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

Hello, everyone, and welcome to WOQOD Conference Call. Please note that this call is being recorded. I'd now like to hand over to Phibion, our moderator for today. Thank you.

Yes. Thank you, Eli. And good morning to you all, and welcome to WOQOD's Fourth Quarter and Full Year 2024 Earnings Conference Call. My name is Phibion. On today's call, we have 3 members from WOQOD's management team, who are going to, first, present the 4Q and full year results; and then the Q&A session will follow. On the call, we have the CFO, Pradeep Kumar. And we have the Finance Manager, Sultan Al-Maadeed. And we also got the IR officer Ahmad Said Al-Mansoori. I will now turn over the call to Ahmad to begin the call. Over to you, sir. Please go ahead.

Thank you, Phibion. Good day to all the participants, and we hope everyone is keeping safe and healthy. We welcome you all to WOQOD's Fourth Quarter and December 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 investments 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 agreement 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 to U.S. dollar 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 updates 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 petrol station in 2003 and has grown to 125 stations at end of '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 operation 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 sales in the State of Qatar. Total fuel sales, higher by 6% during the year '24 versus '23, driven by market demand. Diesel sales volume were lower by 3% during '24, as compared to '23, driven by macroeconomic factors. Combined gasoline sales volume were up by 4% during the year '24 versus '23, driven by market demand. On quarter-on-quarter basis, fourth quarter '24 diesel volume -- sales volume decreased by 9%. However, gasoline sales increased by 5%. Average fuel price for diesel and gasoline remained almost the same during the reporting period. Turning to Slide 8, which shows the jet fuel sales volume comparison. Jet fuel sales were higher by 10% during '24, as compared to the same period last year, driven by market demand. On quarter-on-quarter basis, jet fuel sales volume for fourth quarter '24 decreased by 5%, driven by market demand. Jet fuel price for the year '24 decreased by 10%, as compared to the same period last year, driven by changes in crude oil prices. Combined sales volume of all petroleum products increased by 6% during the year '24, as compared to the same period of last year. Turning to Slide 9 now, which shows the quarterly trend of retail fuel sales volume [ trend ]. Overall retail fuel volume increased by 3% during the year '24, as compared to the same period of last year, driven by increased market demand. Retail diesel sales increased by 1% and gasoline sales increased by 3% during the year '24, as compared to the same period of last year, driven by market demand. On quarter-on-quarter basis, retail diesel sales volume decreased by 2% and gasoline sales increased by 5% in fourth quarter '24. The market share of WOQOD in the petroleum retail market in the State of Qatar reached to 85% during the year '24. Nonfuel retail sales decreased by 8% during the year '24, as compared to the last -- same period of last year, mainly on account of decrease in APC services. 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. Now I would like to discuss the consolidated financial results of WOQOD for the year 2024. Slide 11 shows the revenue trend of WOQOD. Revenue from fuel sales account for nearly 97 percentage of the total revenue. WOQOD achieved a total revenue of QAR 28 billion for the year 2024, which is almost the same as the revenue for 2023. Although overall fuel sales volume increased by 6% in 2024, the decrease in average sales price by approximately 6 percentage result in offsetting the revenue increase from the volumes. As compared to third quarter of 2024, the total revenue decreased by 8 percentage during fourth quarter, mainly driven by the decrease in sales volume by 3 percentage and lower sales price by 6 percentage. Turning to Slide 12, which shows the net income trend analysis. WOQOD have made a net income of QAR 1.052 billion for the year 2024, as compared to QAR 984 million during 2023, representing an increase of 7 percentage. 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 2024 as compared to the same period last year. The increase in net income of QAR 68 million is due to following major factors. Fuel segment margins increased mainly driven by overall increase in fuel sales volume. Trading stock price variance is mainly driven by the impact of price movements on jet fuel inventories. B2B segment margin decreased mainly due to low fuel offtake from B2B segments, driven by the market situation. Bitumen and nonfuel margin also are lower due to prevailing market conditions. On the other side, finance and other income higher, mainly driven by higher return on cash and investments, partly offset by other expenses. WOQOD's earnings per share for 2024 is QAR 1.06 per share against 2023 EPS of QAR 0.99 per share. And WOQOD's Board has recommended a total dividend of QAR 1 per share, for AGM approval, which is 100% of the face value of the shares, with a dividend payout of 94.5 percentage. 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 results to the shareholders. With this, we are ready for the Q&A session. Thank you.

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

Could you talk a little bit about outlook for 2025, maybe just in terms of how you see end market demand for the key products? I think that would be useful.

Well, we expect the jet fuel will definitely continue to improve in 2025 as well. The other segments is almost stabilized in the State of Qatar, so definitely, if at all there's an increase, that's mainly driven by the jet fuel increase in 2025.

Okay. And in terms of -- like in terms of that volume growth on jet fuel, like, is there a range that you're kind of looking for, for this year in the budget?

Well, this year, the increase in volume of jet fuel is around 10 percentage, okay, although it may not continue at that rate, but we would expect a reasonable increase in 2025 as well.

Yes, okay. And then just on the dividend. So yes, a little increase over last year which follows the increase in net income and EPS, so that's very, very nice. Just wondering in terms of the dividend going forward, especially given this very strong balance sheet. Would you be -- look to continue to maintain or increase that dividend even if the EPS was slightly lower year-on-year?

Well, WOQOD's strategy is to pay healthy dividend to its shareholders. About the future dividends, we will see the financial performance and the cash position, and based on that, we will decide the dividend to be declared.

Okay. And then the last question, which is -- I guess it's more of a request than a question, but in terms of the presentation for today's call, it hasn't made it onto the website yet, so it makes the format of the call quite difficult, like, i.e., if it's going to be a presentation with a conference call, we kind of really need to have that presentation beforehand. So that's kind of tricky. I think the other option is to do like a Zoom-based conference call so at least, like, you can show the presentation on the screen in case we don't have access to it yet. So yes, please kind of think about that for kind of next time.

Good suggestion. And we shared the presentation with QNB Financial to circulate to all the participants. And we believe we uploaded, but we will check and reconfirm the status. And going forward, we'll make sure that we upload almost simultaneously when we share with QNB Financial.

Your next question comes from Zohaib Pervez from Al Rayan Investment.

I've just got one question. Your fourth quarter revenue was down about 10%. Your volumes were higher during the same quarter on a year-over-year basis, so what led to this revenue being down while your volumes were higher? And the prices were stable, so...

While checking our data. The overall, the combined sales volume increased by around 2 percentage for the -- as compared to the fourth quarter of 2023. Of course, the revenue side is an impact of the price, which is mainly jet fuel-driven price impact.

Has the jet fuel prices now stabilized? Or I mean the oil prices have recently gone up. Have you seen the jet prices stabilizing? Or they continue to decline.

Jet fuel prices are moving along with the market movements, so whenever there's a change in the market price, definitely it moves with that.

[Operator Instructions] Your next question comes from Abhinav Sinha from Lesha Bank.

I wanted to understand like how does the contract work like when you take the oil from the supplier and when you sell it to the customer. So from what I understand, it varies with the oil price. So is there a lag between, like, when the actual oil price falls versus when it reflects in your margin? Or is it spot basis?

The fuel prices are regulated by the State of Qatar through QatarEnergy. And it is decided on a monthly basis, so every month, for the month, it remains constant. So -- and then the following month -- price will be announced on the last day of every month. Thank you.

Your next question comes from [ Anastasios Dalgiannakis from Al Faisal Investment ].

So first of all, it's good that you have increased, you have been increasing the dividend payout. So you don't accumulate more excess capital. My question is, I mean, you still have a lot of excess capital on the balance sheet that is not -- that is depressing the value. So the question is, is there any new organic, inorganic initiatives that you plan over the next few years? Is there any new ideas, any new plans that you have in terms of deploying capital? Or the situation will remain as is, meaning basically distributing the annual earnings and -- at some point and staying with this kind of excess capital positioning going forward.

Well, regarding the future, yes, WOQOD is looking for the right opportunities for growth. And definitely we'll communicate when we have such opportunities in the future. So that's our future plan.

Okay, nothing more specific or in terms of the timing.

Well, definitely we'll communicate as we get closer to such matters.

The next question comes from [ Samir Darwish from Amwal Capital Partners ].

Maybe as a follow-up to the question that was asked by the gentleman. Given the excess capital that the company have and we've seen some companies in Qatar announcing share buybacks, would that be something on the table for Qatar Fuel, to announce a share buyback program, given all what we mentioned?

Well, WOQOD has no buyback plans at present. Thank you.

Phibion, can you confirm there is only -- we can answer one more question. Or if there are no questions, we can end this call.

As of right now, we don't have any pending questions. I'd now like to hand back over to Phibion for final...

Thank you, Eli. Yes, it does seem like we don't have any further questions from the floor. Thank you all for joining us on this call. Thanks also to the WOQOD management team for making time for investors. Please join us for future calls. And have a good day. Thank you.

Thank you, everyone, for attending today's session. Have a wonderful day. You may now disconnect.