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

Good morning, everybody. Good morning, esteem guests, shareholders and conference participants. Welcome to QIMC Q1 results conference call. My name is Aktham Al-Baqali, I'm the Director of Administration and Finance. I'll be leading this conference call. In my left hand, I've got Mr. Mazen Abu Safa, Head of Accounts. And I've got Surya Narayanan as Senior Business Analyst and speaker for this session. Our content of today's presentation comprises of 4 parts with a quick overview of the company profile and the financial performance and then operational highlights, ending up our session by Q&A. Mr. Surya, you may start.

Good morning, good evening, depending on where you're logging in from. Thank you very much for joining our investor conference call for Q1 2024. As Aktham said, we have our -- presentation is in 3 parts. Company overview, financial performance and operating highlights. For the benefit of [indiscernible] if you're also attending our conference call for the first time. QIMC was established in 1990 as a Qatari public shareholding company listed on Qatar Stock Exchange. From the beginning, our paid up share capital stand at QAR 475.2 million, that's 475. 2 million shares of dominant value QAR 1. Our core competency lies in establishing and managing small- and medium-sized manufacturing companies. We have a highly diverse portfolio across chemicals, petrochemicals, energy services, construction materials, paper and plastic and food processing. We have 8 subsidiaries and 12 associates as on date. Our subsidiaries, Qatar Sand Treatment Plant, which produces washed sand aggregate. We have 100% ownership of this company. We have Qatar Paving Stone, which produces hollow blocks, interlocks, paving stones and kerb stones. This segment is 100% on by us. We have Qatar Assets, which manufacture sulfuric acid, the only sulfuric asset manufacturing plant in Qatar. This again is 100% owned by us. Then we have National Paper Industries Company, which produces specialty tissues, toilet rolls, kitchen tolls and similar products. The first tissue converter in Qatar, and again, 100% owned by us. Then we have Taabia, which is involved in tea packaging. This is a service provider where we did packaging facilities and this again is 100% owned by us. We have KLJ Organic Qatar, which produces chlorinated paraffin wax, caustic soda pills, hydrochloric acid and hypochlorite. In this company, we have a 60% stake and the remaining 40% is held by an Indian company, KLJ India. Then we have Q-Coat, Qatar Metal Coating company, which epoxy-coated steel bars. In this company, we have 50% stake. Qatar Steel has got the remaining 50% stake. Then we have an upcoming company, GIZAZ, the Gulf Class Container Company, which will produce glass bottles, jars and containers. In this company, we got, again, a 50% stake and the remaining 50% is held by other shareholders, some are local, some are from other countries. Then some of our associates here Qatar Jet, which is an aviation fuel distribution company, in this company we've got 40% stake and 60% is held by WOQOD. Then you have Qatar Plastic and Wooden Products Company. This produces FFS films, shrinkable film and storage bags for chemicals and wooden pallets. In this company, we've got 2/3 stake, 1/3 stake is held back QAPCO. Then we have Qatar Aluminum Extrusion company, the first and only aluminum extrusion company currently in Qatar. It produces mill-finished, powered-coated and special-purpose aluminum profiles. Pardon? I request all participants to please mute themselves. Thank you. So Qatar Aluminum Extrusion company produces mill-finished, powered-coated and special-purpose aluminum profiles. We have 45% stake in the company, remaining [ 50% ] is held by other people and other companies. Then we have Gulf Formaldehyde, which produces urea formaldehyde. In this company, we've got 30% stake, remaining 70%stake held by QAPCO and foreign entities. Then we have Gasal, which produces industrial gases like oxygen, nitrogen, hydrogen argon. In this company about 29.5% stake, remaining stake is held by Qatar Energy and Air Liquide France. Then we have United Chemicals, which produces calcium chloride. This is a subsidiary of KLJ Organic Qatar and KLJ has got 65% stake in this company and remaining 35% is held by a local company Gulf Query. The meat Amiantit Pipes, which produces glass reinforced pipes. In this company, we've got 40% stake, remaining 60% stake held by other companies. Amiantit has got a subsidiary called a FiberTie. It also produces glass reinforced pipes, but for a different purpose, they're using a different technology dual-helix technology. Amiantit has got 75% stake in FiberTie. Then we have Qatar Clay Bricks Company, which produces concrete blocks, kerb stone, hordi bricks. In this company, we've got 46.35% stake. Then we have Qatar Saudi Gypsum Company, which produces gypsum product. In this company, we've got 1/3 stake. Then we have NAFCO, National Food Company, it processes, packs and market various food products, particularly dates. In this company, we've got 20% stake and 80% stake is held by Hassad Food Company. NAFCO has got a subsidiary called Tunisian Oil Company. So this company bottles and markets olive oil, and this is 100% owned by NAFCO. So that's an overview of our portfolio. Just an important information about our Gulf Glass Factory, which is coming up. This utilized locally available sand and natural gas, modern technologies and equipment to produce high-quality, lightweight glass containers of various color, shape and sizes. This project is located in the new industrial area. And design capacity of the plant is 200 tonnes per day. That means about 1 million bottles and jars per day. This is the first of its kind environment-friendly factory in Qatar, and this is targeting the local, regional as well as worldwide food and beverage industry. Our other ongoing project is our Corniche Park Towers, which is a real estate project. So it is a multipurpose real estate project, which has got an office tower, then we have a hotel tower and the residential tower. The hotel tower will be operated by an international brand Swiss Hotel, and it got 38 floors, with 342 guest [ rooms ]. Then we have a residence tower, which is 29 floors. This again will be operated and will be sold to residences. It will have 121 bedroom apartments. Then we have a 24 floor office tower, Class A office space and 17 floors will be marketed for selling and leasing and some floors will be retained by us, and then we'll have restaurants and other lifestyle areas in the mezzanine level. So there are retail areas, approximately 4,000 square meters. Now going to our financial performance. There is a comparison between first quarter of 2024, where [indiscernible] in '23. Total assets, QAR 3.86 billion compared to QAR 3.60 billion as of first quarter 2023. Total current assets stands at QAR 583.22 million compared to QAR 616.02 million. Total noncurrent assets, QAR 3272.45 billion to QAR 2987.68 billion. The total current liability is QAR 460.34 billion compared to QAR 385.22 billion. Total equity of shareholders stands at QAR 1.88 billion compared to QAR 1.74 billion as of 31st March 2023. The gross income for the first quarter was QAR 118 million compared to QAR 135 million in the first quarter of last year. Our profit of QAR 36.47 million compared to QAR 48.2 million. This included other income of QAR 11.3 million compared to QAR 16.83 million in the first quarter of last year. Our earnings to earnings per share was QAR 0.077 compared to QAR 0.101 during the first quarter of last year. Our net book value stands at QAR 3.96 per share compared to QAR 3.67 per share as of 31st March. The equity attributable to noncontrolling interest stands at QAR 50.27 million compared to QAR 51.54 million. Total revenues, as you can see, has dropped slightly from QAR 134 million, QAR [ 34.82 ] million and net profit is QAR 36.47 million compared to QAR 48.2 million in the first quarter. Of the total revenue, net profit lower [ 1.3% ], mainly on account of KLJ Organic Qatar and Sand Treatment Plant. Now a few more details. Our gross profit is slightly up, share of results from associates is slightly up by about QAR 2 million compared to last year. Then sales and administration expenses less by QAR 6 million. Then we have QAR 1.08 million dividend from shares slightly less. Other income is less by about QAR 5 million. Finance cost has also reduced. Then we have nonoperating gains and losses. There is -- they have brought down our profit by about QAR 6.3 million, taking it to QAR 36.7 million for the first quarter of 2024. So among our associates, Q-Jet, Gulf Formaldehyde, Qatar Plastic Products and Gasal have achieved higher net profits. While Amiantit, QALEX and QPBC and KLJ have underperformed. Other income lower due to lower rent income. Sales and Distribution and other expenses, lower largely in line with the volume and revenue decline. So our total assets stand at QAR 3.86 billion compared to QAR 3.60 billion as of 31st March 2023. Our total equity is QAR 1.88 billion compared to QAR 1.80 billion as of 31st March 2023. So our earnings per share as I said, is QAR 0.077 compared to QAR 0.101. Return on assets is about 1% compared to 1.4% in the first quarter of last year.

Maybe adding some few words to help with -- so gentlemen, the decline of the net profit is attributed mainly to the fact that we possess around 7 entities in the sector of construction and infra material. And as you may well be aware that the prevailing situation of the sharp decline in the domestic demand, we had around the drop of 30% in revenue from this sector, which [indiscernible] our industrial portfolio. Adding another factor, which is we've got some petrochemical products that we export and the index price has dropped during the Q1 compared to last year by around 25% to 30%. Moreover, last year quarter, we have exited from one of our, let's say, share that position our market that has given us at that time around profit of QAR 5 [ billion ]. So -- and I would like also to say that the management stays fair to exert it's effort for sustainable retail of investments supported by a well-diversified industrial portfolio.

Thank you. Thank you, Mr. Aktham. So some operational highlights, Gulf Glass Factory, so we have got some updates. So this plant will be commissioned starting in the second -- now the trials that are going on and then commissioning and testing will be in March, it's already in progress, and we hope to start commercial production in August 2024. So we are getting very close to commercial production in Gulf Glass Factory. Now some highlights from our Corniche Park Tower. So basement has made significant progress, MEP work almost at the finishing stage. Then podium level, MEP [indiscernible] going on. Facade work is completed. Facade is completed and other remaining facade works are going on. You can see some pictures from the actual...

For those 2, maybe the share of the participating be interested in knowing when the last project is going to go live. So we haven't mentioned that. So startup will be in May. And for the towers, hopefully, that opening will be in September.

So Level 2 to 17 progress, a lot of work is going on similarly and the other one, level 19 and 13, everywhere the work is going at full speed in this tower project. So some actual pictures [indiscernible] of software planning, executive lounge is under construction. Kids Club is now being developed. So that's all from our side in terms of the financial performance, company overview and also some higher updates on our ongoing projects. So please allow me to stop sharing in case you have some questions, we can always go back to the presentation. Now I hand over control back to Mr. Aktham to take it over.

Gentlemen, I hope that this presentation was informative enough to clear off basic maybe need of confirmation. In case you have any questions, query's, you are mostly welcome, please. I would assume that [indiscernible] always start up.

Yes. Let me start with a few questions. Firstly, could you again let us know which segments resulted in the lower revenue for yourself? That's 1 question. Second is regarding the depreciation. The depreciation increased significantly during the quarter. It was, I think, QAR 7 million compared to like QAR 2 million last year. So what was the reason for that increase? Those are my 2 questions.

Thank you, I mean, [indiscernible], for those interesting questions. As I have said in my comments on the financial performance. The segment that has dropped in revenue is the segment that we are investing in constructions and infra. So that is mostly catering the local amount. And we have experienced really a sharp decline, given the fact that the prevailing situation of the government expenditures have been almost nothing been declined -- announced, I mean, for much long. So I mean, we cater, I mean, this kind of mega project that nothing has -- a lot of projects has been promised, but nothing has yet been declared officially. So this is the [indiscernible]. Regarding the depreciation...

Regarding depreciation, accommodation of our [indiscernible] in '24 was fully commissioned and it was correcting the full depreciation, which has not been in '23 was the under progress. This one -- and this is the mostly high [indiscernible]...

So we've got an investment of around QAR 63 million and were homes and accommodations for levels that has been completed, I mean, last year and not been reflected the full amount during Q1 last year.

Warehousing and manpower. Yes. That was the Okay. That was responsible. And you said that you had some petrochemical also exposure, which also led to decline, 25% decline in profits or revenues. That is because of the caustic soda, you meant caustic soda.

Yes, exactly. Well said, well said. You are a good follower of our operation. It is caustic soda prices. You are absolutely right. Dropped Q3 around last year QAR 780 million, QAR 750 million. Now we are talk about QAR 500 million plus.

And has the prices now stabilized? Or they're still slowing down?

I think it will stabilize throughout the year. I think we are at the bottom.

And one last question. Your debt, if I see, your debt levels have not really come down. I mean, they were QAR 1.3 billion in the first quarter of '23 billion, right now, they are QAR 1.4 billion. But your interest expense is lower. So how does that work? How come your interest expense is -- your financing cost, sorry, is lower while your debt levels remain the same?

No. We have one of our group companies, KLJ Organic Qatar, which had -- which has taken shareholders' loan. And the interest portion of that share of this loan has been capitalized this year. So that has reduced the interest actually.

Okay. How much is the total finance cost that is capitalized?

QAR 12 million.

Sorry?

About QAR 12 million.

Sorry, I still did not understand, QAR 12 million, you say?

Yes, QAR 12 million that has been capitalized from interest, from interest to CapEx.

In first quarter. Okay. Perfect. And this is all related to the 2 projects, the glass project and the tower project, right?

Yes. This is KLJ Organic Qatar, mainly KLJ. But as you said, yes, some of that amount is attributed to the other 2 projects, so you are right.

So how -- why is KLJ interest cost on KLJ being capitalized? I thought this was -- this is already running, right, KLJ caustic soda?

No, we have -- we have done some restructuring of the loans for the company. We have shifted some of our, let's say, facilities from [indiscernible] to another bank as we've got some better rate. That's why. We improved our debt what that can be.

Listen, anyone here has any other questions? Sebastian, Safady, Kim, James, [indiscernible], David, [indiscernible] hopeful all of you are here.

Nothing from our side. Thank you so much for the presentation.

Thank you, Sebastian. Thanks for the compliment.

Gentlemen, I guess, if there is no further concerns or questions, if you allow me to close down this conference call. Can I get a green light from your gentlemen, if anybody is having any questions, any questions, please be my guest?

You all are welcome to write to us on our email ID, and this presentation will be posted on our website later today or by tomorrow.

Thank you, gentlemen, thank you for your participation. Hope to see you in the first half of the year results.

With better results. Thank you.