Qatar Fuel Company Q.P.S.C. ("WOQOD") (QFLS) Earnings Call Transcript & Summary

Hello, and welcome to the WOQOD Q3 2022 Results Conference Call. My name is Priscilla, and I will be your coordinator for today's event. Please note, this call is being recorded for the duration of 60 minutes. [Operator Instructions] I will now hand over you to your host, Mr. Fabian Macquarie to begin today's conference. Thank you.

Thank you, Priscilla. Good morning to you all. Thank you for joining us for WOQOD's or Qatar Fuel Company's 3Q 2022 Conference Call. My name is [Fabian Macquarie] from QNB Financial Services. . And then on today's call, we have the WOQOD management team. The CFO, who is Pradeep Kumar; and the Investment Relations Officer, Ahmad Said Al-Mansoori. The way this call will go is we have Ahmad give us an overview of a few things. And then after that, we have Ahmad -- sorry, we have Pradeep to go over the performance. And immediately after that, we have a Q&A session. So I'll now hand over to Ahmad. Ahmad, please go ahead.

Thank you, Fabian. Good day to all the participants, and we hope everyone is keeping safe and healthy. We welcome you all to third quarter and September '22 results conference call, and we appreciate your participation as our Board is committed to continuously enhance its investor relation activities. This is in order to strengthen our communication and full transparency with all members of the global investment community. The presentation of this call will be available on the Investor Relations section of our website. . Any statement that refers to expectations, projections, guidance or any other characterizations of future events, including financial projections or future market conditions is a forward-looking statement based on the assumptions today. Actual results may differ materially from those expressed in these forward-looking statements. The company cannot disclose any commercially sensitive information due to the confidentiality agreements signed with suppliers. Please refer to Slide #2 for the full version of disclaimer statements. All figures expressed in this call are on Qatari riyals and the conversion for the same U.S. dollar as Qatari riyal's 3.64 to USD 1. The key vision of WOQOD is to be the leading petroleum product distribution and related services marketing company in the region. Now I'm on Slide #4, which shows the overview of WOQOD Group. WOQOD started operations in 2002 with exclusive rights for storage and distribution of petroleum products in the State of Qatar. Operations started with 2 petrol stations and has grown to 122 stations at the end of September 2022. The chart on the right shows WOQOD's stations network, and WOQOD also operate 13 FAHES centers for inspection of vehicles. I am now on Slide #5, which shows the key operations of WOQOD Group. The key operations of WOQOD Group consists of diesel and gasoline fuel distribution and sales, jet fuel distribution and sales, shore-to-ship and ship-to-ship bunkering, LPG distribution and sales, natural gas distribution and sales, fuel bunkering, bitumen operations, C-store and auto care activities; vehicle inspection services. Turning to Slide #7 now, which shows the diesel and gasoline fuel sales volume trend analysis. As mentioned before, the core activity of WOQOD is fuel distribution and sales in the State of Qatar. For the quarter ended September '22 versus the same period of last year, the diesel and gasoline chart on the top shows the quarterly trend. Diesel sales volume were higher by 5% in the third quarter of 2022 versus the same period of last year driven by macroeconomic factors. Combined gasoline sales volume were up 12% in the third quarter of 2022 versus the same period of last year, driven by market demand and the easing of restrictions. The table on the right shows YTD September, fuel volume and price variance analysis. Total fuel sales were higher by 6% during YTD September 2022 versus the same period of last year driven by market demand. Average fuel prices were higher by 4% for YTD September 2022 versus the same period of last year. Turning to Slide #8, which shows the jet fuel sales volume comparison. Jet fuel sales were higher by 21% in the third quarter of 2022 compared to the same period of last year, driven by the easing of restrictions on air travel in many countries. Sales for YTD September 2022 was 23% better than YTD September 2021 driven by improved uptick from airlines. Combined sales volumes of all petroleum products have increased by 13% for the YTD September 2022 as compared to the same period of last year. Now turning to Slide #9, which shows the retail fuel sales volume quarterly trends. For the third quarter of 2022 versus the same period of last year, overall retail fuel volumes have increased by 13% driven by increased market demand. The retail diesel sales have increased by 10% and the retail gasoline sales have increased by 15%. Turning to Slide #10, which shows the retail fuel sales volume comparison for YTD September 2022 as compared to that same period of last year. The retail fuel sales volume at petrol stations were higher by 11% for the YTD September 2022 compared to the same period of last year, driven by higher market demand. The share of WOQOD in the petrol retail market reached to about 86% for YTD September 2022. We would also like to share some additional information on other business segments for the period YTD September 2022 versus that same period of last year. Natural gas sales have increased by 3% driven by market demand. Diesel bunkering sales have increased by 24% driven by market demand and nonfuel retail segment have increased by 10%, driven by various initiatives. Now I would like to hand over the call to our CFO, Mr. Pradeep Kumar, to discuss the key financial results. Go ahead.

Thanks, Ahmad, for all the volume updates. Good day, everyone, and hope everyone is safe and healthy. . Now I would like to discuss the consolidated financial results of WOQOD for the 9 months ended 30th September 2022. Starting with the revenue. I'm on Slide 12 now, which shows the revenue trend of WOQOD. Revenue from fuel sales account for nearly 96 percentage of the total revenue. WOQOD achieved total revenue of QAR 22.6 billion for the first 9 months of 2022 as compared to QAR 13.7 billion during the same period last year, showing an increase of 65 percentage. The main reason for the increase in revenue are increase in sales volume by 13 percentage and increase in overall prices by 34 percentage. As compared to second quarter of 2022, the revenue increased by 12 percentage during the third quarter, mainly driven by the increase in sales volume by 7 percentage. Turning to Slide 13, which shows the net income. WOQOD has made a net income of QAR 262 million. For the third quarter ended 30th September 2022 as compared to QAR 230 million during the same period in 2021, increase of 14 percentage, mainly driven by higher sales volume and other income. Additionally, improvement in nonfuel segment also helped the increase in net income. The detailed analysis of net income variance is given in the next slide. Slide 14 shows the key variance analysis of net income for the 9 months ended 30th September 2022 as compared to the same period last year. This increase in net income of QAR 72 million is due to following major factors. Gross margin increased by QAR 108 million mainly driven by increase in volume and pricing. Trading stock price variance, mainly driven by comparatively lower increase in fuel prices during YTD September 2022,against YTD September 2021. Other income increase is mainly driven by increase in dividend from the investment. WOQOD's fundamentals continue to remain robust, and WOQOD is committed to meet all its strategic goals by placing safety as a top priority. WOQOD has a strong leadership committed towards delivering the results to the shareholders. With this, we are ready for the Q&A session. Thank you.

[Operator Instructions] We will now take our first question from [Mustafa Amar]

This is Zohaib from Al Rayan Investment. So the average fuel prices were higher by 4% and your volumes were higher by 13%, but your revenues were a lot more higher. So is it this 4% increase in fuel price is just for diesel and gasoline? Is my assumption correct? And I guess the increase in revenue, the significant increase in revenue then comes from the increase in jet fuel prices. Is my understanding correct?

You're right. The diesel and gasoline segment price remain more or less same, not much fluctuation from the second quarter to third quarter, but the jet fuel, of course, just increased based on the market prices.

Just a follow-up on that. Could you give us some sense of how much the jet fuel price is increased during this 9 month to 9 month or third quarter to third quarter? .

Yes, one second. So the jet fuel price has gone up by around more than 80 percentage as compared to the first 9 months of '21 to this year, 9 months.

[Operator Instructions] We will take our next question from Govind Kumar from HSBC.

Just a follow-up on the jet fuel prices. Could you please let us know what could be a good proxy for the jet fuel prices in Qatar?

Well, jet fuel prices are regulated by the state of Qatar, and it's driven by the change -- fluctuation in the oil prices. So the current oil price is hovering around 90s, and it depends. If it goes up, definitely, it's going to go up. It's going to come down. So it's depending on the fluctuation in the oil prices. .

We will now take the next question from Mr. [Mustafa Amar] from Al Rayan Investment.

Just wanted to understand, in terms of the waterfall chart that you have shown with regards to the net income and the trading stock price variance negative 87%. Is it basically WOQOD taking a loss on the inventory? Or is it just a comparison that has been shown year-on-year?

Yes. On the trading price stock variance, we are holding inventory. And last year -- to start with the last year, the average price was almost QAR 1. In 2021, the price has come down from -- in 2021 beginning, it was QAR 1 and by September, it has gone up by 80 percentage on the price. So that was kind of last year, we gained quite a lot on the inventory that we are holding. Now this year, as you see, the price has not increased as much as it was increased last year. Still the price is going up, but not as much as it has gone up last year. So as compared to the gain that we had last year, this year, we didn't gain that much. So it's a net of those 2 variants.

[Operator Instructions] Dear host, looks like there is no questions as of now. You may continue the presentation.

Thank you.

Conclude the meeting, right, Ahmad?

Yes. If there is 1 last question or we can end the meeting.

I can close.

Thank you so much for all your support, and look forward to meet you next quarter.

Yes. Thank you, Fabian.

Okay, thank you. If there are no more questions, I think we can bring this to an end, and we hope to see you again in Q4. Thank you. Bye-bye.

Thank you.

Thank you.

Thank you for joining today's call. You may now disconnect.