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

Hello, everyone, and welcome to Qatar Fuel conference call. Please note that this call is being recorded. I'd now like to hand over to the moderator for today, [ Fabian ]. [ Fabian ], please go ahead.

Thank you, Eli. Good morning to you all, and thank you for joining us for the WOQOD's or Qatar Fuel Company's First Quarter 2024 Earnings Conference Call. My name is [ Fabian Marquez Erre ] from QNB Financial Services. On today's call, we have from WOQOD's management team, the CFO, Pradeep Kumar; we also have Sultan Jassim Al-Maadeed, the Finance Manager; and Ahmad Said Al-Mansoori, the IR Officer. And the order of the call is that the management team will go over the performance, the Q1 performance first and then the question and answer segment to follow. I'll now turn over the call to Ahmad to begin. Please go ahead, sir.

Thank you, [ Fabian ]. Good day to all the participants, and we hope everyone is keeping safe and healthy. We welcome you all to WOQOD's first quarter and March 2024 results conference call and appreciate your participation. As WOQOD is committed to continuously enhance its Investor Relations initiative, which is to strengthen our communication and improve 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 the disclaimer statement. All figures expressed in this call are Qatar Riyal and the conversion for the same to U.S. dollar as QAR 3.64 to USD 1. 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 product 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 we have reached 126 stations at the end of March '24. The chart on the right shows WOQOD's station network. WOQOD also owns and operates 13 Fahes centers for inspection of vehicles 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 operation, C-Store and auto care activities, vehicle inspection services and office leasing. 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 sale in the state of Qatar. Total fuel sale were higher by 6% during year-to-date March '24 as compared to the same period of last year, driven by market demand. Diesel sales volume were higher by 3% during year-to-date March 2024 versus the same period of last year, driven by macroeconomic factors. Combined gasoline sales volume were up by 8% during year-to-date March '24 versus March '23 driven by market demand. On quarter-on-quarter basis, sales volume for first quarter '24 decreased by 12% and 3% for diesel and gasoline, respectively. Average fuel sales were stable during -- average fuel prices were stable during the reporting period. Turning to Slide 8, which shows the jet fuel sales volume comparison. Jet fuel sales were higher by 19% during year-to-date March '24 as compared to the same period of last year, driven by market demand. On quarter-on-quarter basis, jet fuel sales volume for first quarter '24 increased by 1% driven by market demand. Jet fuel prices for year-to-date March '24 decreased by 9% as compared to the same period of last year. Combined sales volume for all petroleum products increased by 13% for year-to-date March '24 as compared to the same period of last year. Turning to Slide 9, which shows the quarterly trend of retail fuel sales volume. Overall, retail fuel volume increased by 5% year-to-date March as compared to the same period of last year driven by decreased market demand. Retail diesel sales increased by 3%, where the retail gasoline sales increased by 6% during year-to-date March '24 as compared to the same period of last year driven by market demand. On quarter-on-quarter basis, retail fuel volume in first quarter '24 decreased by 8% and 3% for diesel and gasoline, respectively. The market share of WOQOD in the retail market in the State of Qatar reached about 85% during year-to-date March '24. Nonfuel retail sales decreased by 8% during year-to-date March '24, mainly on account of decrease in [ ATT ]. Now I'd 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. Now I would like to discuss the consolidated financial results of WOQOD for the first quarter of 2024. Slide 11 shows the revenue trend of WOQOD. Revenue from fuel sales account for nearly 97% of the total revenue. WOQOD achieved total revenue of QAR 6.8 billion during the first quarter of 2024 as compared to QAR 6.6 billion during the same period last year, showing an increase of 3%. This increase is mainly driven by increase in overall fuel sales volume by 13%, partly offset by the decrease in fuel prices by 6%. As compared to the fourth quarter of 2023, the total revenue decreased by 8%, mainly due to decrease in sales volume by 3% and sales price by 7%. Turning to Slide 12, which shows the net income trend analysis. WOQOD has made a net income of QAR 243 million for first quarter 2024 as compared to QAR 223 million during the same period in 2023, approximately an increase of 9%. On a quarter-on-quarter basis, the net income for first quarter 2024 decreased by 11% due to decrease in fuel sales volume and fuel prices. As compared to the first quarter of 2023, net income for first quarter of 2024 is higher by QAR 20 million, which is 9% increase mainly driven by increase in fuel volumes and other income. 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 first quarter 2024 as compared to the same period last year. The increase in net income of QAR 20 million is due to the following major factors: Fuel segment margins increased driven by increase in fuel sales volume. Trading stock price improvement is mainly driven by lower fuel price impact in first quarter 2024 as compared to the same period last year. B2B segment margin decreased mainly due to low offtake from B2B segments and impact of lower bitumen sales due to prevailing market conditions. Nonfuel and others, lower due to lower income from nonfuel segment due to current market conditions, higher depreciation driven by asset additions, et cetera. Other income increase is mainly due to higher interest income driven by 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 as a top priority. WOQOD has a strong leadership committed towards delivering the results to its shareholders. With this, we are ready for a Q&A session. Thank you.

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

I have a few questions, please. So any chance you could disclose the components of the other income? How much of that income was from dividends? That's my first question. And secondly, on the weaker B2B segment margins. Can you give us a bit more detail about that? I mean what's happening exactly, because I think diesel volume was still high year-on-year. So is that volume related to something else?

On the other income increase that is net of QAR 10 million that comprises QAR 15 million increase in interest income and QAR 5 million decrease in the dividend. That's kind of the quick summary on that. On the B2B segment, it's mainly the contracting sector here in Qatar is impacted due to current economic situation. And once that segment is going to do better, we would expect to gain more margins from that segment.

[Operator Instructions] Our next question comes from Zohaib Pervez from Al Rayan.

I've got 2 questions. Firstly, in -- you've mentioned that on a quarter-over-quarter basis, the prices -- sales prices were lower by 7%. And on a year-over-year basis, they were lower by 6%. I mean now that, I mean, the fuel prices locally were flat as you have also mentioned in the presentation. So is this all this decrease because of the jet fuel or the prices for your bulk business have also gone down? That's my first question. The second question is you have mentioned about the growth rates for the other income. How much of the other income is -- could you just tell us the distribution between dividend income and the interest income of this QAR 150 million, how much is other income and how much is dividend income?

Yes. On the prices, you're correct, the gasoline and diesel prices remain constant However, the jet fuel, which is more of market-driven has impacted with the change in the market prices. On your second part of the question, you asked about the component of that. The dividend is QAR 67 million and interest income is QAR 74 million. That's what the breakup of that income.

Could you just repeat the distribution 1 more time, please?

QAR 67 million dividend income, QAR 74 million interest income.

Next question comes Ildar Khaziev from HSBC.

Yes, just a couple of more questions for me, please. On gasoline demand growth, so it was 8% high year-on-year, which is a pretty strong rate. What is driving this exactly? Is this because of the low base last year, you think? Or this is generally the stronger demand maybe population growth? That's my first question. And secondly, maybe just looking at the balance sheet. Any chance you could maybe comment on the -- that line, which says investment of QAR 3.6 billion roughly, I think of that amount about QAR 2 billion is the deposits and the rest some investments at fair value. What kind of investments are these? If you could say anything that would be great.

Yes. The gasoline, it's mainly driven by the macroeconomic factors. And as we are like 85% distributor in the country, definitely that much volume comes to us. It's purely driven by the market requirements. And we expect the trend to continue. That's what I'm reading as of now. Regarding the investment, okay, it is investments as well as deposits so -- and that's what this QAR 3.6 billion.

So the entire QAR 3.6 billion is deposits, roughly speaking or roughly both...?

No, no. It's a mix of equity investments as well as deposits.

As of right now, we don't have any raised hands. I'd now like to hand back over to the moderator for the final remarks.

Thank you, Eli. It looks like we've come to the end of our call. Thank you for joining us. Please join us again in future. I also want to thank the management team for taking time to address investors' questions. Please have a good afternoon.

Thank you all.