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

Good morning, everybody. Before we start, if I may ask everybody to switch off their mic. So a warm welcome to all of the participants here. Welcome to QIMC's conference call for the third quarter results 2024. Our today's presentations will be organized by myself. I am the Director of Administration and Finance at QIMC. The speaker here will be our senior business [ analysis ], Mr. Surya K. Narayanan; and also with the presence of the Finance Manager, Mr. Mazen Abu Safa. Our presentation today is having 3 topics, quick overview of the company. And then we will go over the financial performance, followed by the operational highlights. And we will be ending our presentations by Q&A. Please, Mr. Surya, go ahead.

Good morning, everybody. I hope you can see the presentation. Welcome to QIMC investors' conference call for the third quarter of 2024. So first, a company -- quick company overview for those who are joining for the first time in our conference call. QIMC was established in 1990 as a Qatari public shareholding company. We are listed on the Qatar Stock Exchange. We have a paid-up share capital of QAR 475.2 million, each share worth a face value of QAR 1. Our core competency lies in establishing and managing small- and medium-sized manufacturing companies. We have a diversified portfolio across chemicals, petrochemicals, energy services, construction materials, paper and plastic and food processing. We have 8 subsidiaries and 12 associates. These are our subsidiaries: Qatar Sand Treatment Plant, which is 100% owned by us. It produces washed sand aggregate. We have Qatar paving stone, which is adjacent to Qatar Sand Treatment Plant in Umm Bab. This company produces [indiscernible] hollow blocks, interlocked paving stones and kerb stones. This is again 100% owned by QIMC. Then we have Qatar Acids Company, the only sulfuric acid manufacturing plant in Qatar, again 100% owned by QIMC. And we have National Paper Industries Co., the first tissue converter in Qatar. We're market leader, where they produce facial tissues, toilet rolls and kitchen rolls, again 100% owned by us. [indiscernible] tea packaging company does this packaging service for Unilever's brands, 100% owned by us. Then we have KLJ Organic Qatar. It's a joint venture with KLJ India. We have 60% stake and KLJ India have got 40% stake. This company produces chlorinated paraffin wax, caustic soda prills, hydrochloric acid and hypochlorite. We have Q-Coat, Qatar metal coating company, which is a joint venture with Qatar Steel. We have 50% stake and Qatar Steel have got 50% stake. This produce epoxy-coated steel bars. Then we have Gulf Glass construction company. This company is new; and this produces glass bottle, jars and containers. We have 50% ownership in this company. Now going on to our associates: QJet, which is Qatar aviation fuel company. In this company, we have 40% stake. The remaining 60% is owned by WOQOD. And then we have Qatar Plastic Products Company; plastic and wood products company, to be precise. This produce FFS films, shrinkable film, wooden pallets. And this -- in this company, we have 2/3 stake; and 1/3 stake is held by QAPCO. [ We have ] Qatar Aluminum Extrusion Company. It produces -- the only aluminum extruder in Qatar. It produces mill-finished, powder-coated and special-purpose aluminum profiles of various sizes, shapes and colors. So in this company, we have 45% stake; remaining 55% held by other companies in Qatar. Then we have Gulf Formaldehyde Company. This is a joint venture we have with QAFCO. In this company, we've got 30% stake. This produces urea formaldehyde. Then we have Gasal industrial gases company. It produces industrial gases like liquid oxygen, liquid nitrogen, hydrogen-argon. In this company, we have 29.5% stake. The remaining stake is held by QatarEnergy and Air Liquide France. KLJ Organic Qatar has got a subsidiary called United Chemicals which produces calcium chloride. And KLJ Organic Qatar have got 65% stake in United Chemicals. Then we have Amiantit Qatar Pipes Company. It produces glass-reinforced pipes. In this company, we have 40% stake. Amiantit has got a subsidiary, having [indiscernible] 75% stake, called FiberTie. It also produces glass-reinforced pipes but using a different technology for a slightly different utility. We have Qatar Clay Bricks Co. It produces concrete blocks, hollow blocks, [ hordi ] bricks. We have got 46.35% stake in this company. Qatar Saudi Gypsum company, which produces gypsum powder; we have again 33.3%, 1/3 share in this company. Then we have National Food Company, Mahaseel. [ It pack and processes ] [indiscernible] market-related food products, particularly dates. In this company, we've got 20% stake. And this company has got a subsidiary called Qatar Tunisian bottling and oil company, which bottles and markets olive oil. So that was an overview of our portfolio, diversified portfolio. Now coming to the 2 ongoing projects. Or -- one is almost on completion now. It's the -- all set for commercial production, the Gulf Glass Factory. It utilizes locally available sand and natural gas to produce high-quality lightweight glass containers in various colors and shapes. [ It is in the new ] industrial area, first-of-its-kind environment-friendly glass factory in this region. It has a capacity of producing nearly 1 million bottles and jars per day. Other -- our other ongoing project is Corniche Park Towers, which is a multiuse tower [ of the ] Corniche. It's got a 5-star hotel component. Then it's got furnished apartments and office towers. We'll move on to the financial performance of the company. So the total assets of the company as on 30th September 2024 stands at QAR 3,965.29 million compared to QAR 3,650.89 million as of 30th September 2023: total current assets QAR 561.12 million compared to QAR 538.80 million, total noncurrent assets QAR 3,404.17 million compared to QAR 3,112.09 million. Total current liability is QAR 465.82 million compared to QAR 316.29 million. The total equity of the shareholders stands at QAR 1,911.93 million compared to QAR 1,914.17 million as of 30th September 2023. The company registered a gross income of QAR 358.36 million compared to QAR 373.69 million in the 9 months of last year, the profit before taxes and provisions QAR 114.60 million compared to QAR 143.22 million. Of that, other income accounted for QAR 37.55 million compared to QAR 76.84 million last year. The earnings per share is QAR 0.241 compared to QAR 0.301 per share. The net book value per share stands at QAR 4.02 compared to QAR 4.03 as of 30th September 2023. The equity attributable to noncontrolling interest stands at QAR 54.32 million compared to QAR 59.40 million. So as we can see, our total revenues has dropped slightly. And net profit [ has also ] dropped by about 20%. Mr. Aktham will have more to say regarding this when we have Q&A. Comparing the results between the last 9 months of 2023 with 2024. Last year, we had QAR 143.22 million. And the major difference, as you can see, comes from other income which [ has dropped by 13.49 ] mainly on account of tax exemption received from our group companies. There was a change in the way of accounting. So that is a major factor which has caused the difference. Otherwise, you can see [ in most of the factors ] we have -- we are more or less the same or slightly better, if you can see: gross profit, QAR 4.80 million more, share of results from associates QAR 5.58 million more. And we have also had a reduction in finance costs, QAR 4.63 million, on account of restructuring of loans. So we ended up with QAR 114.60 million as of 30 -- for the period 9 months ending 30th September 2024. So total assets, QAR 3,965.29 million compared to QAR 3,650.89 million. And total equity stands at QAR 1,911.93 million, slightly higher than QAR 1,854.77 million, as of 30th September 2024. So earnings per share, as we mentioned, is QAR 0.301 compared to -- QAR 0.241 compared to QAR 0.301. And return on assets is 3.01% compared to 4.01%. So that completes our financial performance highlights. I will move on to operational highlights. The glass factory. The plant commissioning began on 15th of June. All the tests were done. We've got all the approvals. And then if you can see, the test run started on 17th July; and everything has been successful. We have produced a lot of samples of various shapes and sizes and [ trial ] shapes; and everything is going good. The commercial production is planned to start on 1st of November 2024. Now coming to Corniche Park Towers. Again, a lot of progress has been made. We are almost on the verge of completion. This report which will be posted in our website have got all the details. These are some highlights on the different towers and also on the fit-out and the interior works. All those things are going on. These are sort of actual pictures of the mosque and then the art pavilion and some pictures from the different areas in the hotel, [ okay ]? So that's all in the presentation on Corniche Park tower and QIMC's performance in the first 9 months of 2024. I hand over back to Mr. Aktham for further proceedings.

[indiscernible].

Yes. [indiscernible].

Yes. Gentlemen, welcome back. I mean I hope that our presentation was informative enough, and -- but we are eager, I mean, to open the window for Q&A. Before we start, I mean, receiving your questions, I would like just to highlight on the main or -- in a nutshell, to make the story in a nutshell here why we are less than last year, due to 2 main reasons. One is there is a slowdown in sales from businesses that we are having, related to constructions, due to known facts that there is general slowdowns in the new bigger projects. The other one is to which Mr. Surya has highlighted already, but I'll say it in details, which is the accountancy treatments on one of our, let's say, major contributor to our portfolio entity. We have, I mean, done some changes in 2023 on the -- and 2024 on the [ taxation treatments ]. We used to be doing the [ full treatment ] at the end of the year. Now we are taking provisions each quarter's. So we don't take, I mean, a big, let's say, change in results [ or ] fluctuations by the end of the year. So this is the reason. We are taking partial provisions each the quarters for taxations. Also, due to the sales of one of our, let's say, [ equipment ] in that entity, we've got some credit from the taxation department. Thank you, gentlemen. I'm ready to receive any questions you might be interested to raise up.

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We have a question from...

Just one second. So gentlemen, I would like just to translate what [ Mr. Abdullah ] has said. I think he was raising, let's say, the rights of having this presentation to be presented in Arabic, for those who kind of speak only Arabic. And we said that, in the next meeting, we'll have bilingual, let's say, presentations for the sake of the Arabic speakers who would like to interact with us in Arabic. He raised a question also about the completion date of the towers; when it is going to be, let's say, commissioned finally. And I have answered him that, by end of [ quarter ] 2025, there's going to be a soft opening. Gentlemen, any other questions? Surya, you said somebody is...

[indiscernible]...

Where is it? I cannot see the question. Where...

It's in the chat window.

[indiscernible]

It looks like a Greek name, possibly from Greece [indiscernible]. He or she observes that the company has got QAR 1.9 billion equity and return on equity is 8.4%, based on the 9 months earnings, so want to know how we allocate capital across different subsidiaries, number one question. Second, two, "What is the return you require of the subsidiaries to fund new projects? And how many of your subsidiaries also achieve the return requirements?"

Yes. [indiscernible]. The -- it depend on the activities [indiscernible] these companies. They should be [indiscernible].

Yes.

It's part of [ retained ] earning.

Yes. I think maybe the best way to look -- maybe if -- [ Mr. Anas ], if you can contact us directly, we'll give you some more details. The answer is a little bit going to be lengthy. We are a consolidated company. We have got more than 20 operational companies. Some of them are associates which you will find it as an -- equity contributions, investments in equity in our balance sheet. Some are subsidiaries which are consolidated. Details are huge. We cannot share it here. We'll consume a lot of time, but we are more than happy to share with you those details if you can contact us directly.

Just on the hurdle rate we consider for new projects...

The hurdle rate, what we are considering for new projects is around 14% -- not less than 14%.

Gentlemen, I don't know. Can you hear me?

Yes, but the voice is -- there is an echo, but we will try our best to understand, yes.

Well, I'll make my question brief and, hopefully, then mute. I wanted to understand the size and more details about the new salt project that you're investing in, the salt. Can you hear -- I don't know if you heard that okay.

Yes, sure. I will give full details, no problem.

And then the second point is do you have a special relationship with the government in industrial projects so that you're invited to all these new ventures. Because -- I don't know. Like it seems like this is a good project and you've been allowed in at the front door. How did you achieve that?

Sure, sure. Very nice and smart question. I'll address that. No problem. I'll open -- also I'll come to that at the end, if I may, [ Mark ], and -- regarding the salt and how we are being -- let's say, having a close, let's say, look on to major projects with the government [indiscernible]. [ Zohaib ], do you want -- you have something? I see you...

[ Zohaib ]...

No. [ Zohaib ]?

Yes. I'll -- I have an -- I mean [ Mark ] already asked one of the questions that I wanted to ask, on the salt project. And what would be your CapEx? I mean I did not see it in your presentation because this is a new project that was recently announced. And you are part of it, so you could give us more details on this one. My other question is you mentioned that some of the sales from some of your subsidiaries, because of the slowdown in construction, impacted your financials, but I -- if I see your 9 -- your third quarter sales are up 15%. You even had good margins, so just what was the rationale? Which subsidiary performed well which led to the sales growth in the third quarter? The other question is if you could have more details on the tax and changes that you mentioned earlier which impacted the other income. How much was the quantum? I mean, in dollar terms, what are we talking about which -- because of which we have this change in other income this year? So if you could -- [ these are my ] 3 questions. And fourth, what is the amount -- how much...

Wait. Can you repeat that one? Could you repeat this one, the second one?

[indiscernible]

The tax one? The tax one, I said...

Yes.

So I want to know the dollar amount of which -- how much was the tax impact last year because of which we can see the other income going down this year. In dollar terms, what would be the, what is the impact?

Sure. [indiscernible].

And my last question is on...

[indiscernible]. Last one is...

And my last question is how much of the finance cost is capitalized in the first 9 months.

Sure. Good questions. Thank you. Good questions. [indiscernible].

[indiscernible] and the revenue [indiscernible].

[indiscernible]. Okay, [ so the last ] questions -- I will summarize your questions. First of all, you want to understand which companies are performing -- outperforming this year, right? Surya, [ go to you ].

Well, if you look at it, compared to last year, Qatar Sand Treatment is slightly less, but if you look at Qatar Acids, it has done very well...

[indiscernible].

Yes, yes, yes.

So Qatar Acids has outperformed last year. National Paper Industries has outperformed last year; and Qatar Plastic Products Company, QJet and also Gasal. All these companies have performed better than last year.

Yes. And also you raised a question regarding the taxations. What's the impact? The impact is around QAR 90 million. This is the answer. I go straight on -- all right? So the -- for the financial part, which you asked about the capitalization [ on the finance ], see we've got -- we don't have any -- I mean [indiscernible] we are having Gizaz. We are having the [ bottle projects ]. It's we have never considered [ there reconstruction ] because it has -- just came to operation. And the tower hasn't been delivered. We haven't restructured the finance or so -- nothing there on the capitalizations. Other than what we have done on the previous presentation that we have shared with you maybe 6 months back regarding KLJ, nothing else. So shall I go back to [ Mark ], if I may, gentleman, now, [ Mark's ] questions regarding the salt. I'll give you how we have been fortunate enough. And what's the story behind QIMC being able to capture those investments being rendered by the government, [ per se ] QatarEnergy. And QatarEnergy, there is a program called Tawteen. Tawteen is -- now is publicly announced. They have their own websites. So they offer opportunities for the public sectors; and we go and bid among others, all right? This is one side of the story. The other side of the story is -- which is salt. I'll give you details how we captured that. We are going to be one of the offtaker. In industrial sort, there are 3 main, let's say, consumers in Qatar. One is QVC, which is managed and being operated by QAPCO. QAPCO is no part of QatarEnergy. And also we've got KLJ is consuming part of it, and also [indiscernible]. So all of us are consuming around 850,000 tonne per year. So we are going to be the offtaker for this project, so they have invited us to participate in this project. We have, let's say, signed -- 3 weeks back, we have signed an MOU between with -- between 3 partners, QatarEnergy and QIMC plus an investor from Turkey. And the investor from Turkey possesses 30% of the equity. We possess 30%, QatarEnergy 40%. This project is right now in the phase of -- I think -- I don't know who is having his mic on. And I don't know. Maybe [ Eric ] and -- yes. So the project has got a very, let's say, tight road map. They are now at the stage of assessing the technology, I mean, to treat this desalinated reject salt coming from the utility provider here in Qatar, through a membrane. And there are several, let's say, technology in the world. And the team is now engaged, I mean, deeply in assessing the technology. Once they finalize that, they will go through the FEED study. And after that, we will make the detailed engineering, and after that, we'll make the final investment decisions. The project -- all of this process should be taking 33 months, no more than that. We will give you an update once we hit the first milestone, hopefully, by our next meeting, [Foreign Language]. I will give you more details. We are still right now trying to, let's say, finalize the major, let's say, contributor to the outlook of delivering this project. I hope, [ Mark ], the answer that I have given you is informative enough.

Yes.

Gentlemen, it seems to be no more questions. If you allow me -- if you have no more questions, if you allow me to close this session....

[indiscernible]

Sorry, Aktham. I have a follow-up -- a couple of follow-ups. Is that all right?

Yes, fine.

So you mentioned -- sorry. Could you tell me? This salt project is going to take 33 months or 13 months, you said, 33 months...

No, 33.

33 months, okay. And any idea on the -- and your contribution towards this project?

What -- say it again. What...

Capital contribution, your capital contribution to the project. Any amount discussed?

Sure. I -- again maybe you know this better than I do, and so is -- the rest of the audience. We are now in the FEED study. And this FEED study will impact, I mean, the final CapEx in a material way, but I can give you a rough estimate. We are talking about USD 290 million. This is the rough estimate. We are going to refine this number once we finish the detailed engineering.

$290 million is the total project, not your contribution -- that's your contribution...

I told you our share is...

30%.

30%. You may give the math, very simple...

And my other question is on you mentioned that finance cost -- I did not really understand that. So no finance cost is being capitalized. Or some of the finance cost is capitalized. Because I wanted to know the quantum...

No. No finance cost is being capitalized. Finance cost is being...

No finance cost...

No. No finance is being capitalized. This is my answer [ precise, yes. We are paying ]...

So all finance cost is being expensed.

Yes. We are paying -- yes, yes.

It's shown in the balance sheet.

Yes.

Yes. For some -- [indiscernible]. So maybe, for some entity, you -- [ there's a choice ] [indiscernible] if it is an associate, but if it is a sister company, it will show on the [indiscernible].

Okay. Because what I was looking at is last -- in the first 9 months of '23, the finance cost was QAR 26 million. And this year, it is QAR 21 million. During the same period, your debt has also increased, slightly but still increased...

But I said -- I made an exclusion to my statement, which is KLJQ. And we have given details in the previous, let's say, presentation. If -- you were the -- I mean the -- you raised this question. KLJ, we have done some restructure on the finance. We have stretched them, let's say, the installments to a longer period. This is the only exception to my statements and which we have given details in our first quarter results.

Okay.

Thank you, gentlemen. And we will see you for the result of the end of this year. Thank you. Thank you.

Yes. We have taken all your inputs. And our next investors presentation will incorporate all the suggestions that we have got. And this presentation will be available in our website very soon. We'll update -- upload it immediately. Thank you very much.