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

Hello, everyone, and welcome to Milaha Qatar Navigation Conference Call. Please note that this call is being recorded. I would now like to hand the call over to Bobby Sarkar. Please go ahead.

Thank you, operator. Hi. Hello, everyone. This is Bobby Sarkar, Head of Research at QNB Financial Services. I wanted to welcome everyone to Milaha's Fourth Quarter and Fiscal Year 2025 Results Conference Call. On this call, we have Akram Iswaisi, who is the EVP of Finance and Investments; and Shami Shtayyeh, VP of Financial Planning and Analysis. So we will conduct this conference with management first, going over the company's results, followed by Q&A. I would now like to turn the call over to Akram. Akram, please go ahead.

Thanks so much, Bobby. Thank you, everyone, for joining Milaha's Full Year 2025 Earnings Call and your interest in the company. '25 was a remarkable and record-breaking year for us, with all our segments posting year-over-year growth with the exception of only one. In our core Marine-related segment, Offshore continues to shine with over 50% net income growth and consistent yearly gains in operating profit margins. We remain committed and bullish on this segment, and we continue to invest in new vessels and capabilities to ensure continued success. On Gas & Petrochem, there were several moving parts impacting our financials, which we'll come into in a few minutes. But aside from net profit growth in our largest segment, we strategically divested from a historically profitable VLGC business. Much work behind the scenes went into that and is another what fits in strategically and cutting loose of what doesn't. Our Maritime & Logistics business faced headwinds that we've been talking about for quite some time. Container shipping rates remained well below levels of 2024 with geopolitical issues, additional vessel capacity coming online and the basic supply and demand economics, each impacting our business in a negative way. In Logistics, the competitive landscape is intense, with margins remaining razor-thin and under pressure, but with the addition of new products and service offerings, such as pharma and chemicals, we're confident that things will move in the right direction. Overall, a good year that we're very proud of. And now onto the results. I'll start by discussing our consolidated financial results and move into our segments. The key highlights of our financial results: Milaha's operating revenues came in at QAR 3.3 billion for the year of 2025 compared with QAR 2.8 billion for the same period in 2024 for an increase of 17%. Operating profit came in at QAR 669 million for the full year 2025 compared with QAR 536 million for the same period in '24 or an increase of 25%. Net profit for the full year of '25 was QAR 1.27 billion compared with QAR 1.12 billion for the same period of '24 or an increase of 13%. And lastly, our earnings per share was QAR 1.12 for the full year of '25 compared with QAR 0.99 for the same period. Now digging deeper into our segments, starting with Maritime & Logistics. Operating revenue from Maritime & Logistics increased by QAR 36 million, going from QAR 828 million in '24 to QAR 864 million in '25, led by our container shipping unit, and this was largely the result of the full year benefit of our China routes that picked up in the second half of '24. Operating expenses increased by QAR 40 million and broken as follows: QAR 19 million of the increase being variable in nature and tied to the revenue growth, QAR 38 million of the increase coming mainly from the right-of-use accounting for 2 chartered and container vessels that joined our fleet in Q4 of '24, QAR 31 million increase in salaries and wages due to increased crewing costs in our Offshore segment along with additional staffing in our other units, QAR 15 million increase in other operating expenses, mainly attributable to one-off excise tax payment recorded in '25. And lastly, we had QAR 38 million in increased fleet and technical costs with our Offshore segment due to additional fleet expenses related to new vessel additions. Nonoperating income increased by QAR 27 million with better performance from our QTerminals joint arrangements, more than offsetting lower gains on the sale of assets that were recorded in '24. And that brings us to an overall bottom line decrease of QAR 7 million versus last year. In Offshore, our operating revenue grew by QAR 471 million or 32% versus last year. Increased project work and EPCI-related work, and the addition of 3 vessels drove that growth. Overall expenses increased by QAR 328 million. QAR 173 million are due to operating supplies and expenses being directly variable in nature and tied to the growth in revenue. QAR 52 million increase in salaries and wages from increased staffing to support current and expected future expansion. And lastly, a QAR 45 million increase in depreciation and a QAR 39 million increase in vessel technical expenses, all primarily driven by fleet additions to fleet growth. At the nonoperating level, there was a QAR 35 million increase in expenses, primarily driven by increased tax provision tied to the recently enacted global minimum tax, which was implemented in Qatar in 2025. The net income result was year-over-year growth of QAR 107 million or 52%. Moving on to Gas & Petrochem. Operating revenue increased by QAR 57 million, going from QAR 246 million in '24 to QAR 304 million in '25 for an increase of 23%. That increase was driven by 2 VLGCs that were primarily part of the Gulf LPG joint venture that we had with Nakilat, which we took full ownership with in early 2025. After we took ownership of the vessels, we started reporting results by line as operating revenue as opposed to reporting on the operating profit level as our share of results of JVs, which was done previously. Operating expenses increased by QAR 20 million, driven mainly by the full consolidation of the 2 VLGCs we acquired. At the nonoperating level, profits increased by QAR 6 million, driven by the following: an QAR 84 million gain on the sale of the 2 VLGCs that I just referred to above; QAR 119 million lower result from our joint ventures. This is mainly Gulf LPG and is due to us consolidating line for line in 2025, along with us divesting QAR 31 million impairment; and lastly, a QAR 12 million increase in our tax provision. Our profit for the segment came in at QAR 575 million versus QAR 726 million in '24 for an increase of 4%. Our trading business units recorded a slight increase in revenue going from QAR 196 million in '24 to QAR 201 million in 2025, mainly from higher marine-related bunker sales. Operating expenses came in lower by QAR 5 million, driven by provisions for obsolete and slow-moving items, with the end result being a QAR 10 million upward swing in the bottom line versus last year. Lastly, in capital. Revenues dropped by 9% or QAR 38 million versus the same period last year, with QAR 19 million drop from lower Qatar Quarries sales and a QAR 24 million drop coming from our investment unit. Investments was impacted by QAR 33 million in lower local equity dividend income due to a onetime additional midyear distribution in '24. The lower dividends were partially offset by higher returns from the rest of the investment portfolio. On the cost side, total expenses came down by QAR 16 million, with QAR 15 million of that related to lower Qatar Quarries cost of goods sold tied to the reduced sales. And at the nonoperating income level, there was QAR 29 million pickup versus. We had QAR 54 million in lower real estate impairments, partially offset by QAR 13 million in higher tax provision and QAR 10 million in lower interest income. All in all, capital recorded a net profit increase of QAR 7 million compared to the same period last year. And that wraps up the segments, and I will turn this over to Sami to discuss our outlook for the rest of the year.

Thank you, Akram. Starting with Maritime & Logistics. On the container shipping side, we expect rates to remain volatile given political and economic trade and tariff issues. In Logistics, pretty much the same story as before. The environment remains very competitive and challenging but we're optimistic that new product and service offerings and turnaround efforts will improve results. In Offshore, on the support vessels and services side, we expect to see continued growth, particularly longer term with all the expansion work in the Qatar's oil and gas industry. For the harbor and industrial logistics operations, we expect stable revenue given the long-term nature of most contracts. In Gas & and Petrochem overall, we expect limited volatility due to the long-term nature of contracts we have in most business units, particularly after exiting the VLGC business. In trading, our focus remains on optimizing the segment and continuing our focus on profitable growth and margin improvement. And lastly, in capital, where we will continue to focus on yield enhancement. And with that, operator, we'll now open up for questions.

[Operator Instructions] Your first question comes from the line of Mohammed Al-Thunayan of Jadwa Investment.

Congratulations on a great set of results. Two questions from my side. The first one is related to the significant improvement in the offshore segment and more specifically in the fourth quarter of '25. So the segment reported revenue of QAR 560 million and bps of 118 million. So should we expect this improvement to continue, I mean, with us during 2026? Or was there any one-off positives or fast execution to some of the company's EPCI contracts during the fourth quarter of this year? That's the first question.

Okay. Thank you for your question. I mean, if you look at our business and our revenue mix, we have a mix of largely contracted revenue. So you have visibility on long-term cash flow, essentially. And then we also have a percentage of our revenue tied to contracts. So there going to be some volatility all in all. But the next 2 to 5 years, in our plan, we're expecting a significant number of service contracts, EPCI work. So the momentum will continue nfor the next few years, so we're very optimistic. And I've mentioned that in previous calls, we have a large CapEx program with a big chunk of that actually going offshore to continue to invest in new vessels and new capabilities and equipment because we're very optimistic offshore. Offshore is going to be a major driving engine for Milaha for the next 2 to 5 years at least.

That's clear. And the second question is related to, I mean, I think the significant improvement in QTerminals. So the company reported QAR 52 million, up from QAR 23 million last year due to higher revenues, which were up by 7% approximately. So should we expect this momentum to continue as well? And also, what's the reason behind the decline in depreciation and amortization for QTerminals? It dropped from QAR 120 million last year to QAR 112 million this year.

Well, I mean, let's -- I don't want to comment too much about -- again, it's a company that we're invested in. But let me tell you, let's start off, we hired a new CEO for QTerminals, a very capable and seasoned executive, who right off the bat already started restructuring the organization, cleaning up the balance sheet, cleaning up the P&L, and you begin to see the results of that in the performance of QTerminals. That's number one. Number two, in the past, QTerminals was impacted by various geopolitical issues not only -- I mean outside of Qatar. Effectively, we have investments outside of Qatar so there, was an impact there, and that had an impact on volumes. So, in general, there is a growth strategy for that company, and we're very optimistic on the, let's say, the growth plans for that business unit, for that entity. And if you look at -- what was your last -- I mean, aside from that, I don't want to comment too much on the P&L. But there's been cost cutting, there's been exiting of, let's say, selling of non-performing assets. So you see that reflected in potentially lower depreciation, improvement in existing asset utilization. So that's basically what's happening. So there's a good amount of optimization that's happening not only across QTerminals but a lot of the business units that we are invested in.

Yes. And just a couple of questions maybe on the first question. So you mentioned that there is a significant CapEx that will be basically in the offshore segment. So capital commitments from the financials, it seems that's around QAR 2 billion, up from QAR 1.7 billion last year. So is it fair to assume that majority of those capital commitments would be go toward the offshore segment?

Not all of them. I mean, we as an organization, if you look at recently, we've announced our joint venture with Fincantieri. So what we've done is we have a new strategy for the organization that we will share more in the future, but part of that is focusing on defense and defense services. Milaha, as the oldest shipping company in Qatar, has the platform and the capabilities and the depth to continue to serve the various Qatari, let's say, pillars. Qatar entities, including the defense sector or different sectors between oil and gas, we're already invested in the oil and gas sector, and we are a major supporter of the oil and gas sector of Qatar. And so the defense is another area where we will continue to grow. We're already doing work in that space on a minor scale but that's going to be a key area of our strategy going forward. Because again, we do have the capability to serve our stakeholders. And so if you look at Milaha as an organization, it's an integrated platform. And we have the ability to serve, trade, oil and gas, and defense.

The next question comes from the line of Nikhil Phutane of CBFS. Your line is now open.

Well, regarding your first of all, the gas and petrochem division. I mean the additional of your VLGC, which took place in the second quarter. Yes, I mean the initial bump up was there in the second and the third quarter. I mean second quarter, but from the third quarter, fourth quarter, we have seen a downturn. Am I right to assume that has got to do with some loss of contracts because largely it looks like a stable revenue stream for you?

You're talking about gas and petchem, right?

Yes.

So if you look at gas and petchem, right, if you talk about -- well if you look -- you're comparing Q3 to Q4?

Right.

Okay. Well, if you look at Q3 to Q4, Q3 had a huge pickup, primarily because we booked again on the sale of the VLGC vessels, right? QR 84 million. And there's also Nakilat. If you look at Nakilat's numbers, which get reported in gas and petchem Q4 was lower than Q3. So it's just, again, a function of timing, and again, Nakilat's results and the timing related to the gain on the sail of the VLGC. Because gas and petchem, essentially, most of our vessels are contracted. So the only variability you will have would be Nakilat. And then one-off items like the gain on the VLGC sale, which was recorded in Q3 and obviously will not recur in Q4.

Okay. Coming to your other things in terms of maritime and logistics. container shipping, for example, again, we are seeing coming down. You mentioned the China factor. No doubt it has improved initially in 2024, second half and first half 2025. But of late, we are seeing a downturn in that also in terms of container shipping revenues. I mean there has been a sequential downturn actually in the third quarter. So what has been the reason behind that?

I mean that business is tied to -- it's a business, right? So rates are not. They're tied to the market experience volatility. So if you look at tankers in general, look at CPP products, extremely volatile. Container shipping is also volatile. And if you look at the Shanghai Containerized Freight Index, you will see that last year, freight rates were extremely high and close to about maybe 3,800 to 4,000 December 2025 about 1,800. So again, if you look at that index, that will tell you exactly what happened in the market. And again, that's a function of a lot of different things, right, extra vessels in the market, vessel increase rates things normalize, rates come down. And that's primarily what has impacted container shipping. You'll see that if you look at the Shanghai Containerized Freight Index, you'll see that volatility, you'll understand that.

I mean how do you see that right now currently going on in the first quarter? I mean how we can assume going forward in 2026?

I can't give you a forecast. Again, it's driven by the market. And what we continue to focus on is how do we manage our cost, right? How do we react to that business is volatile, what matters is how you react to the market and how you position yourself. What goes down? I mean, again, rates come down, eventually, they're going to have to come up again. So you have to look at the fundamentals of the market and understand how you position yourselves. Do you buy vessels when the market goes down? Do you position yourself for the recovery of the market and the pickup in the market? And that's how we operate the business.

In that case, do you see to extent, let us assume first quarter could be again what you call volatile situation price and your freight logistics and your shipyard could support whatever downturn we are seeing it so that overall revenue for maritime could be stabilized. Do you see that going forward?

I mean, again, it's very difficult to predict that. If you look at, again, if you look at the Shanghai Freight Index, it dipped in Q4, but it go back up again. If that trend continues, that means in Q4, rates will go up again. But again, we're impacted by a lot of geopolitical issues today, which again could mean that rates will end up going up again. It is very difficult to predict.

And lastly, any impairments which you likely see it going forward in any divisions?

We don't have a forecast of impairments. I mentioned that in previous calls. But we follow the accounting standards. We engage with the auditors, and we deal with it accordingly. We cannot forecast impairments in what they should or should not.

[Operator Instructions] Your next question comes from the line of [ Hussam Moatassem ] of Ashmore.

So a couple of questions from me. Just the first is if we can get a little bit more color when you talk about the expansion in the offshore segment. So is that specifically in the service sector? And is that linked to North Field? And just on that, is that kind of ongoing servicing or is that just in the expansion phase?

Well, I mean if you look at the expansion of Qatar, there's significant amount of work in North Field expansion clearly. And some of it has to do with the initial phase or construction, right? But there's a lot of work that to build resilient cash flows resilient revenues. So when we invest in CapEx, we have a big budget CapEx. I mentioned that going to be anywhere in the range of QAR 1 billion to QAR 1.5 billion. We're not going to invest CapEx in short-term projects. Our plan is to invest in long-term contracts supported by, and that's really what we're focused on. Repairs and maintenance is going to be an ongoing work as well, and the beauty of that is that it doesn't involve CapEx. But because we have the platform, the vessels, the assets and the capabilities, that would be additional work that that just adds to the bottom line, and it's higher margin work.

So any revenue that's going to come in or any CapEx plan is going to be linked to the long-term kind of visible revenue?

There'll always be an element of services that we'll provide. There might be [inaudible] quarter to quarter because that's, again, services could be a one-year project. It could be six months, it could be a three-month project. But most of the work or the revenue that we're targeting is recurring revenue because, again, we are investing heavy CapEx and cWe want to make sure that that investment is supported by contracted long-term cash flow.

Okay. That's clear. And just one more, in terms of just the gas and petchem segment, so am I right in assuming there's kind of no more spot exposure and the vessels within that are now all on long-term chargers?

That's correct.

We don't have any further questions. I'd now like to hand back to Bobby for final remarks.

Okay. Thank you. If we don't have any further questions, we can end the call for today. I want to thank Akram and Sami for taking the time to go over the presentation and answer all questions, and we like to speak again next quarter. Thanks, everyone.

Thank you so much, everyone. I appreciate it.

Thank you for attending today's session. Have a good day. Goodbye.