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

Hello and Welcome to Qatar Fuel WOQOD Conference Call. I would like to advise all participants that this call is being recorded. Thank you and now I'd like to welcome Mr. Ahmad Al-Mansoori to begin the conference. Ahmad, over to you.

Yes. Thank you, everyone, for joining us in today's WOQOD Year End 2023 Results Conference Call. We have with us today Mr. Pradeep Kumar, CFO; Mr. Sultan Jassim Al-Maadeed, Finance Manager, and myself, Ahmad Said Al-Mansoori, IRO. We hope everyone's keeping safe and healthy, and we would like to welcome you all to our conference call and appreciate your participation as WOQOD is committed to continuously enhance its investor relations initiatives. This is to strengthen our communication and improve transparency with the members of the global investment community. The presentation of this call will be available under the Investor Relations section of our website. Any statement that refers to expectations, projections, guidance or any other characterizations, our 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 the disclaimer statement. All figures expressed in this call are on Qatar Riyal and the conversion for the same to USD as QAR 3.64 to an USD. Now, I would like to hand over the call to our Finance Manager, Mr. Sultan Jassim Al-Maadeed to provide a brief overview of WOQOD and update on the key operational activities.

Thank you, Ahmad. The key vision of WOQOD is to be the leading petroleum products distribution and related service marketing company in the region. I am on Slide 4 now, which shows the overview of WOQOD Group. WOQOD started operation in 2002 with exclusive rights for storage and distribution of petroleum products in the state of Qatar. Operations started with 2 petro stations in 2003 and has grown to 126 stations by the end of 2023. The chart on the right shows WOQOD station network. WOQOD also owns and operates 13 Fahes centers for inspection of vehicle across the State of Qatar. I am on Slide 5 now, which shows the key operation of WOQOD Group. Key operation of WOQOD Group are 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 and finally office leasing. Turning to Slide 7 now, which shows the diesel and gasoline fuel sales volume trends analysis as mentioned before. The core activity of WOQOD is fuel distribution and sales in the State of Qatar. Total diesel and gasoline fuel sales lower by 5% during full year '23 versus full year '22, driven by market demand. Diesel sales volume were lower by 15% during full year '23 as compared to the same period last year, driven by macroeconomic factors. Combined gasoline sales volume were up by 4% during full year '23 versus full year '22, driven by market demand. On a quarter-on-quarter basis, sales volume for fourth quarter '23 diesel sales decreased by 7%, however gasoline sales increased by 6%. As compared to fourth quarter '22, diesel sales dropped by 12%, whereas the gasoline sales increased by 4% in fourth quarter of '23. During the year, average fuel prices for diesel remained unchanged. However, gasoline average decreased marginally by 1.4% during the current year. Turning to Slide 8, which shows the jet fuel sales volume comparison. Jet fuel sales were higher by 16% during full year '23 as compared to the same period of last year, driven by market demand. On quarter-on-quarter basis, the fuel sales volume for fourth quarter '23 decreased by 7% driven by market demand. As compared to fourth quarter '22, jet fuel sales volume increased by 22% during fourth quarter '23. Jet fuel prices for the year '23 decreased by 17% as compared to the same period of last year. Combined sales volume of all petroleum products increased by 5% for the year '23 as compared to the same period of last year. Turning to Slide 9. which shows the quarterly trend of -- retail fuel sales volume trend. Overall retail fuel volume decreased by 2% for the year '23 as against the same period of last year, driven by decrease in market demand. Retail diesel sales decreased by 14%, whereas the retail gasoline -- retail gasoline sales increased by 3% during full year '23 as compared to the same period of last year. . On quarter-on-quarter basis, diesel retail fuel volume in fourth quarter '23 increased marginally. However, gasoline retail sales increased by 6% against third quarter '23. As compared to fourth quarter '22, retail diesel sales decreased by 11%, whereas retail gasoline sales increased by 2% in fourth quarter 2023, driven by market factors. The market share of WOQOD in the petroleum retail market in the State of Qatar reached to about 86% during the year '23. We would like also to mention that non-fuel retail sales increased by 1%, 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.

Thanks, Sultan, 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 year 2023. Starting from the revenue, I'm on Slide 11 now, which shows the revenue trends of WOQOD. Revenue from fuel sales account for nearly 97% of the total revenue. WOQOD achieved total revenue of QAR 28 billion for the year 2023 as compared to QAR 30 billion during 2022, representing a decrease of 7% which is mainly driven by the decrease in fuel prices by 9%, partly offset by increase in sales volume by 5%. As compared to third quarter of 2023, the total revenue increased by 1% during fourth quarter of 2023, mainly driven by increase in fuel sales price by 8%, which is partly offset by a decrease in sales volume by 4%. WOQOD achieved total revenue of QAR 7.44 billion for the fourth quarter of 2023 as compared to QAR 7.36 billion during the same period last year, showing an increase of 1%. The main reason for the increase in revenue is the increase in fuel sales volume by 9%, partly offset by decrease in prices by 3%. Turning to Slide 12, which shows the net income trend analysis. WOQOD has made a net income of QAR 984 million for year 2023 as compared to QAR 1,070 million during 2022, representing a decrease of 8%. On a quarter-on-quarter basis, the net income for fourth quarter 2023 remains almost the same, which is QAR 272 million. As compared to fourth quarter of 2022, the net income for fourth quarter of 2023 is lower by QAR 35 million, which represents a decrease of 11%, mainly driven by lower income from B2B segment. The detailed analysis of net income variance is given in the next slide. . Slide 13 shows the key variance analysis of net income for the year 2023 as compared to same period last year. The decrease in net income of QAR 86 million is due to following major variances. Operating margin decreased during the year 2023 as compared to '22 as a result of decrease in B2B segment income, driven by lower diesel and bitumen sales, which is partly offset by the increase in the jet fuel volume. Trading stock price variance is mainly driven by a decrease in jet fuel price by 17% during the year. I'll come back to the closing values of last year. G&A expense decreased mainly driven by lower receivables provision in line with IFRS requirements. Other income increase is mainly driven by higher interest income driven by the optimization efforts on return on cash. WOQOD's fundamentals continue to remain robust, and WOQOD is committed to meet all its strategic goals while placing safety 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. Thank you.

[Operator Instructions] Our first question comes from the line of Ildar Khaziev from HSBC.

A couple of questions from me, please. First of all, could you provide any guidance on your CapEx for this year? That's question #1. And maybe you could actually comment why -- I think for 2023 earlier, I think you've guided a much, much higher number but it came back lower. Any reasons for that? Anything has been postponed? And question #2 would be about the performance of your jet fueling business. So when I'm looking at the non-controlling interest line on your P&L, it seems that, that line has not been affected by the very strong volume increase for jet fuels. Is my understanding correct that, that subsidiary sort of operates on a fee basis, doesn't really capture any of the inventory trading stock variances, and so on, so forth?

Thanks for the question. On the first part of it, CapEx for the year is QAR 150 million. As compared to last year, it has reduced because a lot of our projects have been completed. That's why it is lower than last year. Regarding the second part of the question, which is jet fuel and their sales of jet fuel is accounted in WOQOD. We accumulated the minority interest. We are handling the operation sites on a fixed fee basis.

Next question comes from the line of [indiscernible].

Just around the operating margin decline driven by B2B diesel and the bitumen business. Are you able to allocate the QAR 97 million decline to those 2 segments, which one was much more impactful?

I would say majority of this B2B -- actually, roughly the B2B impact was around QAR 150 million during the year. But of course, because of jet fuel, that offsets, that's why the net impact is only QAR 97 million.

Okay. Great. And then could you just talk a little bit about just the kind of volume outlook in 2024?

Well, at this point, we expect the same kind of trend for the same volume levels in 2024. We'll wait and see.

Okay. And diesel, you wouldn't expect further decline in diesel from 2023 levels?

At this point, we expect to continue the same level with the market and because it already took a considerable decrease during 2023.

[Operator Instructions] There are no further questions at this time. I will now hand the call back to Mr. Ahmad Al-Mansoori.

Thank you, everyone, for joining us in today's call. We hope to see you in the future. Thank you very much. .

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