Qatar Aluminium Manufacturing Company Q.P.S.C. (QAMC.QA) Q2 FY2025 Earnings Call Transcript & Summary

Thank you for standing by. Hello, and welcome to the Qatar Aluminum Conference Call. Please note that this call is being recorded. I would now like to hand the call over to our moderator, Dana Alsuwaidi, please go ahead.

Hello, everyone, and [Foreign Language] to you all. This is Dana Al Sowaidi from QNB Financial Services. I would like to welcome everyone to Qatar Aluminum Manufacturing Company's Second Quarter and First Half 2025 Financial Results Conference Call. On this call from management, we have Abdulla Yaqoob Al-Hay, Manager, Privatized Companies Affairs, QatarEnergy; Rashid Hamad Al-Mohannadi, Head, Investor Relations and Communications, Privatized Companies Affairs, QatarEnergy; and Ahmad Sall, Assistant Manager, Financial Operations, Privatized Companies Affairs, QatarEnergy. We will conduct this conference call with management first reviewing the company's results followed by a Q&A session. I will turn the call now over to Rashid. Please go ahead.

Thank you, Dana. [Foreign Language], and good afternoon. Thank you all for joining us. Before we go into QAMCO business and performance update, I would like to mention that this call is purely for the investors of QAMCO, and no media representatives should be attending this call. Moreover, please note that this call is subject to QAMCO disclaimer statements as detailed on Slide #2 of the IR deck. Moving on to the call. On Wednesday, 6th of August, QAMCO published its results for the 6-month period ended 30th of June 2025. And today in this call, we'll go through these results and provide you an update on key financial and operational highlights. 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 lines on the phone number provided as part of the invitation. Today in this call, along with me, I have Mr. Abdulla Yaqoob Al-Hay, Manager for Privatized Company Affairs; and Mr. Ahmad Zakri, Assistant Manager for Financial Operations. We have structured our call as follows. At first, I'll provide you with a quick insight into QAMCO ownership structure, its competitive strength and overall governance structure by covering Slide 5 till 14 and Slide 34 and 35 of the IR deck. Secondly, Abdulla will provide you a briefing on QAMCO interim dividend, the macroeconomic environment and key highlights of the financial results. Later, Mr. Ahmad Zakri will provide you updates on operational and financial performance and then I will provide you with more details on JV operation and CapEx update. 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 QAMCO compromises of QatarEnergy with 51% stake and the rest is in the free float, held by various domestic and international corporates and individuals. QatarEnergy being the founding shareholder and the parent company of QAMCO provides all of the head office functions through a service level agreement, while the operation of the JV is independently managed by its own Board of Directors, along with senior management team. QAMCO holds 50% share in Qatar Aluminum Limited, Qatalum, which produce high-quality aluminum of about 650,000 tonnes per year against a nameplate capacity of 575,000 tonnes per year for customers in Asia, Europe and across the globe. The facilities include a carbon plant, port, storage facility as well as a gas-fired power plant. In terms of competitive strength, as detailed on Slide #12, QAMCO joint venture is considered to be among the low-cost aluminum smelters with state-of-art production facility, assured feedstock supply by a long-term agreement with intense focus on HSE, which makes the JV a leader among its peers. I've detailed Slide #14 from competitive positioning prospective. QAMCO ranks among the top-tier companies within the industry at a global scale across most of the profitability matrices. This is a testimony to the JV, linear cost base and continued optimization role, which keep QAMCO JV on the lower side of the cost curve amongst the global peers resulting in a strong margin evolution. Moreover, the JV global marketing partner with the other JV partner, provides access to strategically important markets, which makes the company more competitive in comparison to its peers. In addition, the JV is capable of quickly shifting the product mix from value-added products to standard ingot and vis-a-vis, which provide additional layer of flexibility to the JV in terms of production processes, as well as supply chain management while ensuring optimum production and sales volume in line with evolving market trends. I will cover further details of the JV and its operation activities and sales and marketing arrangements later on in the call. In terms of the governance structure of QAMCO, you may refer to Slide 34 and 35 of the IR deck, which covers various aspects of QAMCO corporate governance in detail. I will now hand over to Abdulla.

[Foreign Language]. Thank you, Rashid, and thank you all for joining us. Let's just start with the macroeconomic update. The global economic landscape remains complex, with an inflationary pressure have eased, the monetary policy remains tight with the interest rate at elevated level. Despite these headwinds, aluminum demand has remained resilient, supported by structural growth and drivers such as expansion of electric vehicles and renewable energy sectors. . Additionally, China is approaching its national aluminum production cap, which is expected to constrain future supply growth. At the same time, alumina prices have increased, driven by production stoppage in key regions, further tightening the supply chain and contributing toward pressure on aluminum prices. These developments create a more favorable pricing environment for products like QAMCO -- for producer like QAMCO. Against this backdrop, QAMCO has delivered a robust financial performance during the first half of 2025 with a net profit reaching QAR 342 million, representing a 44% year-on-year increase. The EBITDA stood at QAR 574 million with a margin improvement to -- improving to 34%, reflecting enhanced operational efficiencies. These results underpin the strength of our business model and resilience of our operational and dynamic market environment. On the interim dividend front, the Board of Directors has approved an interim cash dividend of QAR 0.043 per share, representing 70% of the net profit of the 6-month period ended 30th June 2025. This generous distribution is underpinned by QAMCO's strong profitability during the period, reflecting both favorable market condition and operational excellence. The dividend will be distributed to the shareholders registered as of 14th of August 2025 in coordination with Edaa. With that, I will now hand over to Mr. Ahmad, who will provide further insight into our financial and operational updates.

Thank you, Mr. Abdulla. [Foreign Language] and a very good afternoon to everyone for joining us here today. Referring to Slide 20, this slide shows our financial performance for the first half of 2024 versus the first half of 2025, in which QAMCO reported a net profit of QAR 342 million in first half of 2025 compared to QAR 237 million in the same period last year, a significant increase of 44% year-on-year. This translates to an earnings per share or EPS of QAR 0.061, up from QAR 0.042 in the first half of 2024. Overall, this is a very good result which has enabled generous dividends to be paid out at QAR 0.043 per share compared to QAR 0.03 per share for the first half of 2024. Our share of the joint venture revenue reached QAR 1.7 billion in the first half of 2025 compared to QAR 1.5 billion in the same period of last year. EBITDA improved by 19% year-on-year, reaching QAR 574 million in the first half of 2025. In tandem with the higher revenue, our EBITDA margin also improved to reach 34% in the first half of 2025 compared to 33% in the first half of 2024, which is also a testament to the company's focus on cost efficiency. Diving deeper into QAMCO's net earnings, for the first half of 2025 compared to the same period in 2024 as detailed on Slide #21, the improvement in financial performance was primarily driven by an uplift in average selling prices, which fully offset the marginal decline in sales volumes. Additionally, savings in finance costs were realized, supported by debt refinancing and partial loan repayments at the joint venture level. The average realized selling price increased by 16% year-on-year, reaching USD 2,879 per metric tonne in the first half of 2025. This pricing uplift contributed positively to the net profit by approximately QAR 232 million. Conversely, the decline in sales volumes which was attributable to macroeconomic uncertainties had a negative impact of QAR 19 million on net earnings. Furthermore, the cost of goods sold increased during the period, primarily due to higher raw material costs, particularly alumina. This rise in input costs negatively impacted net profit by QAR 127 million compared to the first half of 2024. Nevertheless, both the decline in sales volumes and the higher cost of goods sold were fully offset by the impact of the higher average selling prices and lower finance costs. Comparing QAMCO's financial performance in the second quarter of 2025 to the first quarter, as illustrated on Slide #22, net profit increased by 19% reaching QAR 186 million. This growth was primarily driven by a 6% increase in sales volumes, largely attributable to higher demand. This was partially offset by a marginal decline of 1% in the average selling price realized during the quarter. Despite the higher volumes, operating expenses remained relatively stable, reflecting prudent cost management and operational discipline. Now I will hand over back to Rashid.

As detailed on Slide #30, QAMCO JV had constantly demonstrated ongoing commitment to maintaining high efficiency and cost competitiveness in its production and operations. The prioritization of health and safety measures underscores its dedication to ensure both well-being of the workforce and the reliability and integrity of its asset. Moreover, executing CapEx project as planned and in alignment with operational requirements showcases the strategic foresight and resource management. Through its focus on operational excellency, health and safety and strategic investment, QAMCO JV is well positioned for sustained success in its industry. By this, we conclude our presentation. Thank you all for listening to us. And now we'll open the floor for the Q&A.

[Operator Instructions] Our first question comes from the line of [ Rian Durham from Ashmore ].

Can you hear me?

Yes, we can hear you.

Well, congratulations on a great first half. My question -- first question is, can you provide any guidance on sort of the dividend for the second half of the year? And I'd like to get your take on if you think that input costs have now settled and whether you see any margin upside for the second half?

Yes. This is Abdulla. Thank you for your question. Basically, you look at our current dividend with the semiannual yield that we are proposing, which is a very good dividend, generous as well. However, the second half, it will be depending on the market situation, the final product price and the decision from the Board towards the final dividend. Let's hope it's going to continue this year, and we distribute a dividend that's in line with the market change or movement. Your second question is what?

About the aluminum cost whether...

Alumina cost-- this is -- this alumina business is or aluminum business is very volatile business. Right now, we have seen the increase in the alumina basically due to the market supply and demand and some constraint in the main supplier, in China. Let's assume that based on the information that we have, we are not assuming any spike to the prices. And we hope that the second half will remain stable.

Our next question comes from the line of [ Akash Chavan ] from SICO.

Congratulations on a great set of results. My question is on kind of a follow-up to the previous question. So as you mentioned that alumina was higher last year because of all the reasons. But throughout the year, we have seen a constant decline in alumina cost. My question is that going forward, we are not seeing that kind of improvement in the profits. Is it just a lag impact, and we will see that -- like we saw some, but the kind of extent to which it has gone down is massive. So is it just a lag impact and we will see better margins for the second half of the year? Or is there some other element apart from alumina cost because if we compare your Q1 to Q2, your OpEx has barely changed. So my question is, is there any other part of the cost, which has impacted like your carbon coke, pitch or aluminum fluoride, things like that?

In our business and due to the supply chain arrangement, definitely, you will see a lag, maybe this lag of 45 days to 60 days maximum. However, other raw material still it will be remaining, hopefully, at the same level. The alumina, hopefully also it will ease down and the price will be improved. And that definitely, you will see it reflected in our margin once we report to the third quarter and the fourth quarter as well.

Our next question comes from Mohit Choudhary from Lesha Bank.

Congrats on your good set of results. I have one question with respect to the U.S. tariff impact. So we see that North America is just 10% of total JV revenue. But do you have anything on the impact of tariffs, which has come down to like 50%. So anything -- any color on that front?

This will be our choice to sell to the United States or to divert our product into the different market. So if we are going to sell to the U.S., then definitely, this -- our product will be applicable under these tariffs. However, we are having a different market to sell our products, where it should not impact our profitability or the market prices for our products.

Our next question comes back from the line of [ Akash Kumar ] from SICO.

I just wanted to know if you can give us some color on how your gas contract is structured with QatarEnergy, like how does -- I know that you don't give the specific formula, but can you give us some idea of how does it change with respect to the movement in aluminum and alumina, like the prices of your gas?

If you look at the aluminum industry and if you look at the gas cost, it is not the main contributor to your cost structure. So basically, any changes into that gas, it will not be impacting. As you can see, we are having, I would say, an excellent margin on our EBITDA, which is a demonstration that we are controlling our cost and such arrangement between the supplier and our joint venture is also, I would say, a quite good arrangement, which give us a sustainability in our costing even during a lower cycle where the price is under pressure, we have reported, I would say, a positive numbers.

Okay. Can you give us an idea, you said that gas cost in your cost structure is not a major issue. Would you be able to tell us how -- like what percentage of your cost is coming from gas?

This is a very sensitive commercial information. We never disclosed any kind of...

There are no further questions. I will now turn the call back over to our moderator, Dana Al Sowaidi, for closing remarks.

Thank you. If there are no more questions, we would like to thank QAMCO's management for the results update and for taking the time to answer all queries, and we look forward to speaking to you all for the third quarter results update.

Thank you, all.

Thank you.

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