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

Hello and welcome to Mesaieed Conference Call. Please note that this call is being recorded. [Operator Instructions] Thank you. Now I would like to hand the call over to Phibion. You may begin.

Yes. Thank you, Angela, yes. Good afternoon to you all. And thank you for joining us for the Mesaieed Petrochemical Holding Company 1Q 2025 Financial Results Conference Call. On this call today, from QatarEnergy privatized company affairs, we have Abdulla Yaqoob Al-Hay, who is the manager of privatized company affairs; Sami Mathlouthi, assistant manager, financial operations; and Rashid Hamad Al-Mohannadi, Head of Investor Relations and Communications. And as usual, we will conduct the call with management, first, reviewing the company results. And then we have a Q&A session immediately afterwards. Let me turn over the call to Rashid to begin. Over to you, sir. Please go ahead.

Thank you, Phibion. Good afternoon all, and thank you 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 Teams link is to display the IR deck on screen. [Operator Instructions] Moreover, please note that this call is subject to MPHC disclaimer statement as detailed on Slide #2 of the IR deck. Moving on to the call. On Tuesday, 29th of April 2025, MPHC 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 in this call, along with me, I have Mr. Sami Mathlouthi, assistant manager for financial operation; and Saoud Ahamad, senior financial management analyst. We have structured our call as follow. At first, I'll provide you on -- a quick insight on MPHC ownership structure, its competitive strengths and overall governance structure by covering Slide 5 to 10 and Slide 41 and 42. Secondly, Sami will brief you on the micro (sic) [ macro ] environment updates and overall of the group results. That will be followed by Saoud, to provide you with more insight into the segmental performance. And finally, we'll open the floor for the Q&A. To start with. As detailed on Slide #5 of the IR deck: The ownership structure of MPHC compromises (sic) [ comprises ] of QatarEnergy with approximately 57.9% stake. And the rest is in the free float held by various domestic and international corporates and individuals. QatarEnergy, being the main shareholder of MPHC, provide 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 term of the competitive strengths, as detailed on Slide #8, all of the MPHC groups are strategically placed in term of competitively priced and assured feedstock supply under long-term agreements, solid liquidity position with a strong cash generation capability and the presence of the most reputable JV partners. Additionally its partnership with QatarEnergy Marketing acts as a catalyst for its access to the global market. As detailed on Slide #10, from competitive positioning [ prospective ], MPHC ranks among the top-tier companies in the regional chemical space across most of the matrices and specifically leading the chart in term of the profit margins. In term of the governance structure of MPHC, you may refer to Slide 41 and 42 of the IR deck, which covers various aspect of MPHC code of corporate governance in detail. I will now hand over to Sami. Over to you, Sami.

Thank you, Rashid. Good afternoon, everyone, and thank you for joining us. The macroeconomic climate remained uncertain during the first quarter of 2025, influenced by several factors carried from the last year. These factor affected commodity markets and heightened recessionary fears linked to inflation pressures and higher interest rate environment. Additionally, potential tariff tensions have increased market uncertainty and added complexity to the global economic landscape, potentially impacting consumers by affecting their purchasing power and overall economic stability. Overall, commodity prices for MPHC basket of products declined on a year-on-year basis. Following the significant high price environment over the last 2 years, this decline was mainly due to cautious approach from buyers amid macroeconomic headwinds coupled with comparatively lower energy prices. Moving on to the results, comparing MPHC financial performance for Q1 2025, compared to the first quarter of 2024. As referred to Slide #16, MPHC reported a net profit of QAR 186 million for the 3 months period ended 31st of March 2025, down by 4% compared to the same period of last year. This decline in profitability was mainly linked to lower selling prices, partially offset by increase in sales volumes in both segments. The drop in group revenue was mainly linked to the decrease noted in average blended product prices, which declined by 6% compared to last year. This translated into a negative price variance of QAR 26 million in MPHC current net earnings compared to the same period of last year. Subdued product demand and macroeconomic uncertainties resulted in lowered commodity prices. On the other hand, blended sales volumes increased by 4% compared to last year, mainly driven by higher sales volumes reported by both segments. This positive movement in blended sales volumes translated into an increase of QAR 8 million in MPHC first quarter net earnings versus the same period of last year. EBITDA for the current period noted a decline versus first quarter of 2024, mainly due to lower revenue. In addition, the growth in average selling prices was partially offset by higher production and subsequent sales volumes within both segments, negatively impacting the group overall EBITDA. However, the EBITDA margin improved from 43% to 44% in the current quarter. These factors collectively contributed to the decreased financial performance observed in the 3 months period ended 31st of March 2025. Overall, the financial results was impacted by lower earnings from the petrochemicals segment, partially offset by the chlor-alkali segment, compared to the same period of last year. The overall performance of these 2 segments resulted in a net negative effect on the company overall results. Regarding the financial position, as shown on Slide #15, liquidity remained robust, with cash and bank balances standing at QAR 3.1 billion as of 31st of March 2025. The decline in cash and bank balances was mainly due to dividend payment for the second half interim dividend, in addition to the payment of MPHC portion in the financing of the PVC project, partially offset by positive cash flow generation during first quarter of 2025. Now I will hand over to Saoud to cover the segmental performance. Over to you, Saoud.

Thank you, Sami. Good afternoon and thank you all for joining us. Moving to the segmental review, we will start petrochemicals segment as covered in Slides 21 to 25. The petrochemicals segment reported a net profit of QAR 153 million for the first quarter of 2025, an increase compared to the same period last year. This rise in profitability was primarily driven by better margins. However, the segment revenue declined during the first quarter of 2025, compared to the first quarter 2024, mainly due to lower selling prices, partially offset by higher sales volumes. The increase in sales volumes was primarily linked to a higher production due to better plant availability. Product prices also declined, mainly due to deteriorating macroeconomics fundamentals compared to the same period last year. The decline in petrochemical prices and demand is consistent with global trends, as the industry faced challenges throughout 2024 and during the first quarter of 2025 due to softening demand, increased global capacity, trade tensions and historically low earnings across various chemical value chains. On quarter-on-quarter basis, segmental profits were flat, primarily driven by almost identical revenue. During the quarter, the segment achieved superior margins compared to the previous quarter. Those stabilized profitability on a sequential basis. Moving to the chlor-alkali segment as detailed on Slide 26 to 30. The chlor-alkali segment reported a net profit of QAR 14 million for the current period, a decrease compared to the same period last year. Higher sales volume were fully offset by lower selling prices due to present macroeconomic uncertainties, leading to a decline in segment performance. This decline was primarily driven by lower selling prices due to an industry-wide price crunch, affecting margins. Comparing the first quarter of 2025 to the previous quarter 2024, the segment profitability increased significantly, turning from a -- loss making to profits. This improvement was mainly due to the planned turnaround during the previous quarter, higher sales volume due to better production efficiency and slightly better selling prices. The combination of these factors resulted in notably better quarterly performance for the segment. I will now hand over to Rashid.

Thank you all. I think we can open the floor for the Q&A.

[Operator Instructions] There are no questions. I would now like to hand the call back over to Phibion for any closing remarks.

Yes, okay, thank you, Angela. If -- it looks like we don't have any questions today, but in any case, thank you all for joining us. And should you have any questions later, feel free to reach out to the management team directly or to QNB Financial Services. Thank you for joining us. And I'd also like to thank the management team for taking the time to update the market. [indiscernible] good afternoon.

Thank you all. Thank you for joining us.

Thank you.

Thank you.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.