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

Thank you for standing by, and welcome to the Qatar National Cement Conference Call. Please note that this call is being recorded. You will have the opportunity to ask questions to our speakers later on during the Q&A session. [Operator Instructions]. Now I would like to hand the call over to Mr. Parvez, you may begin.

Actually, I will start the conference here from Qatar National Cement. This is Essa Kaldari, I'm the CEO of the company. [Foreign Language] Good afternoon, and Happy New Year. Thank you for taking the time to join us for the fourth quarter conference call. This meeting will cover the following: financial performance, challenges, future plans and outlook, and then we have that question and answer. So starting with the financial performance of 2024 as expected during the last year, it was a quite challenging and tough in terms of local demand. For cement, revenue has declined mainly due to overall decrease in demand of cement in the state of Qatar. Despite the external challenges, we posted profit of QAR 160 million compared to QAR 191 million and that's excluding the electricity waiver of QAR 40 million in 2023, a decrease of 16% despite of the 9% decrease in the net revenue on a year-to-year basis. Shareholder equity as of December 31, 2024, amount of QAR 3.044 billion compared to QAR 3.09 billion at the end of the previous year, which reflects a robust of our financial strength. I'm glad to announce that the Board of Directors have recommended to distribute 27% cash dividend to our valued shareholders. Some of our significant achievements in 2024, despite the external challenges, we have not lost our forecast, and we are right on track to achieve our goals. As agreed, we have already achieved an agreement with Kahramaa and Qatar Energy to connect the plants on the residential area in Umm Bab to the public water network. We completed the implementation of SAP HANA S/4, the beginning of implementation of the first phase of the project to invest in the industrial zone to construct warehouses for building material and labor accommodation. This will -- this is with the aim of investing to enhance our company activities and risk -- revenue resources. The final stage transportation and dismantling the sold component of the cement plant number one. Some of our future plans and expectations for the year 2025. We'll continue reducing our -- reducing production costs by rationalizing the energy consumption and other expenses according to the approved budget items and ensuring the achievement of operational challenges, goals and business enhancement. Intensify efforts to find alternative sources of energy like recycling waste and household waste as a fuel over the kiln of the cement factories in Umm Bab. Continue our effort to drive the maximum possible value from each real spent; Implementation involve the project that the company began implementing during the year 2024, such as the project to invest in the rented land in the industrial area. We will continue to develop the health and security, safety and environment conditions and upgrade the social services for the workers, encouraging their multi culture -- sorry culture of multitasking. And our goal is to have zero accident workplace. Now I'll hand this speech to my colleague, Saqib to shed more light on the financials.

Thank you so much. Good afternoon to everybody. And I would like to shed some light on the income statement for the year ended 31 December 2024. I will just close with the important numbers from here. On a net revenue basis, our revenue has declined by 9%. And the gross profit margin has decreased on a net basis, 20%. Other income has decreased by 20% due to the onetime waiver we bought last -- from last year from Kahramaa. The selling expenses are most likely very marginal increase by 1%. The G&A has decreased by 17%. So net profit -- effective net profit decreased as compared to the last year is 16%. And one more thing I would like to highlight here the Board of Directors -- the percentage of EPS, like the dividend distribution is an increase from the last year by 17%, only based on EPS calculation there. So we have increased the distribution as compared to what we earned later. So I would like to hand over to the Q&A session. If you have any questions, please, we'll be happy to answer the questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And your first question comes from the line of Seki Mutukwa with Ashmore Group.

Okay. Hope you can hear me clearly. Three questions, if I may. The first 1 was, could you let us know how much you plan to invest in the industrial zone and when, particularly for this first phase. The second question is trying to understand why the absolute dividend payout is lower than last year. Perhaps it's linked to question 1 about the investment plan, but just trying to understand that. And especially given your strong balance sheet? And then the third question is, have there been any sorts of changes in either cement prices or the kind of discounts year-to-date compared to where we were at the end of last year.

Okay. Regarding the first question, we intend to -- the project we started awarded to a local contractor and the contractor is already on board and started construction. We intend to complete the project by the end of the year as per the contract. And we are going to spend around QAR 30 million.

And the second -- the third question, I mean like you're asking about the discount?

No, there is no planning for any discounts of the prices during the year, but we will see how things will go during the year.

And your question about the dividend, let me give you some more digging like see, as you compare it as from the perspective of the distribution, the last year, our EPS was QAR 0.31 and we distributed 96% of the EPS. This year, our EPS is 24%, but we are going to distribute 27%. So it is an increase of the last year almost by 17%. So like we believe that it's an increase from the last year.

I see. Okay. But you -- I mean, obviously, we're on the same page that the absolute amount that I will receive in the bank account is lower. And you have a very, very strong balance sheet, over QAR 600 million in cash, you're only spending QAR 30 million on CapEx right now for this project and then maybe QAR 20 million, QAR 30 million for maintenance. So I was just trying to understand perhaps you have a level of cash you'd like to keep through the cycle or something else, but...

We would like to keep some cash to unforeseen that was going to come up -- may come up. And the other thing is that we are still pursuing our efforts with the relevant government authority to secure the project, which is related to sludge treatment and waste management treatment. And those will have a big capital amount spend.

We have a very positive impact on the bottom line and the EPS as well.

Your next question comes from the line of Ejayan Al-ahbabi with Al Rayan.

Thank you, gentlemen, for the presentation. This is Owais Parvez from Al Rayan Investment. I've got a few questions. Firstly, what is the rationale for the decline in depreciation in 2024? And my other question is, there is an item in the cash flow, which says proceeds from equal share reduction of associates. Could you give us some more color on what this is and how this resulted in cash flows for you?

So I would like to answer your first question with respect to the depreciation there. The main reason is like we are trying to optimize our fixed costs. So since that we're not producing the clinker for the time being, so that is a fixed cost there. So only the idea behind -- the rationale behind it to optimize it. So we have changed our estimate, and as you see there how we are going to accrue the economic benefit from those assets. So we think that the -- we switch the unit of production method from the straight-line method there. So going forward, the depreciation will be calculated based on the unit production method. Whatever units we're going to produce based on that one, we are going to post the depreciation. This is the rationale behind it. And with respect to your second question, the capital reduction, one of our associates, it's a Qatar Quarries and Building, they are returning back the capital equity, which we invested in to the shareholders there. So that is related to that one there.

Sorry. You said the associate is Qatar Quarries and you're returning back capital. What does that mean, the company...