Mesaieed Petrochemical Holding Company Q.P.S.C. (MPHC.QA) Q4 FY2025 Earnings Call Transcript & Summary

Hello, and welcome to Mesaieed Petrochemical Holding Company. [Operator Instructions] I would now like to turn the conference over to our moderator, Fabian. Please go ahead.

Thank you, Dustin. Good afternoon to you all, and thank you for joining us Mesaieed Petrochemical Holding 4Q and FY 2025 Earnings Conference Call. On today's call from QatarEnergy Privatized Companies Affairs, we have Abdulla Yaqoob Al-Hay, who is the manager of privatized company affairs. We have Rashid Hamad Al-Mohannadi, the Head of Investor Relations and Communications. We also have Sami Mathlouthi, Assistant Manager, Financial Operations. And as usual, our call will have the speakers give us the numbers in the presentation first and then immediately afterwards, we have a Q&A session. I will turn over the car to Rashid to begin. Over to you, sir. You can go ahead.

Thank you, Fabien. Good afternoon, and thank you all for joining us. Before we go into the business and performance updates, I would like to mention that this call is purely for investors of MPHC and no media representatives should be attending this call. Kindly note that the MS Team link is to display the IR deck on screen. In case you want to participate in the Q&A session, you must dial in through the telephone line on the phone provided as part of the invitation. Moreover, please note that this call is subject to MPHC disclaimer statements as detailed on Slide #2 of the IR deck. Now we can move on to the call. On Wednesday, 28th of January 2026, MPHC published its results for the year ended 31st December 2025. And today, in this call, we'll go through these results and provide you on the key operational and financial updates. Today on this call, along with me, I have Mr. Abdulla Yaqoob Al-Hay, Manager for Privatized Company Affairs; Mr. Sami Mathlouthi, Assistant Manager for Financial Operations; Mr. Saoud Ahamad, Senior Financial Reporting Analyst. We have structured our call as follows. At first, I will provide you a quick insight into the MPHC ownership structure, its competitive strength and overall government structure by covering Slides 5 till 10 and Slide 42 and 41 of the IR deck. Secondly, Sami will brief you on the macro environment updates, dividend proposal and brief you on MPHC financial and operational performance. Then Saoud will brief you on segmental performance. And then finally, we'll conclude the call with a Q&A session. To start with, as detailed on Slide #5 of the IR deck, the ownership of MPHC's structure comprises compromises QatarEnergy with approximately 57.9% stake and the rest is in a free float held by various domestic and international corporate and individuals. QatarEnergy being the main shareholders of MPHC provides most of the head office functions through our service level agreement. The operation of MPHC joint venture are independently managed by their respective Board of Directors, along with senior management team. In terms of the competitive advantages, as detailed on Slide #8, all of the MPHC Group companies are strategically placed in terms of competitively priced and assured feedstock supply under long-term arrangement, solid liquidity position with strong cash generation, present of the most reputable joint venture partners. Additionally, its partnership with QatarEnergy Marketing acts as a catalyst for its global access. As detailed on Slide #10 from a competitive positioning perspective, MPHC ranks among the top-tier companies in the regional chemical space across most of the matrices and specifically lead the chart in terms of profitability margins. In terms of governance structure of MPHC, you may refer to Slide #41 and 42 of the IR deck, which covers various aspects of MPHC code of corporate governance in more detail. Now I will hand over the call to Mr. Sami.

Thank you, Rashid. Good afternoon, and thank you all for joining. So let me begin with a quick look at the macroeconomic environment. So the global petchem industry went through a very difficult year in 2025. The main challenges were too much supply, weak demand and increasing regulatory and sustainability requirements. Large investment made after the pandemic added new capacity faster than demand could grow. As a result, production rates for key products stayed very low, putting pressures on prices and profits. Many producers responded by cutting production, shutting down plants or closing high-cost assets. Demand recovery was slow and uneven, especially in construction and automotive sectors, while economic uncertainty and price volatility added further pressure. Against this macroeconomic environment, which affected MPHC performance, the Board proposes a dividend of QAR 0.016 per share for the second half of 2025, bringing the total annual dividend to QAR 0.042 per share. This represents 100% payout of net income, highlighting the company ability to distribute all of its earnings despite market volatility and demonstrating its resilience. Comparing MPHC financial performance to 2025 versus the same period of last year, as referred to in Slide 16, MPHC reported a net profit of QAR 533 million for the period ended 31st of December 2025, which is down by 26% compared to last year. The decrease in profitability was primarily driven by lower average selling prices, which negatively impacted revenue. This price weakness was largely attributable to prevailing macroeconomic headwinds, softer global demand condition and overall market volatility. The drop in group revenue was mainly linked to the decrease noted in average blended product prices, which declined by 10% compared to 2024. This translated into a negative price variance of QAR 216 million in MPHC current net earnings compared to last year. Subdued product amid macroeconomic uncertainties resulted in lower commodity prices. On the other hand, blended sales volumes increased by 4% compared to 2024, mainly driven by higher sales volumes reported by chlor-alkali segment. This positive movement in blended sales volumes translated into an increase of QAR 51 million in MPHC 2025 net earnings compared to last year. EBITDA for the current year noted a decline versus 2024, mainly due to lower revenues. Furthermore, EBITDA margins narrowed during 2025 reflecting the impact of reduced average selling prices across both segments. However, the EBITDA margin declined marginally from 42% to 38% in the current year. These factors collectively contributed to the decreased financial performance observed in year ending 31st of December 2025. Regarding the financial position, as shown on Slide 15, liquidity remained robust with cash and bank balances standing at QAR 3.5 billion as of 31st of December 2025. However, these balances inclined slightly during the period despite the distribution of final dividend for the year 2024, the interim dividend for first half 2025 and MPHC financial contributions towards the PVC project. This increase was also supported by robust cash flow generation throughout the current period. I will now hand over to Saoud to cover segmental review.

Thank you, Sami. Moving to the segmental review. We will start with the petrochemical segment as covered in Slides 21 to 25. The segment recorded a net profit of QAR 494 million lower than last year due to difficult market conditions. Global polyethylene markets remained oversupplied with weak demand, putting pressure on prices and margins. Sales volumes were mostly flat year-on-year as maintenance activities and scheduled turnaround at Q-Chem offset the impact of last year's shutdowns, while strong operational performance and cost discipline helped limit the impact. Softer prices, flat volumes and maintenance downtime weighted on overall profitability during the period. On a quarter-on-quarter basis, segmental profits declined by 88%, reaching QAR 19 million in Q4 2025. This was mainly due to a 6% drop in selling prices reflected a soft demand for high-density polyethylene and oversupply in global markets. Additionally, a 12% decrease in sales volume were linked to planned major turnaround in Q-Chem facilities impacting production combined with weakening polyethylene market demand and contributed to compress the segment quarterly margins. Moving on to the chlor-alkali segment as detailed on Slide 26 to 30. The chlor-alkali segment reported a net loss of QAR 41 million for the year ended 31st of December 2025, representing a significant decline of 215% compared to last year. This downturn was primarily driven by a 14% driven -- drop in average selling prices, which fell to levels last seen during the peak of the COVID-19 pandemic. Prices weakness was worse by recent macroeconomic pressures, slow downstream demand and reduced construction and industrial activities, elevated global inventory levels and declining crude prices further dampening market outlooks. Sales volume inclined by 9%, in line with higher production, supported by improved plant availability and strong operational performance. However, severe market challenges push the segment into a net loss position. Further, compressing margins. On a quarter-on-quarter basis, the segment posted a third consecutive net loss of QAR 27 million in Q4 2025 compared to Q3 2025. The downward trend intensified, primarily reflecting continued margin compression despite modest sequential improvement in both sales volume and average selling prices. While prices showed signs of stabilization during the quarter, they remained near their lowest level since the COVID pandemic, limiting revenue recovery and adversely impacting profitability. I will now hand over to Rashid.

Thank you, Sami. Thank you, Saoud, for presenting the presentation to us. I think it's the time to start the Q&A session.

[Operator Instructions] And we will take our first question from Waleed Jimma from Insight Capital Management. Please go ahead.

Just wanted to ask you if there were any one-off expenses that were recorded during the quarter that we should be aware of? If you could just help quantify if there were any and which segment were they booked?

In terms of one-off accounting wise, we are not aware of any one-offs, but what happened in the petrochemical segment that drove the profitability decline is basically that the petrochemical segment went into a planned turnaround that happens every 4 to 5 years. And it's alternating. So the last one we had, it was in one of the Q-Chem, we have Q-Chem I and Q-Chem II. Last one we had, it was in 2021. And then this one is happening in 2026. And the next one will happen in, I think, 2031. So this is a major turnaround. The plant would be under shutdown for 45 to 60 days off. So that takes away a lot of production, takes away a lot of potential sales volume. It coupled with the decreased trend in terms of polyethylene prices, we've noticed that the profitability for Q4 was heavily impacted. So this is the one-offs that I can think of in terms of the indicator that impacted the profitability during the quarter.

Okay. Very clear. And just one more from my end, if possible. And where do you expect margins to trend into next quarter?

So basically, right now, we have the petrochemical segment, I think they went fully back online. Right now, we expect, based on the prices, so you need to follow the HPDE prices and the way they evolve. This year, I think HPDE price has been among one of the commodities that was worsely impacted compared to others. However, the demand in the future growth in term of demand on automotive sector, demand from construction sector, then we'll see growth as well in our profitability. But the impact on the production side is already concluded during this quarter. So next quarter, [Foreign Language], you'll have the full capacity back online for the Q-Chem. And then hopefully, the prices, you would be -- you need to build your projection around the prices to see how the performance will underpin in the next quarter. But the other segment, which is chlor-alkali, it's been suffering for the last 3 quarters. But the chlor-alkali specifically has been under a lot of constraints. Right now, we have the PVC project. The PVC project already initiated at the end of this year, and that will take all of your production of EDC back, or VCM, EDC to PVC. So once we have the project integrated going forward, in terms of ramping up, et cetera, you'll start to see more of a divergence in the profitability for QVC. So going forward, [Foreign Language], we hope that QVC will perform better. We hope that petrochemical prices will, [Foreign Language], take a better footing into next year. And then all it will be driven by how we perform in terms of our production, et cetera. But I think QVC this year, they have recorded one of the best years in terms of production numbers. They have a lot of -- I think this year was the best year in term of the uptime for production. I think going forward, the focus will be on petrochemical and how it will evolve in terms of pricing.

Our next question comes from the line of Rabih Moussa from QIC Asset Management. Please go ahead.

So 3 questions from my side. Can you provide an update on the status of the suspension PVC plant? When do you expect to be fully operational and the estimated utilization rates for your 2026 and 2027? And are there any planned shutdowns for year 2026? And if so, can you share some details on the days, assets and how much production will be offline? And my final question is regarding the new salt project. When will construction start? And what is the timeline do you expect on it? And this QAR 290 million of CapEx, this is the total CapEx for the project, correct?

Yes. I will start with the first one in terms of the PVC project capacity and the integration of the PVC plant and to the VCM and the EDC. So by the end of this year, 2025, we started the production of the PVC, and the first shipment has been already done. So that's testing shipment. During next year, so we expect that the company will ramp up the production slowly, slowly until the full integration probably by the end of next year or by 2027. So we are still in the testing phase. So testing the quality of the products, testing the integration of the equipment. And then we will update you once we get more clarity from the operating team in terms of the capacity introduction. For 2026, so for the petchem, so there is no planned turnarounds during 2026. As Rashid mentioned during his -- the first question that we had already one of the companies went for plant shutdown last year. So the next one will be planned on 2028 for Q-Chem I. And then for Q-Chem II, the unplanned shutdown took place during Q4 2025. So the next one will be planned during 2030, 2031. So for the petchem, we don't expect any planned shutdown. However, for the chlor-alkali segment, so 2026, we normally have one planned shutdown. So that should be for around 30 days. And then normally, we always plan 1 to 2 shutdowns per month for those plants, which will take probably the unavailability of the plant during the year 2026 for another 24 days. I think that's in terms of the shutdowns. For the salt project, so we have already announced, I think, the cost of the project. And again, that's still an initial, let's say, estimation of the project cost because we haven't yet arrived to the selection of the contractor and the selection of the, let's say, of the project itself. So the total cost of the project will be around QAR 1 billion. That's the total cost. And we announced that there is some restructuring in terms of the shareholding of that project, where MPHC will be holding 60% and [ QIM Co. ] will be holding 40% of that project. So we are still at the feasibility study and at the studies of that project from technology selection of contractors, selection of completion of the studies. So we will announce any further development during the next phase.

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

Yes. My question is regarding, can you clarify the nature of the finance income in Q-Chem II asset? I mean any additional clarity would be grateful. And my second question is, I mean, what is the price dynamic do you see for medium term, considering all the effects and capacity closure and capacity rationalization. Your thoughts would be very helpful.

Can you repeat your first question?

Yes. It's regarding the nature of finance income in Q-Chem II.

You mean whether Q-Chem II has financing?

Finance income in Q-Chem II business. What is the nature of finance income?

Sorry, the question is not clear. So is it about the capacity, the planned shutdown that took place in Q-Chem II or something else?

No, no. My question is regarding the finance income in Q-Chem II financials.

Financing...

Hello?

Yes, there is no financial requirements. So if you [indiscernible]. Yes, the finance income, it's relating to a portion of tax that is due to be paid to MPHC. So in total, there is an amount of QAR 671 million, which were standing at the books of Q-Chem and Q-Chem II and those are to be paid to MPHC. So these are generating finance income on those fixed deposits in addition to any available cash, which is sitting at Q-Chem II level, that will be generating some income at the books of Q-Chem I and Q-Chem II. And out of that, so we take 49%, which is our shareholding in these companies.

And for your second question, I'll take it. So in terms of how the forecast will underpin going forward, as you know, the company doesn't give outlook, but based on what we've seen on reports or external reports, that the prices for HDPE is linked to the supply, how much is their supply in the market and how much is the crude price is trading at. Currently, what we are seeing right now, crude is trading at $60 to $70 per barrel, which makes the other -- cause you know, petrochemical producers can either be produced based on naphtha or based on ethane. So when you have crude trading at lower of the curve, we'll start having more naphtha producer competing, lowering the floor for others in terms of pricing. So going forward, if the crude price take a spike, then you would expect that the prices for polyethylene will increase naturally with that. And again, that will also be subject to the market dynamics, how the supply-demand unravel in each region. We've seen that China demand has been slow. However, over the second half of the year, China is gradually starting to consume more and more. So it will all depend going forward, how the market will react and how the naphtha price -- naphtha producer will start to compete against ethane producer, et cetera. So it will all depend on the market dynamics and also the interest rate.

Our next question comes from the line of Ejayan Al-ahbabi from Al Rayan Investment.

My question is can you please help me understand what is the uplift of selling PVC as opposed to VCM?

So you'll have 2 elements that will support the PVC. First, currently, you're selling VCM, EDC. VCM and EDC is currently sold as a liquid form. Transportation of that product is quite hazardous. Also you have concentration because a few clients are taking those EDC, VCM. So basically, that's one element when it comes to VCM versus PVC. PVC is more of a solid product. You can transport it in containers. You can ship it together with polyethylene, and it's widely used in various applications. So PVC is used in a variety of applications, easier to ship. That's one benefit. Second benefit is the spread. Usually, you'll have a spread between EDC and PVC and more business from quarter to quarter. So the spread is expected to cover your cost to basically produce PVC plus some margin. So basically, you're integrating your products further down the value chain. Also, the PVC currently in Qatar, there is not a single producer of PVC in Qatar. All the PVC is currently being used in Qatar are imported. After this project is up and running, we'll have a local source of PVC. So part of our production will cater for the local demand and the surplus will be exported to international location and it will be easier to ship. You can club it with other products during shipments and even storage is easier. So we expect there is some kind of a benefit from PVC.

Can you please share with us some color on the difference in the spread between the 2 products kindly?

So basically, currently, we don't have it on the IR presentation. I think going forward, next quarter, we'll start to put the PVC prices in the market, and you will see the trends going forward, how it will trade. So from next quarter, [Foreign Language], we'll add the PVC.

Yes. But at the moment, it's ranging from USD 180 to USD 200 per ton.

Our next question comes from the line of Lee Beswick from QNB.

Just wondering if you can talk about caustic soda supply growth, particularly some of the supply growth in China, which is coming on at sort of a marginal cost of sort of somewhere between $200 and $250. What -- how do you think that sort of change to the market? And if caustic soda prices sort of do fall to $300 or below, is that level sustainable? Can you make money at that level? Or would that require cost cutting or some other changes to make money at that level?

I mean caustic soda, the market has been volatile for the last, I think, 2 years or so. It's been on and off depending on how aggressive China is in terms of their project expansion plans. I think China has put a pause on certain projects during, I think, not last year, the year before due to environment and regulation aspect. I think going forward, the market will have to adjust itself based on the cost of producers and how they produce. Of course, us as an MPHC, we always monitor our cost of production, and we make sure that whatever we produce is beneficiary for us. As I mentioned, right now, we are venturing into PVC. So we'll continue to monitor the PVC trends going forward and whether it's beneficial to the company. And we also will continue to implement cost measures where it's needed, et cetera. So it's under the radar of the company under management, and we are aware of the changes in the market.

Do you anticipate that you could be moving to a structure -- a position where you are not at the low end of the cost curve, and therefore, your production is structurally challenged?

I mean us and others are producing at similar levels. I think the majority of the market are suffering, not only us. I think a big portion of the market. Even Chinese producers some of them are selling with net loss. So the market going forward will have to adjust itself by either these lower or higher cost producers will have to either take a decision to shut down or there has to be a self-leveling of the market going forward. So what I can comment on from the company perspective that we are reviewing the cost on thoroughly from standing point today and even going forward at the management level of the company. And if we see that there are certain opportunities for cost management or cost cutting, we are implementing. So all these aspects has already been looked after by the company. And also, we have ventured into a new chapter right now, whereby we are producing PVC. So we'll see how it will evolve going forward and how the company will perform.

Our next question comes back from the Rabih Moussa from QIC Asset Management.

Just a follow-up on the previous questions. So for the PVC project, you expect full ramp-up by end of 2027. And for the shutdowns, the chlor-alkali segment, we have 30 days in 2026. And which quarter is the early days?

Just to answer you on the first part, second part, Sami will answer you. In terms of the PVC, right now, we initiated the project. There is a testing period right now. So we'll have clear clarity going forward into Q1 to report to the market officially when the project is expected to be fully integrated and completed. I think you'll start to see right now quantities coming through in Q1 as PVC. And gradually, you start to realize more PVC volume into [indiscernible]. So the full integration timeline, we'll have to report it officially in the upcoming quarters. But the project right now is in the testing phase. I think the second part for the question about the shutdown, Sami can answer.

Yes, I think for -- as we said in the beginning, so we allocate, in average, 2 days per month for the planned shutdown for QVC due to the plant itself. And then there is, as I said, 30 days of planned shutdown, that will be during Q4 2026.

We have no further questions on the queue. I will now turn the call back over to our moderator, Fabian for closing remarks.

Thank you, Rashid. It's Fabian here. If there are no further questions on the line, it brings us to the end of our call today. Thank you for joining us, and special thanks to the management team for taking its time to update the market. Please do join us for future calls related to Mesaieed. Have a good afternoon.

Thank you all.

Thank you.

The meeting has now concluded. Thank you all for joining. You may now disconnect.