Qatar Navigation Q.P.S.C. (QNNS) Earnings Call Transcript & Summary

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[Audio Gap] that needs to go over our outlook for the rest of the year. As usual, we will end the call with questions and answers. The key highlights of our financial results. Milaha's operating revenues came in at QAR 2.56 billion for the first 9 months of 2022 compared with QAR 2 billion for the same period in 2021, an increase of 26%. Operating profit came in at QAR 424 million for the first 9 months of 2022 compared with QAR 192 million for the same period in 2021 for an increase of 121%. Net profit for the first 9 months of 2022 was QAR 851 million compared with QAR 654 million for the same period in 2021 for an increase of 30%. And lastly, our earnings per share was QAR 0.75 for the first 9 months of 2022 compared with QAR 0.58 for the same period in 2021. Now moving on to our business segments and starting with Maritime & Logistics. The segment posted solid year-over-year results led by strong container shipping rates. Those rates, however, came down in the third quarter, and we saw that reflected in numbers. Shifting back to year-to-date September figures, top line revenue grew by 39% or QAR 307 million, led by our container shipping and logistics units and mainly container shipping. Variable expenses grew in line with the revenue growth, resulting in an increase in net profit of 99% or QAR 126 million. With respect to Offshore, similarly posted strong results both year-over-year and quarter-over-quarter. Year-to-date September operating revenue grew by 29% or QAR 207 million versus the same period in 2021. Increased vessel chartering from additional work, employment of our list book, which was idle last year and additional diving related projects drove the increase in revenue. Variable expenses increased in line with revenue and various accounting provisions and impairments that negatively impacted last year's results did not recur this year. The net income result was year-over-year growth of QAR 884 million or over 470%. As for Gas and Petchem, it had a drop in revenue of 19% and but an actual pickup in operating margin. We divested from -- of both tanker and gas carrier assets, which drove the drop in revenue, but the tankers in specific performed poorly last year due to near record low shipping rates and hence the pickup in operating margin. At the nonoperating level, income increased by QAR 51 million, driven by the following 3 factors: QAR 45 million increase in additional income coming mainly from our share of Nakilat, QAR 16 million less income coming from our VLGC joint venture, Gulf LPG due to much lower shipping rates than the same period last year and QAR 19 million in higher gain on sale of vessels. In 2022, we recorded a gain of QAR 12 million on the sale of gas carriers -- of the gas carrier, whereas in 2021, we recorded a loss on the sale of the tankers. So net profit for the segment ended up QAR 57 million -- up QAR 57 million or 14% versus the same period in 2021. Performance of our Trading segment essentially came in flat. And lastly, Capital. Investment revenue increased by QAR 39 million. And in our Real Estate unit, it increased by QAR 9 million coming primarily from the villa compound, which was leased out in Q3 of last year. On the expense side, we took a QAR 16 million bad debt provision, which was recorded in Q1 of this year and which resulted in overall operating profit growth of QAR 27 million. On the nonoperating income level, however, results came in lower by QAR 97 million, with QAR 86 million of that coming from an impairment on one of our real estate properties. Overall, we ended up with a net profit drop of QAR 71 million in capital. And that drop -- that essentially wraps up the segments, and I will now hand it over to Sami to discuss the outlook for the rest of the year.

Thank you, Akram. Starting with Maritime & Logistics. On the container shipping side, we expect rates to continue their downward trend for the rest of the year. In logistics, we expect a general uplift in Q4 and in warehousing and freight forwarding related to World Cup activities. In Offshore, on both the support vessels and services side as well as the harbor side, we expect a continuation of what we've already witnessed this year. Additionally, the new 5-year contract for a liftboat will take full effect in Q4, which will stabilize income for that key asset. In Gas and Petrochem, overall, we expect limited volatility due to the long-term nature of contracts we have in most business units. Our VLGC JV is exception to that, where performance is difficult to predict due to volatile spot prices. In Trading, growing the business is still a priority, and we expect and are hopeful on better results. And lastly, Capital, we will continue to focus on yield enhancement. With that, operator, we will now turn it over to questions.

[Operator Instructions] We do have a question from Mustafa [ Ammar ] with Al Rayan Investment.

This is Shabbir Kagalwala from Al Rayan Investment. I would just like to know this -- you took an impairment on your capital side, you mentioned about taking it on one of your real estate properties. Can you elaborate a bit if it's like a commercial property or a warehouse or a residential property? And do you see more impairments coming in on that property or everything whatever was required is taken?

Okay. Thank you very much for your question. We actually took the impairment on our warehousing facility, which was built many years ago. And that facility was built with high specifications and at a relatively high cost, which is unrealistic today, so especially when looking at what today's market will accept. So essentially, that's what we've done. We've taken it on the logistic -- on the warehousing facility. Now I've said it before, and I will say it again, the large impairments we recorded over the past few years will not recur. But -- and this is -- and it's important to note, I've also said that on an asset-by-asset basis, we have to -- we may book impairments depending on changing market conditions and dynamics. And so accordingly, we did take that impairment on this asset, but we don't foresee any more going forward. But again, as I mentioned before, historically, we've taken large and substantial impairments, but we don't expect those to recur. But again, as I also mentioned before, from time to time, there will be some adjustments to asset values.

Right. And one final question on the overall outlook of the business in the fourth quarter. Given the World Cup, how do you see fourth quarter panning out for you in terms of your maritime logistics and other segments which are directly exposed to the World Cup?

Well, listen, I mean, we're obviously a very diverse business. So we're in various segments that are impacted by various market dynamics. We are essentially seeing an uptick in Q4 in some of the business units as a result of World Cup activities. So there is a pickup. Now Maritime -- and if you look at container shipping, container shipping, obviously, is very much impacted by global dynamics. And you're beginning to see global container shipping rates coming down. So again, as I mentioned, we have some business segments that will do quite well in Q4. There's quite a bit of activities as a result of FIFA. And -- but we also have business segments that are impacted by global dynamics. So I hope that answers your question.

[Operator Instructions] Our next question comes from Imran Khan with [ Azufa ].

My name is Imran Khan. I'm from [ Azufa ] Logistics Group, and let me congratulate you on the good financial results. My question is there was an investment by Milaha together with [ Qatar port ] in Ukraine. And how is that turning out to be for you? I mean I don't need any surprises because I know that the situation in Ukraine is bad. But are there any plans to invest in Europe, in Germany or in other European markets using your excess capital and cash that you're generating from your operations in Qatar?

Thank you very much for the question. Even though we are a major shareholder or partner as well in QTerminals, we can't really provide guidance on QTerminals. But what I can tell you is that QTerminals has a very aggressive growth plan. And so whatever actions or activities take place, you essentially hear about them in the market. As it relates to Ukraine, obviously, the situation is clear to everyone. And so we're in a wait-and-see mode. But essentially, I don't expect major surprises other than what we have heard about in the media. But again, that's all I can say. But again, QTerminals has an aggressive growth plan. They have a solid management team with strong operational capability, and we are quite confident that the management team can grow the business and continue to build up the port portfolio.

There are no further questions at this time. I'll now turn the call back over to the company for closing remarks.

This is Bobby Sarkar. If there are no further questions, we can end the call. I just want to apologize for the late start of the call. And I want to thank Akram and Sami for taking the time to respond to our questions and for the presentation. And we'll pick this up next quarter. Thank you so much.

Thank you very much. Thank you very much, everyone, for your interest in Milaha, and we look forward to seeing you in Q4.

This concludes today's conference call. You may now disconnect.