Industries Qatar Q.P.S.C. ($IQCD)

Hello, and welcome to Industries Qatar Conference Call. Please note that this call is being recorded and that for today's call, we will not have a question-and-answer session. I would now like to hand the call over to Bobby. You may begin.

Okay. Thank you, Angela. Hello, everyone. This is Bobby Sarkar Head of Research at QNB Financial Services. I wanted to welcome everyone to Industries Qatar's First Quarter 2026 Financial Results Conference Call. So on this call from QatarEnergy's Privatized Affairs Group, we have Abdulla Al-Hay, who is the Manager; Rashid AL-Mohannadi, who's the Head of IR and Communications; Ahmad Zakri, who's the Assistant Manager in Financial Operations; and Saffan Mohammed, who is the Senior Financial Management Analyst. So 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's business and performance updates, I would like to mention that this call is purely for IQ 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 deck. Kindly note that the MST link is to display the IR deck on screen. In case you want to listen to the call, you must dial-in through the telephone lines on the phone number provided as part of the invitation. Now we can move on to the call. On Wednesday, 29th of April, IQ published its results for the 3-month period ended 31st of March 2026. And today, in this call, we'll go over these results and provide you on key updates on financial and operational highlights. Today on this call, along with me, I have Mr. Abdulla Yaqoob Al-Hay Manager for Privatized Company Affairs. We have Mr. Ahmad Zakri, Assistant Manager for Financial Operations; and Mr. Mohamad Saffan Senior Management Analyst. We have structured our call as follows. First, I will provide you a brief overview of IQ ownership structure, competitive advantages and overall governance framework. Then Ahmad will walk you through the overall consolidated results and present an update on key financial performance indicators. Finally, Saffan will guide you through the segmental performance. To start with, as detailed on the IR deck, IQ ownership structure compromises of QatarEnergy with 51% stake and the rest is in the free float held by various domestic and international corporates and individuals. [ Industrial ] Qatar is the second largest company on Qatar Stock Exchange by market capitalization. The company continues to benefit from a strong credit profile with S&P Global Rating assigning an issuer credit rating of AA- with a stable outlook and Moody's assigning a rating of Aa3 with also a stable outlook, reflecting IQ's solid and performance financial and financial fundamentals. QatarEnergy being the main shareholder of IQ provides most of the head office functions through a service level agreement. Operation of the IQ group companies are independently managed by its respective Board of Directors, along with senior management teams. In terms of the competitive advantages, as detailed on the deck, 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 prices, lower operating costs and dedicated marketing team in the form of QatarEnergy Marketing to market the group petrochemical and fertilizer products and a well-established joint venture partners. Most importantly, our well experienced senior management team. In terms of the IQ governance structure, you may refer to the IR deck, which covers various aspects of IQ code of corporate governance in further detail. I will now hand over to Ahmad. Over to you.

Thank you, Rashid. Good afternoon, everyone, and thank you for joining us today. I will walk you through an overview of the consolidated results and present an update on the company's financial performance. Starting with our production status, in line with our previous announcement, the group stopped and reduced production of certain products. Accordingly, the overall production for the period is down compared to the previous quarter and the same period last year. Production utilization and average reliability factors have also decreased due to the higher unplanned shutdowns arising from the unannounced stoppage and reduction of production, notably in March. With that context, let me now turn to our first quarter net profit performance. The group reported a consolidated net profit of QAR 0.7 billion for the 3-month period ended 31st March 2026, which is a 26% decline versus first quarter of 2025, mainly due to lower sales volumes by 7% and higher operating costs, partially offset by higher average selling prices by 8%. The group's revenue for the first quarter of 2026 remained broadly consistent with first quarter 2025 as the lower sales volumes were largely offset by higher average selling prices. The group's financial performance for the 3-month period ended 31st March 2026 was largely attributed to the following factors: First, product prices. Blended product prices reached USD 531 per metric ton, which is an 8% increase against the same period last year, and this contributed positively towards the group's net income. This improvement was primarily driven by bullish global fertilizer and steel markets, whilst the ongoing regional conflict led to uncertainty and drove energy and commodity prices higher. Sales volumes for the current period decreased marginally by 7% versus the same period last year, largely driven by 16% lower production amid shipping constraints and ongoing regional uncertainties. In terms of operating costs, the effect increased for the period, primarily driven by unfavorable inventory changes, mainly in the fertilizer and steel segments, increased depreciation and higher fixed overheads, which was partially offset by lower volume-driven variable costs. Looking at performance versus the previous quarter, the group's earnings decreased notably by around 21%. This decrease was mainly due to lower sales volumes by 25% as well as the absence of a one-off other income of QAR 222 million relating to a reversal of impairment within the steel segment with respect to previously mothballed assets. On a comparable basis, which is after adjusting for this one-off item, the adjusted net income for the current period has increased marginally by around 4% versus fourth quarter of 2025, largely due to higher average selling prices by 14%, which reached USD 531 per metric ton. Revenue for the first quarter of 2026 has decreased by around 14% against previous quarter, mainly due to lower sales volumes amid regional uncertainties impacting shipping and logistics. Production volumes have also declined by 20%, in line with the announced production stoppage and reduction due to the ongoing regional conflict. Conversely, average selling prices increased amongst all segments, driven by supply side economics, mainly shipping and logistics bottlenecks. However, the group continues to maintain a strong financial position with cash and bank balances at QAR 8.5 billion as at 31st March 2026 after accounting for a dividend payout relating to the financial year 2025 amounting to QAR 2.7 billion and routine capital expenditure payments of around QAR 0.4 billion. Currently, the group has no long-term debt obligations. The group generated positive operating cash flows of around QAR 1.1 billion while investing QAR 0.4 billion in capital expenditures, thereby generating a modest free cash flow of around QAR 0.7 billion for the period. Now I shall pass on to Saffan to take you through the segmental review.

Thank you, Ahmad, and good afternoon to all of you. To start with Petrochemicals segment. As detailed on the IR deck, the Petrochemicals segment reported a net profit of QAR 4 million for the first quarter of 2026, down significantly versus the same period of last year. This decrease was largely linked to lower revenue of 27% and a decline in gross margin. Revenue declined because of 19% lower sales volume amid lower production during the later part of the quarter and shipping and logistic disruption associated with the ongoing regional conflict together with lower average selling prices that was broadly down by around 10%. Blended average selling prices for the segment moderately declined amid capacity additions, weaker margin for the end producers and users and capacity rationalization, partially offset by selective demand from certain segments like packaging, infrastructure and plastics. On a quarter-on-quarter basis, segment's net earnings declined significantly on the backdrop of lower sales volume by 25%. Sales volumes have declined notably due to supply and logistic constraints and lower production volumes. Selling prices, however, increased to USD 690 per metric ton, recording an incline of 6% due to tightened supply conditions and increased demand. Now moving on to Fertilizer segment. Fertilizer segment reported a net profit of QAR 495 million for first quarter of 2026, a moderate decline of 10% against the same period of last year. This decline in net profit was primarily driven by lower gross margin due to increased operating cost. Operating cost increased mainly due to unfavorable inventory changes during the period, coupled with increased average feedstock costs. The revenue for the reporting period improved mainly due to effect of higher average selling prices by 17%, partially offset by lower sales volumes. Average selling prices improved at the backdrop of stronger demand from key agricultural economies, supply constraints and export restrictions. Sales volumes were down moderately due to lower production and ongoing shipping and logistical challenges due to regional uncertainties. On a quarter-on-quarter basis, net profit within the segment marginally decreased by 7%, owing to a 10% lower revenues stemming from notable decline in sales volume by 22% due to ongoing supply and logistic constraints and lower production within the segment. Selling prices, however, have increased moderately by 16% compared to the previous quarter, mainly due to restricted supply from the GCC region, which remains a key supplier of global fertilizer. Sales volumes, however, declined by 22% due to lower production and limited access to shipping and logistics due to ongoing regional conflict. Now moving on to the Steel segment. The Steel segment reported a net profit of QAR 196 million, which increased significantly by 70% versus the same period of last year. This increase was primarily driven by higher revenue by 27% on account of combined effect of higher average selling prices by 18% and higher sales volumes by 8%, partially offset by weaker results from associates and lower other income. The increase in sales volumes was primarily driven by higher production due to the restart of some of the previously mothballed facilities and recovery of demand in the regional and developing markets, although sales were stressed during the latter part of the quarter amid ongoing regional uncertainty. Selling prices have also marginally improved by 18% on account of better macroeconomic fundamentals on tightened supply conditions and recovery of demand in some larger steel consuming regions. Compared to the last quarter, segment's net profit declined notably by 47% due to lower other income as the segment recorded a one-off nonoperating income of QAR 222 million relating to a reversal of impairment of certain fixed assets during the previous quarter. Excluding the impact of this one-off item, net profit within the segment went up substantially by 34% mainly due to a moderate increase in average selling price by 18% despite a decline in sales volume by 29% on the backdrop of ongoing regional uncertainties. Production marginally declined mainly due to the ongoing conflict in the region. With that, we conclude our call. We would like to thank our investors for their continued trust and support, and we look forward to speaking with you again during our next earnings call.

Okay. Thank you. I want to thank IQ management for taking the time to go over the results, and we will pick this up again next quarter. Thanks, everyone.

That concludes today's call. Thank you all for joining. You may now disconnect.