Qatar National Cement Company (Q.P.S.C.) (QNCD) Earnings Call Transcript & Summary

Good day, and welcome to the Qatar National Cement Q2 2021 Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to CEO (sic) [ General Manager ], Mr. Mohammed Al Sulaiti. Please go ahead, sir.

[Foreign Language]

[Interpreted] Ladies and gentlemen, thank you for joining the call and your interest in QNCD. I will start with the details behind the figures. The company's production and sale of cement has increased 1.4 million tonnes compared to 800,000 tonnes for the same period last year. Also, the production and sale of wash sand increased to 3.3 million tonnes compared to 2.5 million tonnes for the same period of the last year. And both increments have contributed to the increase of revenue by 41%, which is QAR 120 million. And as Mr. Sulaiti said, the performance was satisfactory in light with the adverse impact of COVID-19 on the construction business in the country. And as you know, last year, the operation of cement plants #4 and 5 has been suspended until further notice due to COVID-19 impacts. I would like to bring your attention to 2 factors affected the financials in the first half of 2021. The first one is the management has reconsidered its assumptions about the useful life and further use of plant #4 and 5. The decision was taken on the ground that these plants have been suspended for -- have been suspended until further notice. Hence, the plants are underutilized and idle for unspecified period, which require reassessment of the useful life estimates used in the depreciation calculation. As a result of the revision of useful life, a reduction of QAR 27 million has been adjusted during the period. The second factor is a lawsuit filed by the Ministry of Municipality and Environment against the company, claiming that the company extracting raw materials used in cement industry from outside the designated area. The company entered into amicable decision with the ministry, which is subsequently sanctioned by the court. In accordance with the outcome of the court verdict related to the case, the company has agreed to settle a sum of QAR 34.5 million in 5 annual equal installments commencing this year. Consequently, this obligation has been charged to the income statement of the period. With all above facts, the incremental sales, the revision of the useful life estimates and the settlement of the lawsuit case, the net profit increased to QAR 94 million compared to QAR 68 million deals in the same period of last year, which is an increment of 38%. Now I will hand over the mic to my colleague, Mr. Saqib Parvez, to discuss the investor presentation. Thank you.

Good afternoon to everybody. I would like to give you a brief overview of the condensed interim income statement for the 6 months ended 30 June 2021. As the General Manager and Finance Manager have already explained to you, that the revenue has increased by the 41% compared to the last -- first half of the last year. And the cost of sales is consequently like increased by 24%. The factors like affecting the cost of sale already discussed by Mr. Sadig Ali Nimary. And the GP has increased by 97%. The other income just slightly increased by 4.4%. And the expense related to the legal claims, this is a onetime item appearing on the face of the income statement. The selling and distribution expenses has increased by 192%. Now the general and administration expenses decreased by 19%. And the share of loss of profit from associate, these all items, that decreased by 115%. And the net profit is increased in totality by 38%. The current ratio of the company remains steady as compared to last quarter. Like it increased to 4.39x as compared to 4.49x in December. And the reason is that in the first quarter that we have paid 20% dividend to shareholders. The equity to total asset ratio remains same as -- at 0.91% -- 0.91x. As you see, the quarter-on-quarter basis, the revenue and the cost of revenue is starting from the first quarter of 2020, it was steady and then, in the second quarter, decreased and then it took a projectile by increasing that. So -- but in the last quarter, the revenue has decreased. That's mainly due to the seasonal effect. The cost of sales remains steady throughout the season.

Thank you. We are ready for any questions.

[Operator Instructions] We have our first question, please go ahead. It's from Mr. Zohaib Pervez of Al Rayan Investment.

I've got 2 questions. Firstly, could you give us some more details about the new project, the waste treatment tender that you received? Some more details upon when this will start, will there be more investment required, what will be the quantum of investment required, margins, some more details on that? That's my first question. The second question is you've mentioned that the cement sales increased to 1.4 million from 0.8 million last year. This is for second quarter or first half? This production and sale data that you mentioned for wash sand and cement?

[Foreign Language]

[Interpreted] I told you within August 2020, we will proceed with the tendering process for projects. And after completion of the licenses and the paperwork with the Ministry, after that, we can know exactly when we can start. And for the other question about the quantity of sales, it is for the 6 months -- 6 months to 6 months.

Just a follow-up on this. You mentioned that the tendering process will be in August. I thought you have already won the tender, right?

No, we are not starting the tendering process. It will start in August.

We have our next question from Lee Beswick of QNB.

Congratulations on the results. They are good set of results. First question is just regards -- you made a comment earlier on in the year that you wanted to see higher returns to shareholders. I think it was either at the end of last year or the start of this year. And traditionally, when Qatar Cement has done that, it's increased dividends. But I was just wondering, given the cash flow situation at the moment, whether...

The voice is breaking. Can you improve the voice?

Can you hear me?

Yes, better. If you can speak loudly, please?

Yes, sorry. I just -- I said that at the start of the year, you made some comments about increasing returns to shareholders. And in the past, when Qatar Cement has done that, it's usually sort of increased the dividend. But I was wondering, given the cash flow situation at the moment and that you've got too much cash on your balance sheet, and also given the stock valuation, whether you'd actually consider increasing -- or doing share buybacks as well as increasing the dividend for increasing returns to shareholders? I just wonder whether that's something the -- whether Mr. Sulaiti has or Mr. Nimary has considered that? I don't want to know what the Board thinks. I want to know what they think.

[Foreign Language]

[Interpreted] If you see, we have a lot of cash commitments at the same time. But just now on the facility for you, we are always working to reward shareholders better and better. Wait until the end of the year, and the picture will be clear to say whatever we have.

Our next question comes from Sameer Kattiparambil of EFG Hermes.

I have one question. Could you give me some more color on your waste management CapEx? What exactly it is for? So are you going to use the waste materials as feedstock? Or could you give me some more color on that?

[Foreign Language]

[Interpreted] I told you, this project, it is a national project rather than profit-making project. And it is just to share the company's requirement to treat the waste of the country. And as we told earlier also, this project will start in August. We will start the tendering process. And after receiving all the licenses needed for the project, then we'll move on. But specifically, this project is burning the waste inside the kiln or inside the cement factory. It is like that. Thank you.

All right. So will this make -- will this -- how much of your fuel will be sourced from this waste material once you come up with this plant?

[Foreign Language]