamped. So that's a separate project that we announced last year. So currently, the blue ammonia project production will be dedicated to the blue ammonia basically.

So it will be basically be sold as blue ammonia. The 1.2 million capacity will be sold as blue ammonia.

Our next question comes from the line of Sashank Lanka from Bank of America.

I have three questions, if that's okay. The first question is on the blue ammonia project which the person before for us as well. Just wanted to understand, how has the contracts been agreed on this? Are you going to charge a premium versus the gray ammonia market? And where are you selling these volumes? Have you set your 100% volumes contracts? That's the first one. The second question is when I look at the urea pricing in the second quarter, I think the realized pricing was around $340 per tonne. So just wondering if there was any shipments that were delayed? And could there be -- because I know it's a weighted average kind of a price you realize. So should we assume, because of the shutdowns, there could be more volumes sold in Q1? I think prices for urea started to go up quite a bit towards the later part of Q4. And the third question is, Q4 historically has always been a heavy turnaround period both for Petchems and Fertilizers. So should we assume a normalization of volumes in Q1 and subsequent quarters this year?

So with respect to blue ammonia volumes, that is handled by QatarEnergy Marketing. Now as you know, the project will be operational only in the second quarter of 2026. And once it's ramped up, it will be third quarter and the real commercial operations will be third quarter, fourth quarter, right? So still, it's too early to comment on the customers, the volumes and the contracts. It's very too early. And also, it's completely handled by QatarEnergy Renewable Solutions, right? So from IQ's perspective and from QAFCO's perspective, we have an offtake with QatarEnergy Renewable Solutions. And apparently, what we hear, blue ammonia should attract a premium. Right now, we have no [ information ] on that. So technically, blue ammonia, given that it's energy efficiency, other benefits, it should attract a premium. Right now, it's not marketed by anyone. So on a very large scale, we are the ones who will first start selling. Other than the 50,000, this marketing done by someone, so there is no history.

Yes, sorry. If I can just follow up on that, Saffan. So how will you get compensated? Is it like a fixed-margin kind of a contract you have with QatarEnergy? I understand they take the offtake, pricing risk and all of that, but how will you be compensated? How should we be factoring this in our models?

See, for QatarEnergy, we have the fees, right, for -- we will get a price. See, QatarEnergy will market. QatarEnergy will sell. And whatever the price they realize, they will pay to QAFCO, right? Now all this carbon is captured into the ground, right. For that, QAFCO will pay a fee. Whatever the price that is sold will be paid to QAFCO. Let's say, whatever the price, $600, $500, $700. To manage the carbon capture, there will be a separate fee.

Okay, which you need to pay basically, QAFCO needs to pay to QatarEnergy for that?

Yes.

Yes. So I think the project works well for you. And obviously, blue ammonia premium is higher than what gray ammonia price is. Is that understanding correct?

Yes. It has to be. The whole economics is based on that, right?

Okay. Okay, clear. Sorry about that. My second question was related to basically your urea prices in Q2 and then the volumes going into the rest of the year.

So basically, always between month and months and quarter-on-quarters, due to various reasons, shipment at the last day sometimes, due to vessel availabilities and with the various weather conditions, sometimes shipments get delayed. So it works both ways. Sometimes, depending on if the prices are better, it helps you; if the prices are -- works the -- prices goes down, it works the other way. Now we have noticed that there were a few thousands of metric tonnes got shipped in the first quarter of 2025 (sic) [ 2024 ] as well. So because the prices have gone up, that would work well for you in this quarter. I mean that was your question, right?

Yes, yes. That's clear, Saffan. And then...

I apologize. Let me bring him back to the queue real quick. I apologize, Mr. Lanka, please go ahead.

Yes. No, I was just following up on the volumes question. We should assume that the volumes in the first 3 quarters should be similar to the levels that we saw last year, right? Just to be clear.

No, no. It depends on -- in 2024, we had a shutdown in the fourth quarter. So next year, it depends on which quarter the shutdown will be. So that all will be aligned with QatarEnergy upstream shutdown also, right? So if QatarEnergy is going to have a shutdown, maybe a shutdown in, say for example, Q2, so QAFCO will align on that shutdown. So it's not necessarily Q4.

Yes. Okay. Understood. But anything, any guidance you can give us on volumes?

Right now, we don't have, but we can give it separately.

Our next question comes from the line of Dalal Darwich from Goldman Sachs.

My question has been mostly answered, but I just have maybe like a follow-up on it. So just to clarify. We don't have, today, visibility on when the shutdowns could happen in 2025? So this is just to confirm. And the second part of the question is that is it possible to quantify the impact of the shutdowns that took place in 4Q, whether it's on revenues, volumes, any metric?

I'll answer you with regard to the Q4 shutdown. I think Q4, we witnessed a shutdown within the Fertilizers segment and that impacted our production volume. However, we benefited from selling more since we -- as we discussed before, any plant turnaround, we'll have -- we'll ramp up certain production to dampen the effect. The effect of the shutdown was dampened due to that. And that's why we are reporting comparable profitability in quarter-over-quarter in Fertilizer. Even EBITDA margins are comparable on quarter-on-quarter. With regard to the future guidance, I think Saffan has mentioned that we can give it separately, if you want. We will provide you with that, our guidance for the following quarter.

Our next question comes from the line of Anoop Fernandes from Sisco (sic) [ SICO ].

My questions have been answered.

Our next question goes back to the line of Dalal Darwich from Goldman Sachs.

Yes. Sorry for that. Just maybe one more follow-up on our end. Could you provide some details on the QAFAC contract and where we stand on that topic today?

You are referring to the end of term, the joint venture expiry?

Yes, please.

So the -- following the expiry of the contract term, basically, the legal formalities have been done. So once it's completed, it will be transferred to be the affiliated party of QatarEnergy MNC IQ. So currently, it's under completion of the legal formalities. So in 31st December financials, as you will have noted, we have consolidated QAFAC as a subsidiary.

So once those formalities are done...

Completed, we will announce to the market of the actual position.

Ms. Darwich, would you be still asking more questions? Your line might be on mute.

Sorry. Okay. Can you hear me? Sorry. Yes, I was on mute. So yes, just also a follow-up on this. So the JV, should we expect the company to acquire the remaining stake in it?

So basically right now, the stake, as we announced in the financial, will go to a related party through IQ. Once this formalities is done, we'll announce the party that will take the stake, but from thereafter, we don't know whether this would be off to IQ or not. As we discussed, the structure is -- once the joint venture expires, the stake goes to basically the founder, and once the founder have it, then it's upon the founder whether to keep it, whether to delegate it, whether to sell it. So this has not went back to the founder. So basically, it has to go first to the founder. And then we'll announce to the market that it went. And then we'll report back to the market whether it's over to IQ or not.

Once the legal formalities are completed, we'll announce the transfer, to whom it will be transferred.

Our next question comes from the line of Seki Mutukwa from Ashmore.

Two questions, please. First one, going back to QAFCO 7. Any global blue ammonia projects in 2025 coming on stream? Do you think it will be wise to keep an eye on just to get a sense of the potential premium one could be talking about? It would be helpful just to know what you might be looking at. And the second question was just in terms of the sort of Board either pushback to management or conversation with management about the dividend per share, which whilst being 100% in absolute terms, is lower than it was last year and you've got a pretty healthy balance sheet, which can easily sustain the CapEx, including the cash flow generated. Just wondering how that sort of conversation -- how we've put that out in terms of paying a lower absolute dividend whilst still a high payout.

So answer to first question. To our knowledge, based on various analysts from other sources, we have not heard of any major projects. Although we have heard of various fertilizer capital expenditure projects, but we have not heard of any blue ammonia projects. And also, with respect to premium, as I mentioned in one of the previous questions, since it has not been physically sold, we haven't heard of any premiums. But in theory, it should attract a premium. With respect to your second question, in our view, the Board was quite generous in paying 100%. And the reason being why we consider it is generous, IQ's cash flows are pretty much commodity-driven. Cash flows are quite cyclical. Free cash flows are -- see, if you look at our profits, like QAR 4.5 billion versus QAR 4.7 billion last year, and also if you look at the free cash flow, although we made QAR 4.6 billion operating cash flow, we spent, out of that, QAR 3.3 billion in capital expenditure, retaining only QAR 1.3 billion as free cash flow, right? And we used fair amount of opening balances in paying the dividend. So therefore, it was more prudent in paying that dividend. So it's not, how do I say, our EPS or our -- the profitability is not -- it's not a retail business, so it's not like a telco or an electricity business where you're earning some, like, stable company. Our earnings are volatile, so we want to maintain certain buffer in our cash flows so that we can ensure future dividends are also covered. So it's, again our view, Board would have had much more deeper thinking and deeper discussion in deciding on that dividend.

With regard to blue ammonia question, I think 2025 will have a lot of projects from other regions will -- is expected to be FID-ed. There is one project that is expected to be FID-ed with one of our regional peers, but also -- yes, for the blue ammonia. Also, we have one project in the U.S. that is expected to be FID-ed this year. And also, we have one project in Europe for CF Industry (sic) [ CF Industries ], which is under the HOA. But our project seems to be a leading project in terms of blue ammonia, in terms of the scale as well, given we will produce 1.2 million tonnes of blue ammonia. So it will be one of the pioneer projects and it will set the tone of the market.

Our next question comes from the line of [indiscernible] from [ CBFS ].

Well, actually this is regarding your steel plant. I mean you have mentioned about sitting in mothballing facilities between DR-1 and DR-2, so we wanted to understand whether -- I mean you mentioned that DR-2 could be seeing an decrease in production output, in case that it will go to DR-1. I mean, secondly, how much [indiscernible] do you see in 2025 from DR-1 plant as you go for low-carbon steel product? And will it be margin accretive, as compared to your existing other products, rebar, DRIs, HBIs?

Basically, we're operating both. We are operating -- in addition to DR-2, we are operating DR-1 as well. So the idea is to make use of the opportunity coming from markets where you have low-carbon steel demand. So that's why we have started from Q4, operating the plant that was previously mothballed, the DR-1, so that'll produce additional DRI and HBI. And we will use them to sell in the CBAM implementation, the CBAM restrictions which have been placed when the regulation will be starting. So the strategy was to capture those markets, sell those DRI/HBI in those markets and realize some strategic benefits in selling in those markets. So that was basically -- because we are electric arc furnace operator, right? So our carbon emission is, I think, probably 1/4 or 1/3 compared to a blast furnace operator. So we benefit from that and use that as a strategy to penetrate those markets.

Okay. So I mean -- so on your total capacity, 800,000 MT, which you have mentioned in DR-1, can we expect a significant amount, I mean, start rolling from, I mean, 2025 in terms of the production capacity of the -- yes?

The idea is to operate at full capacity. That is the intention. The plan is to operate the DR-1 and DR-2 at 100% capacity and sell as much as DR based on the demand that arises. But again, there is a caveat with the new Trump administration, with duties and taxes coming in, in different forms that certainly could change also. But at this point in time, our business plan, the revised model, basically suggests we will operate both DR-1 and DR-2 in order to benefit from various opportunities present in the market.

Yes. And also, the Trump new, let's say, tariffs, that will have either direct or indirect impact on a lot of products as well. So this is something to keep in mind going into Q1 and Q2.

The market there is evolving.

Okay. I mean you did mention about low-carbon steel product, I mean, in terms of being much more margin accretive, as compared to your existing product. That will be also one of the reasons, I mean, where you are going for this product?

When you say margin. DRI, on the value chain -- so you have DRI, HBI, billets. Then you have rebar, right? So usually when you go further on the value chain, margins are higher, but here, you have a niche market, right? So you sell more volumes and realizing more contribution, right? It's not necessarily the margins are higher, right? So there are other factors to consider. What we try to do, you try to attract a niche market, a low-carbon steel market. But usually, rebar is more profitable on a conventional basis.

Okay. And regarding your shutdown, I mean, can you just give a guidance in first quarter 2025, any shutdowns in any of your plants?

Yes, we can give that, but can you write an email to our IR desk so that we can send you?

Okay.

Our next question comes from the line of Giuseppe Villari from Morgan Stanley.

I have two if I may. The first one is about the maintenance CapEx. You have raised guidance for the next 5 years, and we were wondering, is the increase related to inflation? And then the second question, you've already spoken a little bit about it, but we were wondering if you could give us an idea of your expectations about urea prices in the second half of next year?

So maintenance CapEx is usually we spend around QAR 400 million to QAR 500 million a year in terms of asset wise. And with asset size becomes bigger, obviously, with inflation, obviously, year-on-year, you see it increase, right? Now, '27 and '28, we have QAFCO 7 coming in. And a couple of major turnarounds are there in those two years. We have a CapEx major turnaround, it's in 2027 and QAFCO is in 2028. So those turnarounds will add some value. So typical maintenance cost is around QAR 400 million to QAR 500 million. Again, on top of that, we have specific turnarounds, major turnarounds, so those adding up to QAR 3 billion, which we don't see as a bigger number.

Okay, clear. And some outlook for the urea prices?

So generally, we don't give outlook from a company perspective, but we see from general analysts, from market perspective, they expect the prices of second half, unless unusual things don't happen, the second half, prices will continue to prevail, with slight variations.

But the tariff if imposed by the U.S. could have an impact on pricing [indiscernible] the prices we have on the [indiscernible]. You see that we sell to North America, around 31% of our revenues are from North America, so if there is a tariff that is imposed by the U.S., that could drive their gross quantities and you could have some kind of a shift in product or the destination and also having impact on price. And some of that, it will depend on the gas price, how it will evolve, evolving into the second half of next year. Also, you should be on the lookout for how the India will structure their tenders for the upcoming season, which is next year. So there are a lot of uncertainties, things to keep on the radar. So it's quite difficult to predict, but we are hopeful that the prices would not sink to the bottom end, because right now, we have inflation that is expected to grow, so basically, when inflation grows, we have a growing appetite of spending for the consumers then. And given that it's a necessity to the -- to do agricultural product, it will remain within normalized level. We are hoping for that. But again, the company doesn't give any guidance or give any projection for the future.

Our next question comes from the line of Prateek Bhatnagar from HSBC.

Most of them have been answered. I just have one remaining. In your Petrochemicals segment, the margins declined sharply. Were they all because of the unplanned shutdowns, or was there any other thing at play as well? Any color there would be helpful.

There are a couple of reasons. One was, because of these shutdowns, we have capitalized the assets and depreciated them. So most of them were done in the fourth quarter. So that was one of the reasons. And also because in fourth quarter, there were productions spilled over because of shutdown, so we have to use the previous quarter's inventory, so there was adverse inventory movement. So these two are the main reasons. And also generally in the fourth quarter, there are audit adjustments take place, right? So there were certain accrual bookings taking place usually. So these factors have impacted your fourth quarter operating expenses. So that impacted your margin. While the revenues remain flat, the operating costs increased, affecting your operating margins.

And our next question comes from the line of [ Ravi Musa ] from [ Epicure ].

I just have one question on blue ammonia. So say if blue ammonia is priced at a premium, how much do you expect that premium to be?

That's a very difficult question to answer because still there is no physical market to explore.

I mean this kind of arrangement is taking place at QatarEnergy Renewable Solutions. Us being in IQ, it's difficult to answer the question because we are not revealed -- or we don't know what/how the commercial discussions happening at that front. But we are guaranteed an offtake from them once the project is up and running. So we are hopeful that you can be patient with us. Hopefully, we'll have more views going into 2025 last quarter. Coming closer to the cut-off date, we'll have more of a view on this.

Thank you. Seeing that there are no more questions in the queue, I would now like to turn the call back to our moderator, Bobby Sarkar, for closing remarks.

Okay. Thank you, operator. If there are no further questions, we can end the call for today. I want to thank Abdulla, Rashid and Saffan for taking the time to go over their presentation and then answer all our questions. Thanks, everyone. And we will pick this up again next quarter.

Thank you, all.

Thank you.

Yes, thank you.

The meeting is now concluded. Thanks, all, for joining. You may now disconnect.