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

Hello, and welcome to the Qatar Fuel Company, WOQOD conference call. I would like to advise all participants this call is being recorded. Thank you. I'd now like to welcome the Roy Thomas to begin the conference. Roy, over to you.

Thanks, Kevin. Hello, everyone. This is Roy Thomas from QNB Financial Services. I want to welcome everyone to Qatar Fuel Company, WOQOD's Second Quarter and First Half 2024 Financial Results Conference Call. On this call from WOQOD we have Sultan Jassim Al-Maadeed, the acting Chief Financial Officer; and Ahmad Said Al-Mansoori, the IR Officer. We will conduct this conference call with management first reviewing the company's results followed by Q&A. I will turn the call now over to Ahmad Said Al-Mansoori. Go ahead, Ahmad.

Thank you, Roy. Good day to all the participants, and we hope everyone is keeping safe and healthy. We welcome you all to WOQOD second quarter ended June, 2024 results conference call, and appreciate your participation as WOQOD is committed to continuously enhance its investor relation initiatives. This 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 or 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 agreement signed with suppliers. Please refer to Slide #2 for a full version of [indiscernible] statements. All figures expressed in this call are on Qatari riyals and the conversion for the same to U.S. dollars is 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 operation 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 for WOQOD Group. WOQOD started operation in 2002 with an exclusive right for storage and distribution of petroleum products in the State of Qatar. Operations started with 2 petrol stations in 2003 and has grown to 126 station at the end of June '24. The chart on the right shows WOQOD station network. WOQOD also own and operate [indiscernible] for inspection of vehicle across the State of Qatar. I am on Slide 5 now, which shows the key operation of WOQOD Group. The key operations 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, [indiscernible] and auto care activities, the vehicle inspection and office lease. 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. Total fuel sales higher by 8% during first half '24 versus the same period of '23, driven by marketing. Diesel sales volume were lower by 1% in first half '24 versus first half of '23 driven by macroeconomic factors. Combined gasoline sales volume were up by 6%, first half '24 versus first half '23 driven by market demand. On quarter-on-quarter basis, diesel sales increased by 2% and gasoline sales volume remained stable. 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 16% in first half '24 compared to the same period last year driven by marketing. On quarter-on-quarter basis, Jet Fuel sales volume for second quarter '24 increased by 3%, driven by market demand. Jet Fuel prices for first half '24 decreased by 3% as compared to the same period last year driven by change in crude oil prices. Combined sales volume of all petrol products increased by 10% for first half '24 as compared to the same period last year. Turning to Slide 9, which shows the quarterly trend of retail fuel sales volume trend. Overall, retail volume increased by 4% for first half '23 against the same period of last year, driven by increased market demand. Retail diesel sales increased by 2% where the retail gasoline sales increased by 4% during the first half '24 as compared to the same period of last year, driven by market demand. On quarter-on-quarter basis, retail fuel volume in second quarter '24 decreased by 3% and 1% for diesel and gasoline, respectively. The market share, also including the petroleum retail market in the State of Qatar, reached about 85% during first half of '24. Nonfuel retail sales decreased by 8% during first half '24 driven by -- driven mainly by decrease in APC. Turning to Slide 11 now, which shows the revenue trends of WOQOD. Revenue from fuel sales accounted for nearly 97% of the total revenue. WOQOD achieved total revenue of QAR 7.1 billion during second quarter of '24 as compared to the QAR 6.48 billion during the same period last year, showing an increase of 10%, an increase is mainly driven by increase in overall fuel sales volume by 10% in the first half of '24 as compared to the same of last year. As compared to first quarter of '24, the total revenue increased by 4%, mainly due to increase of sales volume by 2%. Turning to Slide 12, which shows the net income trend analysis. WOQOD has made a net income of QAR 239 million for the second quarter of '24 as compared to QAR 217 million during the same period in '23, representing an increase of 10%. On a quarter-on-quarter basis, net income for second quarter '24 decreased by 2%. [indiscernible] analysis of net income value is given in the next slide. Turning to Slide 13, which shows the key variance analysis of net income for the first half of '24 as compared to the same period of last year. The increase in net income of QAR 42 is due to the following major factors. Fuel segment margin increased driven by increase in fuel sales volume, trade stock price improvement is mainly driven by lower Jet Fuel prices impact in the first half of '24 as compared to the first half of '23. B2B segment margin decreased mainly due to lower offtake from B2B segment and impact of lower bitumen sales due to prevailing market conditions. Nonfuel margin and others, lower -- were lower due to lower income from nonfuel segment due to prevailing market conditions, higher depreciation driven by asset additions. Other income increase is mainly due to higher interest income driven by optimization efforts and return of cash. WOQOD fundamentals continue to remain robust and WOQOD is committed to meet all its strategic goal while placing safety as our priority. WOQOD has a strong leadership committed towards delivering the results to the shareholder. With this, we are ready for the Q&A session. Thank you.

[Operator Instructions] Your first question comes from the line of Rob Skepper from Ashmore.

Thanks for the update today. Can I just ask on the B2B segment, how much of that was -- has that decline year-on-year is related to the bitumen sales. And like when you look at the bitumen market now, have things troughed? Or are things still deteriorating?

Well, my apology, the question is very clear from -- it's not very clear from our end. But I reckon, you're asking about what is the reduction in the bulk segment? And is it -- what's the forecast of it? Am I correct?

Yes..

Okay. So the reduction is 6%, and the market enroute to recovery. We don't see it going down trend.

Got it. Great. And then I just wanted to ask about the dividend. You've announced the interim dividend. Did you have any comments from like what that signals and is that a permanent change?

We announced dividend QAR 0.4 per share. Dividend payout ratio of 83%, and that has been announced. No change will take place.

[Operator Instructions] Your next question comes from the line of Zohaib Pervez of Al Rayan Investment.

I've got a couple of questions. First is, you've shown that your trading stock price variance is actually positive. But I look at -- if I look at your prices for your different products, it seems all of them are lower or flat. I mean the diesel gasoline prices are flat, Jet Fuel is actually lower and bitumen, you yourself said, it's lower. So what is leading to these gains in your trading stock price movements? That's my first question. The second question is on your fixed deposits where you're earning quite chunky return, which has really positively impacted the financials. What is the tenor and -- what is the tenor of these fixed investments and the rate that you currently -- profited that you're currently earning? .

Yes. For the first question, the prices went down, but not as severely as compared to last year. In terms of the second question, my apology, I cannot answer that question. These are confidential information. .

Okay. One other thing as you introduced, Sultan, as being the acting CFO, has there been a change in management? Has Pradeep left and you've become the acting CFO?

No. Actually, Pradeep is on annual leave.

[Operator Instructions] Your next question comes from the line of Ildar Khaziev from HSBC. .

This is Ildar Khaziev from HSBC. Just a quick question. Can you tell us anything about the performance of the B2B business so far in the third quarter since we are sort of in the level of -- not in the middle of, but we are past July in August already. Have you seen any signs of improvement year-on-year or [indiscernible]? .

Well, the way I see it, honestly, in terms of the B2B, it is involved as stipulated earlier. it is in lot of recovery. I don't -- we don't forecast it's going to go lower than what it has reached.

Your next question comes from the line of [indiscernible] from TFI. .

Can you provide us an update on government subsidies on petrol .

That's not within our domain. Roy?

We just wanted to note that we'll have 1 last question before we end the call. .

[Operator Instructions] There are no further questions at this time. So I'd like to hand back to Roy. .

All right. If there are no further questions, we'd like to thank WOQOD's management for the results update and answering all the queries. And we look forward to speaking to you all for the third quarter 2024 results. Thank you very much. .

Thank you everyone for attending. I hope to see you next quarter.

That does conclude our conference for today. Thank you for participating. You may now all disconnect.