Qatar Industrial Manufacturing Company Q.P.S.C. (QIMD) Earnings Call Transcript & Summary

So gentlemen, I think everybody is connected right now and I think now that we are all set, I think we shall start. If I may, just before I start to make a quick roll call for the entity. I have here Mr. Mazen Abu Safa, the Head of Accounts at QIMC; and I've got Surya, Senior Business Analyst, who is going to do the presentation for you. Gentlemen, welcome to QIMC first quarter conference call. We've got the material to be presented to you composed of 4 parts; company quick overview, financial performance, operational highlights and then we'll open the floor for questions and answers. Surya, Please go ahead. Everybody can stay mute, I would appreciate it, please.

Thank you. Good morning, everybody. Today's presentation will be in 3 parts. First will be a company overview, then financial performance and operational highlights. First, we'll go into company overview. QIMC, as you know, was established in 1990. It is listed on the Qatar Stock Exchange from inception. We have a paid-up share capital of QAR 475.2 million, which comprises 475.2 million shares of nominal value of QAR 1. Our core competency lies in establishing and managing small and medium-sized manufacturing companies. We have diversified portfolio across chemicals, petrochemicals, energy services, construction materials, paper and plastic and food products. We have 8 and 13 associates as on date. Our subsidiaries: Qatar-Acids Company, which produces sulfuric acid; KLG Organic-Qatar, which produces chlorinated paraffin wax, caustic soda and hydrochloric acid. And then we have Qatar Paving Stones, which produces hollow blocks, interlocks and curbstones of different shapes and sizes. We have QatarSand Treatment Plant, which produces washed sand and aggregates. We have Qatar Metal Coating Company, which produces epoxy coated steel bars. We have National Paper Industries Company, which produces facial issues, kitchen rolls, toilet rolls and so on. We have Jahiz, which is a tea packaging company. And then we have Gulf Glass Factory, which is going to produce glass containers which is under commissioning. We'll have more details on this company as we go further. We also have subsidiary associates. Qatar Jet Fuel Company, which distributes aviation fuel to the airlines. Qatar Plastic Product Company, which produces FFS films, shrinkable films for the chemical industry and it has got a subsidiary, which produces -- Qatar Wooden Product Companies, which produces wooden pallets. Then we have Gulf Formaldehyde, which produces urea formaldehyde. Then we have Gasal, which produces industrial gases; United Chemicals, which produces calcium chloride. We also have Amiantit Qatar Pipes Company, which produces glass reinforced pipes and they have got a subsidiary Sarplast Qatar, which produces the same kind of item, but with a different technology for different utility. Then we have Qatar Clay Bricks Company, which produces concrete blocks and Hordi blocks. Then we have Qatar-Saudi Gypsum Company which produces gypsum powder; Qatar Aluminum Extrusion Company, which produces aluminum profiles of different shapes and sizes in different finishes like mill finished, powder coated, also wood coated, wood finish and so on. Then we have National Food Company, which processes and packs various kind of food products and it has got a subsidiary, Qatar Tunisian Oil Company, which bottles and markets olive oil. I take this opportunity to welcome Mr. Akber Khan from Ar-Rayyan. Ongoing projects, Gulf Glass Factory. This factory is going to use locally available sand and natural gas and use modern technology equipment to produce high quality, lightweight contents of various colors, sizes and shapes. The project will be located in the new industrial area in Doha, which is developed with modern infrastructure and utilities. The design capacity of this is 200 tons per day of glass containers, nearly 1 million bottles and jars per day. This is the first of its kind environment friendly factory in Qatar and it will serve the local and regional as well as worldwide food and beverage industry. So we have Corniche Park Towers, which is a mixed use development rising on Corniche. It is a combination of 3 towers multiuse; so we've got office towers, hotel complex and residential properties. And this logistics warehouse is completely already rented out. It's a modern complex, which has got human accommodation plus different types of storage facilities for cold, dry and wet. Now going to financial performance of the company. As on 31st March 2022, we have total assets of QAR 3.3554 billion. Total current assets QAR 748 million. Total noncurrent assets QAR 2.606 billion. Total current liability QAR 427.5 million. Working capital of QAR 320 million. Total equity of the shareholders is QAR 1.739 billion. During the 3 months we earned a gross income of QAR 120.85 million, profit before tax is QAR 40.8 million, other income QAR 10 million. Our earnings per share stood at QAR 0.086 per share. We posted a net profit of QAR 40.8 million. Net book value per share is QAR 3.66 per share. Equity attributable to noncontrolling interest is QAR 42.36 million. As you can see, we posted a net profit of QAR 40.77 million compared to QAR 29.06 million in the first quarter of last year, which means we have reported a 40.3% increase over last year -- the same period last year. Going into a little more details. As we said, net profit is up by 40%. So comparing our net profit for 2022 with first quarter 2021. Our gross profit is up by QAR 4.3 million. I just look into the specific aspects. Share of the results of associates has increased QAR 2.9 million. Other income was raised by QAR 2.7 million. Finance cost is actually reduced by QAR 2.2 million and nonoperational gains is also less and then noncontrolling interest is also less. So in the end, we have posted QAR 40.8 million compared to QAR 29.06 million. Our gross profit is up as all our subsidiary except Qatar Acid in Q4 they have performed better compared to first quarter last year. Share of results of associates in line with last year. Qatar Jet, Qatar-Saudi Gypsum Company and Qatar Clay Bricks and Gasal have performed better than last year while Plastic Products, Sarplast, Galex and GFC have reported slightly lower profit. Marginally lower dividend yields from share market because our portfolio mix has changed. Sales and distribution and general administration expenses have been optimized. Slight increase in rental income from logistics warehouse complex. Our finance cost is lower due to reduction in the bank interest on loan taken by one of our subsidiaries. Our total assets as on 31st [ December 2022 ] is QAR 2,802 million -- 3.354 million compared to QAR 2.802 million on 31st December 2021. Total equity stands at QAR 1781.62 million compared to QAR 1629.16 million on 31st December 2021. Earnings per share, as I said, is QAR 0.086 per share compared to QAR 0.061 reported in the first quarter of 2021. Our return on assets is 1.32% compared to 1.10% in the first quarter of last year. So that completes our financial performance overview. Some operational highlights. Our KLJ Organic-Qatar exported its products to more than 25 countries in Middle East, Africa, Europe and Asia and Americas. Qatar Paving Stones are exploring export opportunities to Kuwait. Galex has exported its products to Europe, Australia, Africa as well as U.S. besides Middle East. Qatar Clay Bricks Company has started commercial production of standard and large curb stones on its new machines. Some operational highlights. These are just some pictures from our Gulf Glass factory, which is under commissioning. It is -- factory construction is expected to be completed within '22. Then the installation of equipment, all those things will start and we expect it to get over by the second quarter of 2022 with commercial production starting from July 2023. This technology is being installed by a world-class glass -- specialized glass company from Italy and they've already started the works and a lot of equipments have already started arriving at the site. Now Corniche Park Towers, all concrete works are completed. Facade works have completed up to level 25. The installation of panels of main from core facade is going on. So a lot of work is happening. Mr. Aktham will update you on -- more on Corniche Park Towers. These are some pictures mock-up we have done for different areas for the hotel and room apartment, residential apartment, office. So a lot of things are happening and this project is coming out nicely. So that's it from us in terms of our company overview, financial performance and operational highlights. I hand it over back to Mr. Aktham for further proceedings.

Hope that presentation was so informative that could have addressed most of what you were expecting. Nevertheless, you have -- you are most welcome to -- I mean to share all of your questions with us here at this Q&A platform. Anybody having any questions? Yes, you may go ahead. We are ready if you have a question.

Thank you for the presentation. So my question is regarding the revenues. Your revenues declined -- they declined slightly, but they still declined. What was the reason for this decline? Which business resulted in this decline? I mean we can see that there is a subsequent decline in the cost of sales also. So what -- which business was responsible for this? That's one. The second question is on the general and administrative expenses, they have declined from QAR 15 million to QAR 12 million now. What -- again what was the rationale for this and is this QAR 12 million a sustainable level or there is some one-off or something in that? Those are the first 2 questions.

Your questions are very smart. You know that our company's consolidations statements and the revenue is considering only subsidiaries not associates. Those companies who are performed far more better during this has not been regarded in the revenue. And you've got a slight, it's not a big deal, slight reductions in the construction side in the metal coating sites. We know Qatar Steel has downsized their operation and this slight decrease is coming from that part of our JV. Regarding the G&A, I hope it is going to be sustainable, Insha Allah. This what I can confirm to you.

I've got a follow-up -- 2 follow-up questions to that. One is this improvement in G&A, is it because of you let go of some people, there's lower staff costs or it's because of what? What was the rationale for the lower general and administration? Second question is that Qatar Steel have in this recent earnings call just like yourself having right now, they are actually increasing their capacity from -- like they're kind of doubling their capacity. So would you see the benefit of that in your metal business?

I hope, but we haven't experienced that during the first quarter. I hope this will have less friction down the year, Insha Allah. And regarding the G&A, the main contributing element is the lease agreements that we have had. We have managed by the end of last year to reduce our lease agreements in some parts.

Sorry, lease agreement for what?

For our offices.

Does anybody have any other question?

I have a question, if I may. So just want to know when are we expecting the Corniche Towers to complete and how much of it is -- you have already prerented? That's my first question. The second question is on the QJet sales with Qatar Airways becoming more operational and more flights are taking off now. What do you see the outlook for QJet for the remainder part of the year?

Yes. I think -- thank you for those questions. I think the second question regarding QJet I think has been repeated maybe from the same source or from Ar-Rayyan. It has been repeated. Last year I have been asked the same questions. It seems to be a newer disk always regarding Qatar Fuel Jet. I mean, yes -- Qatar Fuel Jet, I will start from the second question, is expected to have more traffic in aviation. And once you noticed, everybody noticed, the whole people will notice; that will have its direct impact on our revenue we are assumed to be generating, Insha Allah. I cannot say more. We have to see. But definitely I mean what you are saying is logic because we are approaching closer and closer toward the end of the year for the World Cup.

Right. And with the oil prices going up significantly, annual jet fuel prices will follow. Do we see any change in the pricing which you guys get?

I don't think that this will impact us in terms of because we are not trading on jet fuel. We are a service company. We get a designed markup. So if there is more service, then we will gain more not only on the basis of the fluctuation of the prices.

Right. So currently, you have a fixed dollar margin which you get on per liter. Is there a chance for it to go up in terms of dollar amount because now since the end product price is higher so just wondering if there is a possibility of the margins to go up in this business?

Well, nothing in the horizon, on the radar indicates that the margin will stretch a little bit. I hope so. So regarding the completion of the tower during the last year -- during the pandemic everybody has suffered, all contractors, the restrictions. There is an impact that has delayed the project. We were assuming that this project will be completed by the end of the year, but it seems to be that we are going towards the second quarter next year. In terms of completions, if I may just split I mean the work in 2 parts. So if you are talking about the envelope, Insha Allah, within 2 months the envelope, the facade will be completed. Construction wise has been completed 100%. So what is the -- the remainder goes to the fit-outs, the insides. And as you have seen, the quality that we are maintaining requires, I mean, a little bit of time. That is why even though that our progress and completion is high, but I think we need enough time for the fit-outs to perfect I mean the quality that we are assuming. Regarding the rent or the prerent that you have asked about, nothing till now. Nothing, but we are right now and finalizing some deals and we might come up with an update on the third quarter.

Sorry, I didn't -- this is Akber. I didn't get a question.

Do you have any questions?

No. Thank you for asking. My colleagues have asked the questions we were curious about.

Okay. Gentlemen, since there is no more questions, I think if I may call this session off. Can I?

Yes. There are no questions from my side.

No question from my side also.

Okay. Thank you, gentlemen.

Thank you very much.

Thank you.