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

Sorry for that, I mean, technical issue. Good morning, everybody. I assume that you are all set to start our meeting. I would like to welcome everyone to Q1 2025 results conference call for QIMC. I would like to introduce the panel here. My name is Aktham Al-Baqali. I'm the Chief Supporting Officer -- Service Officer for QIMC. Here on my left hand, Mr. Mazen Abu Safa, Manager of Finance. In front of me is Mr. Surya K. Narayanan as Business Senior Analyst for QIMC. As usual, we have got around 4 topics to go over. We'll go through company overview, financial performance and operational highlights, and then we'll end our meeting by giving you the chance to raise any concerns or questions you've got. Before I hand over the presentation to be done through by Surya, I would like just to give a quick snapshot of our results as has been disclosed on last Thursday that there is a drop in Q1 compared to last year by 14%. We have achieved QAR 31.3 million compared to QAR 36.5 million of last year. And mainly the reason is attributed to one of our construction sister company has performed less due to the deposit of the raw material, relocation by the regulator has taken us 2.5 months to be relocated. We are now settled down. So the operation has been ceased for more than 2.5 months during Q1 but everything has restored now back into normal, and we expect no further disturbance in operation coming out from that JV. So business should normalize during the rest of the year. Surya, go ahead.

Thank you. Good morning, everybody. QIMC, for those who are joining this conference call for the first time, QIMC was established in 1990 as a Qatari public shareholding company. We are listed in the Qatar Stock Exchange. We have a paid up share capital of QAR 475.2 million, with nominal value of shares being 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 material, paper and plastic and food processing. We have 8 subsidiaries and 12 associates. So there is a quick snapshot of our subsidiaries. We have Qatar Acids, which manufactures sulfuric acid. Then we have KLJ Organic Qatar, which manufactures chlorinated paraffin wax, caustic soda prills, hydrochloric acid and hypo. Then we have Qatar Sand Treatment plant, which produces washed sand and aggregates. We have National Paper Industries Company, which produces facial tissues, toilet rolls, kitchen rolls. We have Q-Coat. Now KLJ Organic Qatar is a JV with an Indian company with QIMC having 60% and the Indian company having 40%. Q-Coat is a joint venture with Qatar Steel. We have 50% and Qatar Steel has got 50% and this company produces epoxy-coated steel bars. Then we have Taabia, which is a tea packaging company, 100% owned by QIMC. Then we have Gizaz, the Gulf glass factory, in which we have 50% stake and remaining 50% held by other shareholders. Then we have Qatar Paving Stone, which manufactures hollow blocks, interlocks, paving stones and kerb stones. Now we have associate companies starting from Qatar Aluminum Extrusion Company, the first and only aluminum extruder in Qatar, which produces mill finished, powder coated and various several purpose -- special purpose aluminum profiles. Then we have -- in this company, we got 45% stake. Then we have got Qatar Plastic Products Company, which produces FFS films, shrinkable films and wood pallets. In this company, we've got 66.66% stake. Then we have QJet, which is Qatar Aviation Fuel Distribution Company. In this company, we've got [ 50% ] stake, remaining 60% held by WOQOD. Then we have Gulf Formaldehyde, which is a JV with QAFCO. It produces urea formaldehyde. In this company, we've got 30% stake. Then we have Gasal, which produces and supplies industrial gases. This is a JV with QP and Air Liquide, so -- or QatarEnergy and Air Liquide. QIMC has got 29.5% stake. Then you got United Chemicals, which is a subsidiary of KLJ Organic Qatar. KLJ Organic Qatar has got 65% stake in United Chemicals. Then we've got Mahaseel, which is a national food company. This is a joint venture with Hassad Foods. We've got a 20% stake and Hassad Food has got 80% stake, and this company produces and markets various food products, primarily dates. Then we have got a subsidiary called Qatar Tunisian Oil Company (sic) [ Qatari Tunisian Food Company ], which bottles and markets olive oil. Then we've got Qatar Saudi Gypsum Company, which produces gypsum powder. In this company, we've got 33.33% stake. Then we have Amiantit Qatar Pipes, which produces glass-reinforced pipes. In this company, we've got 40% stake and remaining 60% held by other shareholders, including a shareholder from Saudi Arabia. Then we have FiberTie, which is a subsidiary of Amiantit Qatar Pipes. Amiantit holds 75% stake in FiberTie. FiberTie also produces GRP, but using a different technology and for a different utility. Then we have Qatar Clay Bricks Company, which produces concrete blocks, kerb stone and hordi bricks. In this company, we've got 46.3% stake and other -- the remaining shares are held by other local shareholders. Now ongoing product, Gulf Glass Factory. As you know, this company utilizes locally available sand and natural gas, modern technologies and equipment to produce high-quality, lightweight glass containers of various colors, sizes and shapes. The design capacity of this plant is 200 tons per day of glass containers, nearly 1 million bottles and jars per day. We'll have more update on this particular project as we go forward. Then another ongoing project is Qatar Salt. This is in the initial stages. This company is set to produce various kinds of industrial salts. So this is a joint venture with Mesaieed Petrochemical Holding Company. And again, we'll share some more details about this particular project as we go by. And then we have Corniche Park Towers, our real estate venture. We'll share more details about this also as we go further. Now going to the first quarter results. The total assets of the company at the end of 31st March 2025 stands at QAR 4.08 billion compared to QAR 3.86 billion at the end of 31st March 2024. Total current assets out of this amount to QAR 527.64 million and noncurrent assets QAR 3.55 billion. Total current liability is QAR 490.32 million compared to QAR 460.34 million at the end of the first quarter of 2024. The total equity of the shareholders stands at QAR 1.92 billion compared to QAR 1.83 billion at the end of first quarter 2024. During the first quarter, we reported QAR 117.92 million, which is almost the same as QAR 118.28 million we reported in the first quarter of last year. The profit before taxes is QAR 31.3 million compared to QAR 36.47 million, Mr. Aktham already outlined the main reason for this. Out of this, the other income constitutes QAR 8.62 million compared to QAR 11.32 million in the first quarter of last year. Earnings per share stands at QAR 0.07 per share compared to QAR 0.08 last year. Net book value per share is QAR 4.04 per share compared to QAR 3.85 per share. Out of the total equity, the equity attributable to noncontrolling interest stands at QAR 57.08 million compared to QAR 50.27 million at the end of first quarter. So total revenues, as you know, QAR 117.92 million compared to QAR 118.28 million. Net profit, QAR 31.3 million compared to QAR 36.47 million. Now if we compare the QAR 31.3 million versus QAR 36.47 million, the gross profit is slightly less by QAR 3.51 million, the reasons were explained earlier. Share of results is more or less the same results from other associates. Sales and administration costs again maintained at the same level. Dividend from share is more or less the same. Other income is slightly down by QAR 2.68 million due to less rental income. And finance cost is more or less the same. The nonoperational gains is slightly higher due to IFRS compliance and then noncontrolling interest QAR 2.49 million more. So from QAR 36.47 million, we have reached QAR 31.3 million. Now total assets of the company as on 31st March stands at QAR 4.08 billion compared to QAR 3.86 billion at the end of first quarter 2024. Total equity QAR 1.98 billion compared to QAR 1.88 billion at the end of first quarter 2024. Now earnings per share, as we said, is QAR 0.066 compared to QAR 0.077 and return on assets is 0.79% compared to 0.98% in the first quarter of 2024. So that completes the overview of the financial results for the first quarter. Some highlights on the operations side. Now update on the glass factory. The planned building, including all extended facilities have been completed. We have received approvals from all the authorities. All equipment and production lines have been installed and mechanical completion was obtained in August 2024. Official test runs of the plant have been performed under the supervision of the EPC contractor. And we achieved efficiency of production at the level of 85%. We have already started working on getting requirements or certification of ISO 9000, 14000 and 45000 and also we are working on ISO 22000 and HACCP certification. And we have already started production and our sales campaign is underway and we have already started exporting to some of the countries and for local customers as well. Now coming to -- for Qatar's salt project. The steering committee has been appointed. The technical committee member has been appointed and selection of technology is ongoing. Our team has visited Indonesia and China to look at some installations. Then the FEED tendering, the deadline is supposed to be over yesterday, 26th April and we are also undergoing market study and this will be completed by end of this month. Now coming to the real estate project. We have made a lot of progress in almost every area and Mr. Aktham will share more details about it in the further presentation, but the good news is that we are almost ready for soft launch. So that's it from my side. Over to you, Mr. Aktham.

Yes, gentlemen, the stage is yours right now. Stop sharing. Yes, gentlemen, the floor is yours. If anybody -- [ Sahab ], can you hear me?

Yes, I can hear you. Yes.

Yes. Gentlemen, if anybody has any questions to raise, you are most welcome. The floor is yours.

Let me start since my mic is already open. A few questions. Firstly, could you give us more update on when will be the soft opening for the towers? And what is the pre-leasing for the leasing tower, the 3 towers, 2 are managed by Accor, one is the leasing tower that -- which you will basically rent out. So what is the pre-leasing on that one? How many floors are already leased? Some -- if you could have some color on that? The second question is on the subsidiary where you said there was a relocation. Which subsidiary was that? And why exactly was it relocated? Also, what was the cost of the relocation? Was that already incorporated in the financials? The third question is on debt. Your debt...

Here are the questions with relocation. Okay, go ahead.

Was relocated, you said one of the subsidiaries was relocated because of which were lower.

Yes, yes, I got it. Number three, Sahab?

Number three is on the debt. Your debt has actually increased, but your finance cost has reduced. Is this because you renegotiated contracts and because the interest rates came down? Also, your interest rate is very, very low. Is there like a preferred rate that you are getting from the banks considering the industrial importance of your projects? These are my 3 questions.

Okay. Yes. Any other questions? Thank you for those, I mean, wonderful questions, Sahab. Anybody is having any other questions, so I can write them down, then I address them one by one?

Yes. My question is on the glass factory. You said that it has -- it was already operational. And so in the first quarter, what will be the capacity utilization of that? I understand it was probably still in the initial stages of operation, but if you could give us some color of what would be the capacity utilization?

Very clear, very clear. Understood all them. But if any other gentleman is having any other questions, so I can add them all together, so I address them one by one from the guests here? So I assume that maybe I raise this question after I address all of those 4 concerns of yours, Mr. Sahab. I start with the towers. Your question was about the leasing, how we are going to go by in the coming months. We are now at the stage of, let's say, civil defense inspections. We have done the first round and by God Grace that the observation was minus, and we are now expecting another visit from the civil defense. We are expecting that by mid of next month, May, we will be having the approval of the civil defense and we expect that QIMC will shift by end of June to the offices. Offices is now -- there are a lot of negotiations. There is not much of office space to be leased out, but we are in negotiation with the recognizable firms to lease out one by one. For the residential towers and the hotel, they are all operated by Accor Swissôtel. So we don't have to worry about leasing out the apartments because they are service apartments. And the soft opening will follow right after the soft opening of the offices. We are expecting that to take place by end of June. So we have given the hiring notice to the operator to deploy all of their human resources to be in site. They are already, but they have to recruit all other gaps. So this is what about the tower. So going to the number two, which was regarding the deposits. Yes, I was referring here to the sand treatments. The sand treatments, you know that the quarry has run out -- the previous quarry has run out of raw material. So we have to be relocated to another deposit. So this transaction was carried out by one of the government regulator and they have assigned it, but due to some internal procedures of that regulator, it has been delayed, but it has been awarded of handling of that. And we are expecting also to fit out the next, let's say, location also to avoid this from happening in the future. So we have been awarded these new deposits by mid of March. And we are working also on other locations to avoid these transitions between one location to another location. I hope that this answer is very clear to you, Sahab. Now going to the third question regarding the debt. I guess you have pointed out clearly that the finance cost has dropped down. I know that the debt has -- exposure has came bigger, but the finance cost has gone down because of the interest rate has dropped down. And maybe Mazen would like to elaborate a little more.

Most of this debt has been still capitalized until the project finished, until it's set up, then it will be start affecting the profit and loss.

Finance cost, what is reflected is from the subsidiaries, not...

Yes, you are right. So going Mr. Sahab to the glass factory, this is really -- I mean, you asked very straightforward questions. I like your contributions, Mr. Sahab. Now we are at the, I would say, commissioning stage during the first quarter, but we have managed to run the factory with a capacity of 60%. As Mr. Surya has indicated during the presentation of the project of glass that we are now expecting another final expectation that has to do with Coca-Cola and Pepsi. They have done their own instructions, but we need to obtain that certification in order to start this big client transactions in which we would be hopefully an equal to an efficiency of 85% at least by May, we're expecting that by May. Gentlemen, is anybody having any other questions? Maybe Sahab, you should have asked me, I was expecting you, but I'm going to relate this kind of concerns. I mean which company has contributed the best during this quarter. Maybe I was expecting you. You always ask about KLJ, but this time, you missed KLJ. You haven't raised any question regarding KLJ. So KLJ has performed double than last quarter due to, let's say, an improvement in the selling price. And we are expecting that we will keep performing so during the course of this year.

That's even better that you gave us more color on KLJ. Sorry, on the interest cost, you said that some of the interest cost is being capitalized. Could you tell us how much is actually being capitalized in the first quarter?

Well, now about QAR 25 million.

QAR 25 million.

Yes. This is the project is running now. If you talk about the project, the project is still running and now the [indiscernible] project finished status. So about this first quarter, it's about QAR 25 million.

So if this capitalized once the project is naturally commissioned, so do you mean that your interest cost for a quarter is going -- it will increase to QAR 30 million? I mean right now, it's QAR 5.5 million. If I add QAR 25 million, that's QAR 30 million.

This depends on the time period. Now there's no ready answer for that. It depends on the time period. It will be -- when it will be set up and will be fully completed, it depends. This is -- until now -- well, it depends. Until now I can't give answers. I'll tell you, now this is again regarding this interest cost calculation and it depends on the period, it depends on the account, the project fee from the fully commissioned.

What is the expected finance cost once this project is launched, the interest cost?

We can share it with you. We have the numbers, but it's not really with us. But you know that the project has started back in 2018, and we have started drawing down the debt from the bank from that time. And we have been, I mean, capitalized on this interest. And I know that the exposure of debt is around how much is QAR 970 million. This is exposure of debt. And yes, the debt is around QAR 230 million. But if you would like some more precise numbers, figures, we are more than happy, I mean, to take this offline. Gentlemen, anybody is having any other questions? Gentlemen, I guess we are done. We can call this session off. Hopefully, that we meet you in the half of the year results. Thank you.

Thank you.

Thank you.