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

Hello, and welcome to WOQOD conference call. Please note that this call is being recorded. [Operator Instructions] Now I would like to hand the call over to Phibion.

Thank you, Angela. Good morning to you all, and thank you all for joining us this morning for WOQOD's First Quarter of 2025 Earnings Conference Call. My name is Phibion. I'm with QNB Financial Services. On today's call, we have 3 members of WOQOD's management team. They are first going to present the 1Q results and then answer investors' questions afterwards. On the call, we have the CFO, Pradeep Kumar. We also have Sultan Jassim Al-Maadeed, the Finance Manager; and we have got Ahmad Said Al-Mansoori, the IR Officer. I will now turn over the call to Ahmad to begin the call. Please go ahead, sir.

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 First Quarter and March 2025 Results 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 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 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. Our operations started with 2 petrol stations in 2003, and we have grown to 125 stations by end of March '25. 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 finally, 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 lower by 3% during YTD March as compared to the same period of last year, driven by market demand. Diesel sales also have seen a decrease by 7% YTD March as compared to the same period of last year, driven by macroeconomic factors. Combined gasoline sales volume for first quarter '25 remained almost the same as that of first quarter '24. On quarter-on-quarter basis, sales volume for first quarter '25 decreased by 12% and 6% for diesel and gasoline, respectively. Average fuel prices 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 lower by 3% for the first quarter of '25 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 '25 decreased by 9%, driven by market demand. Jet fuel prices for YTD March of '25 decreased by 12% as compared to the same period of last year, driven by change in crude oil prices. Combined sales volume for all petroleum products decreased by 3% during YTD March '25 as compared to the same period of last year. Turning to Slide 9, which shows the quarterly trend of retail volume sales. Overall fuel retail volume sales at WOQOD petrol stations remained almost same for first quarter of '25 as compared to the same period of last year. On quarter-on-quarter basis, retail fuel volume in first quarter of '25 decreased by 9% and 6% for diesel and gasoline, respectively. The market share of WOQOD in the petroleum retail market in the state of Qatar reached to about 85% during YTD March '25. Nonfuel retail sales decreased by 12% during YTD March '25, mainly on account of decrease in APC. 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. I would like to discuss the consolidated financial results of WOQOD for the first quarter of 2025. Slide 11 shows the revenue trend of WOQOD. Revenue from fuel sales account for nearly 97 percentage of the total revenue. WOQOD achieved total revenue of QAR 6.3 billion during first quarter of '25 as compared to QAR 6.8 billion during the same period last year, showing a decrease of 7 percentage. This is mainly driven by overall decrease in fuel sales volume by 3 percentage and decrease in average sales by around 6 percentage during the first quarter of 2025. On a quarter-on-quarter comparison basis, the total revenue decreased by 6% during first quarter '25, mainly driven by a decrease in sales volume by 9 percentage which is partly offset by increase in average sales price by 3 percentage. Turning to Slide 12, which shows the net income trend analysis. WOQOD has made a net income of QAR 230 million for the first quarter of '25 as compared to QAR 243 million during the same period in '24, representing a decrease of 5 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 first quarter of '25 as compared to same period last year. The decrease in net income of QAR 13 million is due to following major factors. Fuel segment margin decreased mainly driven by overall decrease in fuel sales volume. Trading stock price variance is mainly driven by impact of price movements on jet fuel inventory. B2B segment margin increased mainly due to higher transportation income during first quarter '25 as compared to same period last year. Other is lower mainly due to lower dividends due to prevailing market conditions and timing of return on cash and investments. 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] And your first question comes from the line of Rob Skepper from Ashmore.

Could you just start just by looking on the volume side on the kind of diesel and gasoline kind of core business. So I guess in particular, like those volume numbers are kind of quite a bit weaker again, in particular, diesel volumes down 12%. Could you just talk a little bit about end markets there? Like what's driving it so much lower specifically? That would be great.

Well, this gasoline and diesel demands are purely driven by the market demand. And specifically in terms of diesel, as you know very well, some of the major infrastructure projects is completed here. So definitely, that will impact our diesel sales volume. So these are the major factors.

But I guess, I mean, a lot of those infrastructure projects were also completed by first quarter last year as well. So I guess I'm kind of intrigued for such another big step down. Do you have like visibility? Is there anything you're tracking on when kind of those volumes can bottom out to your mind?

At this point, we think that it's bottoming out. So we are -- it's going to recover in coming quarters and coming years.

Okay. Got it. And then, yes, I just wanted to, yes, just talk a little bit about profitability. So yes, I guess the first quarter in hindsight was a relatively steady quarter, considering what we've seen obviously in markets in the last few weeks in April and particularly like the moves we've seen in oil and energy markets. Yes, I guess just so we're kind of all clear. So as kind of things stand with obviously the negative price moves in the second quarter, would we likely see a bit of a negative margin hit like in the second quarter from that? Or does it take longer to feed through into the profitability?

Yes, we are closely monitoring the market. You are right. We see some volatility in the prices, and we will know the outcome towards the end of this quarter. But definitely, that lower prices will impact us, especially the inventory that we are carrying will have an impact with the change in price.

Yes. Okay. Great. And then I just wanted to ask on the balance sheet. Yes, obviously, you've got a lot of liquid assets on the balance sheet, and it's very large in proportion of your market cap. Could we just get an update on like the asset allocation of your marketable securities today?

Yes. On the investments, approximately 20 percentage is in the equity market and remaining lying in our cash in long term with the banks so that where we protect the volatility in the market to a larger degree.

Got it. Okay. And do you tend to take any action in times like this, where there's volatility or just buy and hold?

Well, we started the process last year. We did last year itself, and we continue to watch the market.

Your next question comes from the line of Wei Chow from Al Rayan.

This is Zohaib Pervez from Al Rayan Investment. So on Page 13, you've mentioned that the trading stock price variance has had a positive impact on the trading stock price, this inventory gain. But the jet fuel prices were lower, the jet fuel volumes were lower. So how come there is a positive impact on the fuel inventories? Could you give us some color on that? The second question is on the margins. Usually, your gross margins are linked to the volume and the volume in this quarter is lower, so then what led to the gain in the gross margins? These are my 2 questions for now.

Yes. First, I'll answer with your last part of the question, the margin. If you look at my Slide 13, which clearly states that the operating margin has come down due to lower sales volume. On the first part of your question, which is about the trading stock price variance, as I mentioned during the variance analysis that the price -- fuel prices compared to last quarter of '24, it increased by 3 percentage in the first quarter. So of course, the fuel price variance you're comparing to the inventory that we have on 31st December versus the movement in this quarter. So that's where the price has gone up. Naturally, when the price goes up, we'll get the benefit of that. And if the price goes down, we'll take the hit. So first quarter, the price has gone up by 3 percentage.

So the first quarter, the price -- jet fuel price is higher by 3% quarter-over-quarter.

Yes.

Okay. But this shows the variance -- I mean the analysis on Page 13 is between the first quarter of '24 and the first quarter of '25. So I thought that between '24 and '25, the prices are lower by 12%. So is this -- is my understanding correct that this is the quarterly analysis or the annual analysis?

Okay. Let me give you that variance a bit, okay? This is the variance between 2 quarters. And if you look at the first quarter variance of [ 2014, ] it's the price existed on 31st December '23 versus the price during the quarter of '24. Now again, this year, we are taking the price as of 31st December '24 versus the movement in the first quarter of '25. That's what I was mentioning. So it is that way. You're right also, it's a variance between 2 quarters, but the price prevailed on 31st December does have an impact on the inventory price movements.

Okay. Okay. My last question is on the dividend income. The dividend income has, I think, come down this quarter. Is it because of the interim dividends, which last year, you probably earned the full year dividend and this year, you earned only second half dividends. Is it only because of that? Or is it because the total yield has actually come down for your portfolio?

Well, there are 2 factors. And one of the reasons you already explained, it's the interim dividend. During second and third quarter of last year, we received some interim dividends, which comes out of the final dividend which we received this year. But on the other side, definitely, we are going to receive some interim dividends towards second and third quarter of this year as well. So that's a timing adjustment, too. On the other side, we repositioned some of the reimbursement toward the market risk, of course, which goes into kind of cash where the return is going to come over a period of time. So it's timing adjustment as well.

[Operator Instructions] There are no further questions. I will now turn the call back over to Phibion for any closing remarks.

Thank you, Angela. It looks like we don't have further questions, which brings us to the end of our call today. Thank you for joining us. Thanks to the management team for taking time to update the market. And please join us for the Q2 conference call. Enjoy the rest of your day.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.