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

Good morning. My name is Rob, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Mesaieed Petrochemical Holding Company's Third Quarter 2022 Results Conference Call. [Operator Instructions] Thank you. Roy Thomas, you may begin your conference.

Hello, everyone. This is Roy Thomas from QNB Financial Services. I want to welcome everyone to Mesaieed Petrochemical Holding Company's third quarter 2020 financial results conference call. On this call, from Mesaieed Petrochemical Holding Company, we have Abdulla Yaqoob Al-Hay, the Acting Manager for Privatized Companies Affairs, Qatar Energy; Sami Mathlouthi, the Assistant Manager for Financial Operations, Privatized Companies Affairs, Qatar Energy; Rashid Hamad Al-Mohannadi, the Head of Investor Relations, Qatar Energy; and Riaz Khan, Investor Relations Officer at Qatar Energy. We will conduct this conference call with management first reviewing the company's results followed by a Q&A. I will turn the call now over to Rashid Hamad Al-Mohannadi. Go ahead, Rashid.

Thank you, Roy. Good afternoon, and thank you all for joining us. I hope you are doing great. Before we go into the business and performance updates, I would like to mention that this call is purely for the investor of MPHC and no media representatives should be attending in this call. Moreover, please note that this call is subject to MPHC disclaimer statements as detailed on Slide #2 of the IR deck. On 25th of October, MPHC published its results for the 9-month period ended on 30th of September 2022. And today, in this call, we will go through these results and provide you an update on key financial operations and operation highlights. Today on this call, along me, I have Abdulla Yaqoob Al-Hay, Acting Manager for Privatized Company Affairs; and Sami Mathlouthi, Assistant Manager for Financial Operations. And we have structured our call as follows: at first, I will provide you a quick insight on MPHC ownership structure, its competitive strength and overall governance structure by covering Slides 5 til 10 on Slide 41 and 42. Secondly, Sami will brief you on MPHC key operational and financial metrics. Later, I will provide you with an insight on the segmental performance. And finally, we will open the floor for a Q&A session. To start with, as we said on Slide #5 of the IR deck, the ownership structure of MPHC compromises of Qatar Energy with approximately 65% stake and the rest is in the free float held by various domestic and international corporates and individuals. Qatar Energy being the main shareholder of MPHC provides most of the head office functions through a 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 competitive advantages, as detailed on Slide #8, all of MPHC group companies are strategically placed in terms of competitively priced and assure feedstock supply under long-term arrangements, solid liquidity position with strong cash flow generation capability and the existing -- or the joint venture with a very knowledgeable and reliable partners. Additionally, its partnership with Muntajat acts as a catalyst for its access to the global market. As detailed on Slide #10, from competitive positioning perspective, MPHC ranks among top-tier companies in the regional chemical space across most of the matrices and specifically leads the chart in terms of profitability margins. In terms of the governance structure of MPHC, you can refer to Slide 40 and 41 of the IR deck, which covers various aspects of MPHC code of corporate governance in detail. I will now hand over to Sami.

Thank you, Rashid. Good afternoon, and thank you all for joining us. Starting with macroeconomic environment as detailed on Slide 12. The macroeconomic climate remains wavered throughout the marketed geopolitical conflicts and recessionary fees linked to inflationary pressures and higher interest rate environment. Unprecedentedly higher energy prices in Europe persistently weighed on European producers. Also, China's zero COVID policy is bringing additional layer of pressures to the commodity. On overall commodity prices declined on a quarter-on-quarter basis, mainly due to cautious approach from buyers and mild macro headwinds, coupled with comparatively lower crude prices. However, product prices for the group vastly improved. Products remained strong versus last year, mainly due to positive momentum carried forward from the latter part of last year. For the 9-month period, end 30th of September 2022, MPHC recorded a net profit of QAR 1.5 billion, up by 2% compared to the same period of last year, as detailed on Slide #16. Growth improved financial performance for the current period was largely attributable to improve product prices, which, on average, increased by 6% and translated into an increase of QAR 253 million in the group's net earnings, as you can see on Slide #17. On the contrary, sales volumes declined by 3% versus the same period last year, mainly driven by lower plant operating rates amid a large scale turnaround carried out at Q-Chem facilities during the current period. Decline in sales volumes translated into a decrease of QAR 160 million in MPHC net earnings. On the operational performance front, MPHC operations continued to remain robust and resilient with total production for the year reaching 850,000 metric tons. Current period transaction volumes declined by 5% versus the last 9 months of 2021, mainly due to the largest scale turnaround carried out at Q-Chem facilities. Moving on quarter-on-quarter performance, MPHC revenue inched lower by around 14% and net profit by 27%. Key contributor towards this decline in revenue and net earnings was mainly linked to lower selling prices realized during the current period versus the second quarter of 2022. Decline in selling prices was mainly linked to downward trajectories noted in commodity prices and mild macroeconomic headwinds affecting global markets and comparatively lower crude prices. However, sales volumes improved by 12% compared to the previous quarter despite demand-related concerns, while both the segments reported growth in sales volumes in comparison to the previous quarter. On an overall basis, our base case strategy will be to continue our focus on the strategic driver of operational reliability in terms of continued improvement in efficiency and achieving cost optimization, which would enable the group to contain costs while making strategic investments for unlocking further growth potential. I will now hand over to Rashid to cover the segmental performance.

Thank you, Sami. Starting with petchem segment, as covered on Slide 22 til 26. Petrochemicals segment reported a net profit of QAR 966 million for the first 9 months of 2022, down by 4% versus the same period of last year. This marginal decline in profitability was primarily driven by reduction noted in segmental revenue, which decreased by 3% as lower sales volume rated on higher selling prices. Segmental sales volume declined by 9% on a year-on-year basis as segment carried out a large scale turnaround at Q-Chem facilities capacities during the first quarter of 2022 and also affected segment production volume, which declined by 9%. On the contrary, product prices improved by 7% and offset the negative impact related to lower the -- sales volume to an extent. Selling prices improved mainly on account of continued positive momentum from constructive macro drivers carried from natural part of last year. In terms of segmental revenue by geography, as detailed on Slide 25, Asia remains a main market for the segment, along with Indian subcontinent and Europe. Moving on to Chlor-Alkali segment, as detailed on Slide 27 til 31. Chlor-Alkali segment reported a net profit of QAR 471 million for the 9-month period ended in 30th of September 2020, increased by 12% compared to the same period of last year, mainly due to better revenues. On overall basis, revenue grew by 17% within the segment. This growth was driven by improvement in blended average selling prices, which increased by 11% versus 9 months of last year, complemented by the strength from the end product industries such as aluminum PVC, et cetera. Also, sales volume improved by 5% due to better production volume, which in turn grew by 3% on a year-on-year basis. In terms of segment revenue by geography, as detailed on Slide 30, India subcontinent remains the main market of this segment. Now we will open the floor for the Q&A session.

[Operator Instructions] And we appear to have no questions. I will turn the call back over to Roy Thomas for some final closing remarks.

If there are no questions, we'd like to thank the representatives of Mesaieed Petrochemical Holding Company for the results update, and I look forward to speaking to you all for the final quarter results. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect.