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

Hello, everyone, and welcome to the Qatar National Cement Conference Call. Please note that this call is being recorded. I'd now like to hand over to our moderator for today, Roy Thomas. Please go ahead.

Thanks, [ Adi ]. Hello, everyone. This is Roy Thomas from QNB Financial Services. I want to welcome everyone to Qatar National Cement Company's Second Quarter and First Half 2024 Financial Results Conference Call. On this call from Qatar National Cement Company, we have Engineer Essa Mohammed Ali Kaldari, the Chief Executive Officer; and Saqib Parvez, the Head of Finance and IR Officer. We will conduct this conference call with management first reviewing the company's results followed by Q&A. I will turn the call now over to Engineer Essa Mohammed Ali Kaldari. Go ahead, Essa.

[Foreign Language]. Good afternoon. Thank you for taking the time to attend the meeting, and I hope that you enjoyed your summer holidays. This meeting will cover the following topics: the second quarter financial performance, future plans and outlook and some of the challenges. And then it will end up with the question and answer. Let's start without any further ado, starting with the financial performance as expected for the second quarter of this year was quite challenging, on top in terms of local demand for cement, revenue has declined mainly due to overall decrease in demand of cement in the state of Qatar. Consequently, overall, financial performance is slightly short of our budgeted expectations. Despite the external challenges, we posted a profit of QAR 31 million compared to QAR 37 million in the second quarter of last year, i.e., a decrease of 16% quarter-to-quarter. Some of the achievements of June -- by the second quarter of 2024, rationalization of production costs, especially in the consumption of gas, electricity, commodity material and other costs. We have explored new opportunity for our products to increase our market share and 0 accidents in the workplace. Some of our future plans and expectation for 2024, evaluating investment opportunities in projects which have low collaboration with our existing line of business, evaluating introduction of new products, continue our effort to drive the maximum possible value from our expenditure, continue our effort to optimize our costs. Our future outlook, we are living in a very macroeconomic challenges due to different reasons locally and internationally. Without elaborating, I think it's very well known to everybody, it is affecting our -- affecting us and our customers and our suppliers. However, in tough time never lasts, but tough people do. Despite the current challenges we are facing, we are expecting that demand of cement will start picking up from the second -- third quarter of 2024. And that is derived from the -- especially the report being issued especially report issued by the National Planning Council, announcing increase of the building permit by 36% in July. And in addition to this, we have provided detail of the project in the IR presentation. I will hand over the mic to my colleague, Saqib, to shed some more light on our financials. Thank you.

Thank you. Let's start with the entire income statement for the 6 months ended 30 June 2024. So revenue, as we predicted, it has fallen by 15%. The cost of sale is slightly down by 12%. Gross profit is down by 22%. Other income has fallen by 12%, Selling and distribution expense has fallen by 62%. G&A is slightly higher. The net profit for the year is overall like slightly fallen by the 19%. So in addition to this, I would like to have more detail to our respected colleagues, investors and potential investors about the future. If you have IR presentation that you can see that some project highlights are mentioned there. We are expecting that some new projects are going to be announced by the Ministry of Municipality, Qatar Energy, Qatar Free Zone and [ Ashghal ]. So some of these projects are quite big, like Ministry of Municipality, they announced some [indiscernible] Information Technology Services, which costs [ $5.5 billion]. And Qatar Energy has announced some very big projects for oil and gas infrastructure, it costs around $28 billion. So its deadline is 31 December 2026. And there are some [ buildings ], which need to be announced by the Qatar Free Zone. And there are some projects of water and sanitation roadway infrastructure and the value of the project is not announced, but the expected deadline is '27 and architecture and other developing buildings, Dar Al Arkan is also a big project. And [indiscernible] also have some other projects like water and sanitation roadways, which again is going to be ended by the 2027. So we are expecting going forward that starting the last quarter or third quarter from this month and going for the next year, things will be much [ better ]. So I would like to end my presentation, and we can move to the next session of the Q&A. We are open for your questions.

[Operator Instructions] Our first question comes from the line of Zohaib Pervez from Al Rayan Investment.

So I've got a couple of questions. Firstly, it was mentioned in the financial statement that the plant -- clinker plant has been closed and in the presentation, you just mentioned that you see positive demand growth from the next quarter. So if there is positive demand growth, then why would you close down the clinker plant? That's the first question. The second question is again on the same subject, but a different that the last time the clinker plant was closed, the gross margin actually improved probably because you don't have to pay the take-and-pay some of the costs related to utilities or take-or-pay probably. So would that be the case again? And how much would the savings be from the closedown of the clinker plant, if you could quantify it in Qatari Riyal terms, that would be great. And my third question is on the pricing, where do you see the prices? Are they still at the QAR 250 level as they were in the first quarter? Or they have changed considering the slowdown that we're seeing in the construction segment for now.

Okay. Regarding your first question, shutting down the clinker production, I think we will continue shutting down the plant, as we do have adequate inventory to support the market. But we do have a deal with the relevant authority or, let's say, supplier of gas or electricity that in case there is demand, we will be able to go back to them and then re-energize our operation. So that should not be an issue. That's regarding your first question. I hope that I've already answered it. With regard to the price, I think we will continue with the current price, which is around QAR 250 per tonne for OPC, and that should continue throughout the end of the year. Reevaluating in the price, I don't think that's on the table at the moment. It was -- the price reduction was given during summer holidays and during the downtime of last year. And I think now things start to pick up, the price will continue as is at the moment.

On your third question, like we're expecting that as the things will be better, the margin will improve also.

Could you repeat the margin a bit? Do you think the margins are going to improve because of this close down?

Yes, yes.

And Could you quantify it in terms of ... Sorry?