Qatar Aluminium Manufacturing Company Q.P.S.C. (QAMC.QA) Q3 FY2025 Earnings Call Transcript & Summary

Hello, and welcome to Qatar Aluminum Manufacturing Company Conference Call. Please note that this call is being recorded. [Operator Instructions] Now I would like to hand the call over to Dana. You may begin.

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 Aluminium Manufacturing Company's Third Quarter 2025 Financial Results Conference Call. On this call from management, we have Rashid Hamad Al-Mohannadi, Head of Investor Relations and Communications; and Ahmad Zakri Salleh, Assistant Manager, Financial Operations. 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.

Thanks, Dana, [Foreign Language] and good afternoon, and thank you all for joining. Before we go into QAMCO business and performance update, I would like to mention that this call is purely for investors of QAMCO and no media representatives should be attending this call. Moreover, please note that this call is subject to QAMCO disclaimer statement as detailed on Slide #2 of the IR deck. Now we can move to the call. On Monday, 27th of October, QAMCO published its results for the 9-month period ended 30th of September 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 this call and MS Teams 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 on this call, along with me, I have Mr. Ahmad Zakri, who is the Assistant Manager for Financial Operations, and we have structured the 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 30 and 31 of the IR deck as well as covering the broader macroeconomic environment impacting the sector. Later, Ahmad will provide you a detailed update on operational and financial performance metrics, along with insights into our JV operations. And finally, we'll open the floor for the Q&A. To start with, as detailed on Slide #7 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 shareholders. QatarEnergy being the founding shareholder of 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 their respective Board of Directors, along with senior management team. QAMCO holds 50% share in Qatar Aluminum Limited, Qatalum, which produces high-quality aluminum of more than 670,000 tonnes per year against a nameplate capacity of 575,000 tonnes per year for customers in Asia, Europe and North America. The facility includes a reduction plan, a carbon plant, casthouse, utilities, port and storage facilities as well as 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-the-art production facility, assured feedstock supply via a long-term agreement with intense focus on HSE, which makes the JV a leader among its peers. As detailed on Slide #14, from competitive positioning perspective, QAMCO ranks among the top-tier companies within the industries at a global scale across most of the profitability matrices. This is a testimony to the JV lean cost base and continued optimization drive, which keeps the QAMCO JV on the lower side of cost curve among global peers, resulting in stronger margins. Moreover, the JV global marketing partnership with the other JV partner provides access to strategically important markets, which makes the company more competitive compared to its peers. In addition, the JV is capable of quickly shifting the product mix vis-a-vis from value-added product to standard ingot, which provides an additional layer of flexibility in terms of production processes as well as supply chain management while ensuring optimum production and sales volume in line with evolving market dynamics. In terms of the governance structure of QAMCO, you may refer to Slide 30 and 31 of the IR deck, which covers various aspects of QAMCO code of corporate governance in detail. We can now start by diving into the macroeconomical updates. Throughout the first 9 months of 2025, the aluminum market has shown signs of shifting from prolonged surplus towards a more balanced or potentially tighter supply-demand environment. China production growth has slowed due to policy constraints and capacity limits, while global inventories has gradually declined, reducing the supply cushion that previously characterized the sector. This, combined with a moderate capacity growth and structural demand from energy transition has helped stabilize the market. However, the cost pressures, volatility in aluminum and energy prices and ongoing geopolitical and trade uncertainty continue to weigh on the sentiment. With that, I will now hand over to Ahmad, who will provide further details into the financial and operational updates.

Thank you, Rashid. [Foreign Language], and good afternoon, everyone. Let me first start by referring you to Slide #20, which outlines our financial performance for the 9 months period of 2025 compared to the same period in 2024. And if you refer to this slide, you can clearly see that QAMCO has delivered a robust set of financial results. Net profit reached QAR 534 million, up from QAR 428 million in the same period of last year, and this represents a 25% increase year-on-year. This translates to an earnings per share or EPS of QAR 0.096 compared to QAR 0.077 in the same 9-month period of 2024. Our share of the joint ventures revenue increased to QAR 2.6 billion, up from QAR 2.4 billion in the same period of 2024. EBITDA also improved 11% year-on-year, reaching QAR 895 million, with margins remaining stable at 34%, which reflects the continued operational resilience of QAMCO and its joint venture. Diving deeper into QAMCO's net earnings for the 9-month period of 2024 compared to the same period last year. As you can see detailed on Slide #21, the improvement in net earnings was primarily driven by an uplift in both average selling prices as well as sales volumes. The average realized selling price increased by approximately 9% year-on-year reaching USD 2,816 per metric tonne, and this contributed approximately QAR 218 million to the net profit. Sales volumes also improved marginally by around 1%, and this added QAR 31 million to the net earnings, supported by favorable supply-demand market dynamics. On the cost side, we clearly saw operating costs also increased, and this was mainly driven by higher raw material costs, in particular, alumina, which negatively impacted net profit by around QAR 168 million compared to the same period last year. Additionally, savings in finance costs were also realized through debt refinancing as well as the scheduled loan repayments at the joint venture level. And this further contributed to the higher net profit for the 9 months period in 2025. Moving on to the quarter-on-quarter financial performance. Comparing QAMCO's financial performance in the third quarter of 2025 to the second quarter of 2025, as you can clearly see on Slide 22, net profit increased by around 3% at QAR 192 million. This growth was mainly driven by a 13% increase in sales volumes quarter-on-quarter, reflecting stronger market demand for aluminum products. However, this was partially offset by a 6% decline in average selling prices quarter-on-quarter. In tandem with the higher volumes, operating costs also increased. And this increase in sales volume fully offset the impact of lower prices as well as higher costs, resulting in an improved net income for the third quarter in 2025. QAMCO's joint venture has continuously demonstrated its ongoing commitment towards maintaining high efficiency and cost competitiveness in its production and operations. The prioritization of health and safety measures underscores its dedication to ensuring both the well-being of its workforce as well as the reliability and integrity of its assets. Through its focus on operational excellence, health and safety and strategic investments, QAMCO's joint venture is well positioned for continued sustained success in this industry. Now I will hand over back to Rashid. Over to you, Rashid.

Thank you, Ahmad. Thank you all for listening to us, and now we'll open the floor for the Q&A.

[Operator Instructions] Your first question comes from the line of Nikhil Phutane with CBFS.

Well, my question is regarding on your premiums on aluminum prices, which we used to revolve around $300 per tonne. And in the third quarter, it has come down to around $200. So that's my first question. What has been the reason behind the reduction? Also the spurt in volumes, which you have nicely captured in the third quarter of 2025. So can we expect the volumes to go back to the mean level in the current quarter around 160 metric tonnes.

Sorry, can you repeat your first question just now in terms of the...

It has got to do with the premium on aluminum prices, which has been revolving around $300, so which has come down to around $200. So what has been the main reason behind a drop on this? And also, why had -- the spurt, which we have seen in the third quarter in volumes, can we expect again coming back to the mean level at around $160 per quarter in the current quarter?

Okay. I think in terms of premiums, the premiums are influenced by a lot of regional and local factors. It's got a lot to do with the shipping conditions in the shipping market. It's got to do with the localized supply-demand dynamics. We expect the premiums to constantly fluctuate quarter-on-quarter. If you look at the average prices for the whole 9 months, it's reflecting quite a strong and stable total average selling price. In fact, it's trending up. We expect this to continue, and we expect the premiums to remain quite stable as well over the remaining quarters. Overall, we're quite bullish in terms of prices. If you look at the 9 months performance, you can clearly see our numbers are very strong. And if you look at what's driving this strong demand in the market, you look at the demand for aluminum across the energy transition sector, across solar, it's continuing to remain strong. And if you look at the construction sector as well, we're seeing some form of a revival in the construction sector. Hopefully, it holds over the remaining quarters. But yes, we don't expect huge fluctuations in premiums, but it will continue to move up and down, and it will be influenced by regional localized conditions, but we don't expect major changes.

Okay. So you are saying prices could likely be stable at around $200 in the fourth quarter?

Probably, depending on market conditions, yes.

Okay. And regarding the volumes, I mean, what we can expect in the current quarter?

I think in terms of our production, if you look at production and sales volume, again, it's been rather stable. We don't expect any major fluctuations in the fourth quarter as well, and we expect to be hitting our internal targets. And if you look at demand for aluminum products as well, we see continuing strong demand for aluminum products, and we don't expect this to change in the near term. So again, we expect demand to continue to remain strong, and we expect these figures to continue in the fourth quarter.

Okay. Coming back to your alumina prices, actually, as against what we were expecting, we could continue -- we are seeing that it has remained at a little bit higher levels than what was expected. Just wanted to have an idea on this. I mean, it has got to do with some high inventory costs, which was passed on.

No, I think if you talk about alumina, if you look at the trend of alumina prices in 2025, I believe alumina prices spiked in the early part of 2025. And this was due to the fact that some key producing regions, particularly in China, if I'm not mistaken, around [indiscernible], they had some production constraints and also some shutdowns. So I think that drove prices to spike up. But what we are seeing as far as alumina prices, the prices have trended down in the recent months. So if you see alumina prices is starting to stabilize and starting to trend down. So we don't expect this trend to change. We expect prices to continue to taper down and become more stable in the forthcoming quarters.

Actually, my question is, the third quarter alumina prices, which has been reported, has the alumina prices also include some inventory, which has come from second quarter high alumina prices or it is only for the third quarter?

I think when it comes to inventory prices, basically, it's weighted across all the production lines. So you will see fluctuations quarter-on-quarter. It's all embedded inside the overall inventory values.

So going forward, you are saying we could be seeing quite a good deviation given the fact that alumina prices have further come down in the fourth quarter?

Could be. That could be a scenario that unfolds in the fourth quarter. But it also depends on where alumina prices head towards in the fourth quarter. We expect it to continue to stabilize and probably taper down. So you'll see probably it will continue to stabilize and maybe trending slowly down.

Okay. And last question on your energy cost in part of your raw material. So it looks like it has continued to remain at the same second quarter per tonne prices. So what has been the reason behind it? I mean, unlike in the earlier quarters where the energy cost was quite low. So is there any reason behind energy costs continue to remain high?

I think at the end of the day, our energy costs, I mean, we have a secure and stable supply. And we have a long-term pricing contract that underpins energy costs. There's been no change to this long-term pricing in the contract. We don't expect prices to again fluctuate wildly. So I think you can expect to see quite stable prices moving forward.

Your next question comes from the line of Wei Chao with Al Rayan Investment.

So following up on the questions that the earlier participant was asking, you expect that the premiums are going to remain at the current level of around $220, if I'm not wrong, right? Please correct me if I'm wrong.

Just to add here, this is Raj. So as Ahmad mentioned, we always have fluctuation in the premium. But particularly in this quarter, as you see, we sold higher sales volume. And that higher sales volume also was supported by selling some volumes of standard ingots. So those volumes of standard ingot typically realize lower premium given that they are not value-added products. Hence, why we see the decline in premium in this quarter, particularly. So also going forward, how things will unveil will depend on the product mix in the next quarter, the destination we sell the product to, and the contractual agreement with the customer and how that will reflect into the premiums. So just as a side note, this quarter had some standard ingots, and that's part of the impact why you're seeing lower premiums. I hope I answered your question.

Yes. The other question is on the alumina prices. Alumina prices have recently come down. How long does it take for these alumina prices to be reflected in your numbers?

Yes. So basically, we have trending numbers in terms of inventory that could range from 30 up to 50 days of inventory. But typically, we are targeting between 40 to 45 days of inventory. So you would expect the inventory turnover to be within this time frame. Also, as we mentioned in the past, we are procuring our alumina on contractual basis while securing the volumes, but the price is as per the agreed pricing mechanism with the supplier. So basically, it will depend how we realize it. But if the price of alumina in the future goes down, then naturally, that should cascade into our cost of goods gradually with time.

There are no further questions. I will now turn the call back over to Dana for closing remarks.

As there are no more questions, we would like to thank the company'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 fourth quarter results.

Thank you, Dana. Thank you all.

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