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

Hello, everyone, and welcome to 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. You may now begin.

Thanks, Ellie. Hello, everyone. This is Roy Thomas from QNB Financial Services. I want to welcome everyone to Qatar National Cement Company's First Quarter 2025 Financial Results Conference Call. On this call from Qatar National Cement Company, we have Engineer Essa Mohammed Ali Kaldari, the Chief Executive Officer; Wael Zuhair Oukal, the Chief Financial Officer; and Saqib Parvez, 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. Go ahead.

[Foreign Language] And good afternoon. [Foreign Language]. A warm welcome to all of you. Thank you for taking time to join us for the first quarter 2025 conference call. This meeting will be covering with the following topics: financial performance, the challenges that we are facing, future plans and outlook. And then at the end, we will have the question and answer. Some of our economic update. We are living in a very challenging economic environment. The global economy is still assessing the impact of tariffs. But the good news is that we cannot see that impacting us, at least for the time being. Some of the industry updates. At the moment, the local construction sector is facing a lot of headwinds. This is impacting the demand of construction materials. Being an industry raw material leader, we are not immune to those conditions. We are trying our level best to minimize that impact. With regards to diversification, I think previously we have mentioned that we are looking at different projects. One of the projects were the industrial area project, which awarded in the first -- which we have already awarded the first phase of this project earlier this year to one of the reputed contractors here in Qatar. And the plan -- it's planned to be completed by end of this year. And now, I'll pass to my colleague, Saqib, to share some light on the financial performance of the company. Thank you.

Thank you. This is first quarter results that the sales revenue of the company is QAR 91 million compared to QAR 106 million. It is a 15% decline from the last quarter in the same -- 2024. The cost of sales has slightly increased and the gross profit margin has reduced by 48%. Other income stays good. Selling and distribution has increased a bit by [ 67% ]. G&A is -- margin increased. Net profit is -- overall declined by about 40%. Overall, the company's financial position is very strong. We still have net assets of QAR 3 billion, and the current assets are exceeding 6x more than the total liabilities side. So we believe we have very strong financial positions and we can -- which should help us to weather the crisis and, at the same time, fulfill the expectations of our esteemed shareholders. So let's move to the question and answer. If you have any, please.

[Operator Instructions] Your first question comes from the line of [ Wei Chao from Orion ].

A few questions. Firstly, you -- I think what my understanding is that there is a crisis apparently and you guys are well positioned to weather that crisis. But what kind of crisis are we talking about? Are you seeing a crisis in the economic demand for your product? And if so, what kind of demand? Has the demand reduced? Could you give us some color on that? Second question is regarding your margins. Your gross margins have come down significantly. Could you tell us the rationale for that? I will start with these 2 questions and then we probably have a few more.

Okay. Thank you for asking the question. First of all, I'd like to clarify. We are not considering this as a crisis, but we consider it as a challenge. The demand for cement, at least in the construction industry, has slowed down from, let's say, by end of last year and earlier this year. But -- though there was a slowdown, we can see that there are some lights in the tunnel. Things start to pick up, we can see it maybe by beginning of this month. And just to be -- just to clarify that according to the model of Intelligence Qatar, construction market size is expected to grow CAGR of 9.3% to reach around QAR 387 billion by 2030. And at the same time, Qatar is aiming to host 2030 Asian Games. And the good news is recently, even -- as well as the public authority awarded 5 projects worth of, I think, around QAR 5.5 billion to some of the contractors here in Doha. I think we are hoping that things will start to improve. That's I think to answer your first question. The second question, I can pass it to my colleague here.

See, the currency is used as a phrase, not as a real currency effect. So please take it as a light [ manner ]. So see, in terms of the margin, there are certain overheads, like we have stopped the clinker production since last year. So due to that stoppage, there are certain overheads which we need to incur. These are not being absorbed in inventory, right? That's the main reason why the GP margin has shrink a little bit there. But hopefully, [Foreign Language], once the production will be started, that it will be -- margin will start improving there.

So let me understand this. So the gross margin, you're saying, is lower or it has contracted because the plants are closed, the clinker plants closed?

I said it because there are certain overheads which you need to maintain in order to keep ball running there. So those overheads, before it was being absorbed in the inventory, since the production is not going on, so those overheads are being charged as profit and loss. So that is the main reason for the reduction in the margin there. So as I said, as things will move, start moving the production in the next year hopefully, so things will start improving there.

And when do you expect to switch on the -- like restart the clinker production?

I think the -- as of today, we're expecting to start from next year. But we are ready. If things looks fine in this year, we'll start producing there.

So then the -- if that's the case, then the margin for this year is going to be much lower than last year if I take first quarter as a start indicator?

It's an hypothetical question, so we cannot comment. Let's see how things will be in the upcoming quarters.

Okay. Okay. And you said that the selling and distribution expenses were higher. Is this because -- have you started a rebate program for the year? Or this just general, this is for...

As of today, we are not offering any rebates. This is -- actually, we started some other services. So that is a part of that. And starting with the [indiscernible] customers, we started that [indiscernible]. Sorry?

Sorry, I could not understand that.

No. As of today, we are not offering any rebates to the customers. So the reason for increase is sales and distribution charges, that we started offering the distribution services to the customers. That is part of it.

Distribution services, okay.

Yes.

Our next question comes from line of Seki Mutukwa from Ashmore.

I hope you can hear me, apologies. Just wanting to understand on the volume side of things. I know in the presentation, you said that's the main reason for the decrease. But when you look at April, and I know you were a little bit hopeful as to how things had started this month, are you seeing month-on-month improvement and year-on-year? Or what did -- sort of what indicatively are you seeing to maybe help with that bit of optimism, at least from here on?

Yes. Well, as you know, Ramadan was part of the first quarter this year and this contributed in a lower volume at the beginning of this year. But we can see that things will start -- we can see that there is an improvement in sales in April, starting from our [indiscernible], which will -- we believe that this will continue, and we can see that. Yes, this will continue. So this will continue. But maybe during the summer, we will have some kind of a slowdown. But we believe that by end of third quarter and beginning of the fourth quarter, things start to become much better.