Qatar Navigation Q.P.S.C. ($QNNS)

Hello, and welcome to Milaha. Please note that this call is being recorded. [Operator Instructions] I'd like to hand the call over now to Bobby Sarkar. Please go ahead.

Thank you, Gail. Hi, hello, everyone. This is Bobby Sarkar, Head of Research at QNB Financial Services. I wanted to welcome everyone to Milaha's First Quarter 2026 Results Conference Call. On this call, as usual, we have Akram Iswaisi, who's the EVP of Finance and Investments; and Sami Shtayyeh, who's the VP of Financial Planning and Analysis. So we will conduct this conference with management first reviewing the company's results, followed by a Q&A session. I would now like to turn the call over to Akram. Akram, please go ahead.

Thank you very much, Bobby. Thank you, everyone, for joining Milaha's Q1 2026 earnings call and your interest in the company. Before I get into the details of our Q1 results, I want to go over 2 topics that I expect most of you are interested in. The first has to do with last week's press release, about our realignment of business segments. And the second has to do with the regional conflict and its impact on our business. Regarding Milaha's realignment, for those of you who are unaware or who have not seen the recent press release, Milaha announced that it reorganized 2 of the 5 business segments. Those 2 that were reorganized our Maritime & Logistics and Trading basically. Maritime & Logistics now comprises container shipping, ports and logistics operations. These 3 units form the foundation for a seamless end-to-end door-to-door supply chain solutions, which is what we have been trying to build, and it was a natural step to bring them under one focused and unified segment. 3 We also formed the MTS unit, Marine Technical Services. And under that unit, we put our shipyard, ship management and shipping agency operations and combine them with our trading activities and renamed the segment Marine & Technical Services. Historically, the traded segment included heavy equipment sales as well as bunker and marine-related sales and services. The marine-related activities serve the same customer base, vessel owners as our shipyard, ship management and shipping agency businesses as we -- they all serve one client, the vessel owners. By bringing all of these operations under one umbrella and focusing on serving the customer, we have created a dedicated segment that delivers a true one-stop shop solution for vessel owners and operators. This realignment did not happen in isolation, and has been in the works for some time with some synergies already delivered in recent quarters. We are now formally closing loop on the effort following the appointment of an executive EVP to oversee the Marina & Technical Services segment.as well as the recent sale and investment of the Hino dealership, which happened a few weeks ago and which we owned since 1982. While relatively small in terms of contribution to the group, the exit of the Hino dealership reinforces our long-term strategy of concentrating on core business activities and exiting noncore activities. Milaha has remaining 3 business segments will remain structurally unchanged. You will have seen that we started reporting financials under this new structure starting this quarter. In terms of the regional uplift. From the start of the war, the safety of our people was our top priority, with operations spread across multiple locations, ensuring that every employee returns home safely each day was our top priority. In parallel, we focused on maintaining and supporting supply chains to the State of Qatar and to our clients. We quickly diverted container ships to support supply lines, establish new trade routes and plugs into our agency network to keep cargo moving. And we came up with creative ways to do this in the midst of a very disruptive environment. That's operationally. But financially, we also took some preemptive actions. We prudently implemented cost control measures and delayed some nonessential spend. But let me be clear, we have not stopped investments. We're still focused on growth and growing the top line. The operational teams and assets on stable to support our clients once our clients result normal operations, and this is our commitment, and we fully believe that our investment in our clients and relationships in our people and assets and in our growth initiatives will pay off post complex resolution. So how has this war impacted our various segments? Each one really needs to be looked at on its own and same will go through our view in the element section. But in short, much of the impact is contained within our Offshore segment. This segment caters to the energy sector with a concentration in Qatar. So the oil and gas production limited or on hold, we have had vessel suspensions impacted revenue but also increased costs such as insurance, more risk bonus to crew, demobilization, et cetera, all of which negatively impacted our results. Ironically, while our Offshore segment was most impacted, we also are still most bullish on the segment once things settle down. The fundamentals are strong. We have a phenomenal strong platform. We've invested in assets, and we believe we are primed to be beneficiaries of the work to come. Now on to our Q1 results. I'll start by going over our consolidated financial results.and then move on to our various individual business segments before turning it over to Sami to go over our outlook. As usual, we will end the call with Q&A. The key highlights of our financial results. Milaha's operating revenues came in at QAR 874 million for the 3 months ended March 31, 2026, compared with QAR 759 million for the same period in 2025 or an increase of 15%. Operating profit came in at QAR 150 million for the 3 months ended March 31, 2026, compared with QAR 212 million for the same period in 2025 for a decrease of 29%. Net profit for the 3 months ended March 31, 2026, was QAR 297 million, compared with QAR 374 million for the same period in 2025 for a decrease of 21%. And lastly, our earnings per share was QAR 0.26 for the 3 months ended March 31, 2026, compared with QAR 0.33 for the same period in 2025. Now moving on to the business segments, starting with Maritime & Logistics. Operating revenue for Maritime & Logistics decreased by 15% or QAR 26 million going from QAR 181 million in 2025 to QAR 154 million in 2026, driven by our container shipping units, which saw volumes drop and thus revenue thus revenue by QAR 38 million due to the regional conflict. In our Logistics unit, higher project cargo movement, particularly in January and February helped drive QAR 11 million increase versus 2025. But then operating expenses decreased by QAR 17 million, with most of that being variable in nature and tied to the revenue drop. Nonoperating income decreased by QAR 6 million, coming primarily from our Q terminals joint arrangement, largely due to reduced volumes at Hamad Port as a result of the regional conflict. And that brings us to an overall bottom line decrease of QAR 15 million versus 2025. With respect to Offshore, Offshore continued to show in top line growth with revenue up 25% or QAR 102 million despite vessel and work interruptions and suspensions faced in the month of March due to the regional conflict. The growth came from additional work and the inclusion of a new vessel in Q2 of '25. Overall expenses increased by QAR 132 million with reduced margins on EPCIC work. as that nears completion and war-related expenses driving the misalignment with revenue and thus impacted margins. Expenses for war risk insurance coverage, war risk bonus paid to crew, demobilization and remobilization costs all drove expenses upwards. QAR 3 million of increased tax provisions drove nonoperating expenses up and overall profit for the segment ended 51% or QAR 36 million down versus 2025. Gas & Petrochem. There was some modest growth in revenue versus '25, totaling QAR 5 million, going from QAR 58 million to QAR 63 million in '26. However, the nonrecurrence of a favorable onetime item recorded in 2025, along with the loss of income from our VLGC divestment last year, reduced net profit for the segment by QAR 5 million going from QAR 187 million to QAR 182 million in 2026. Our newly reported Marine & Technical Services. This segment reported a slight increase in revenue, going from QAR 89 million in '25 to QAR 95 million in '26, driven by proceeds from the sale of our Hino dealership primarily, which I spoke about earlier. Further revenue growth was hampered by the regional conflict, obviously, in this segment. These provisions for bad debt added war-related costs and other miscellaneous expenses reduced net profit by QAR 9 million versus last year, going from QAR 11 million to QAR 226 million. Lastly, in Capital, there are some revenue expense moving parts, but a short investments was impacted by QAR 4 million in lower dividends and QAR 6 million from the non-reoccurrence of a favorable one-off adjustment reported in '25. Those drove Capital's net profit decrease of [ QAR 13 million ] compared to 2025. And that wraps up the segments, and I will now turn it over to Sami to discuss the outlook for the rest of the year.

Thank you, Akram. Starting with Maritime & Logistics. In container shipping, most of our vessels are actually outside of the Strait of Hormuz and are working on moving cargo, mainly from China and India to Oman. Surcharges have offset increased expenses such as insurance. The vessels in the Arabian Gulf were operating coastal routes and intra-Gulf with similar dynamics where surcharges are largely offsetting the increased costs. In Logistics, we can do what others cannot simply because of, amongst other things, linkages with our container shipping arm. We believe we're well positioned for growth as clients are seeing how we're able to move their cargo. Our acute terminals joint arrangement is financially exposed during the Strait of Hormuz closure with limited ships calling Hamad Port volumes are similarly limited and that affects profitability. In Offshore, once the conflict is resolved, we expect to see strong recovery across the board. However, up until that happens, the segment is expected to underperform. In Gas & Petrochem, overall, we expect limited volatility due to the long-term nature of contracts we have in most business units. There is some exposure during the conflict period and particularly on the OpEx side with additional insurance and crew pay but nothing material. In Marine & Technical Services, focus on this new segment will be on cross-selling services to existing and potential clients and extracting further synergies from the reorganization. While the conflict is ongoing, ship services are impacted due to fewer vessel calls to [indiscernible]. On the flip side, however, the shipyard is active and operations are ongoing. So it's really a mixed bag on performance up until the conflict is resolved for this segment. And lastly, Capital where the focus will continue to be on yield enhancement. The ongoing conflict is not expected to have much, if any, impact on this segment. With that, we'll now open it up for questions and answers, Operator.

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

One question from my side, which is related to the Offshore [indiscernible] segment. So despite the conflict, the managed to grow revenues by approximately QAR 102 million. Y-o-Y, as mentioned, EBIT went down to some bonuses and costs that was incurred in the month of March. So can you shed some light on what was I mean, a bit during the months of Jan and Feb, pre-additional cost in because it seems it was really strong before the conflict impacting the cost structure of the segment?

Yes. Thank you for the question. So I think if -- I mean you highlighted, of course, an excellent point that we've been within our ticketing, which was we were in a good growth trajectory first couple of months until we got sucker-punched right? And that's what I call it. In March, we got sucker punch. And so we're in a good growth trajectory. We had a new vessel deployed, and there was plenty of work. And so come March, we had to deal with a difficult situation where we're effectively in a defensive position, trying to first of all, ensure that we protect our people, protect our assets and ensure that we support our clients, right, obviously, because we are -- we consider ourselves an anchor -- part of the key cut of Qatar infrastructure and anchor supporter of a lot of our clients and all best clients in Qatar. So we've been busy supporting our clients with a lot of different things, obviously, during March. And so as you've alluded to, January and February were good months. And then March, we've had to incur additional costs. And those costs include increased -- significant increase in insurance premiums and obviously, as you're probably well aware, additional bonuses, additional crew cost that we have to incur. Usually, our crew, they are mobilized on vessels and then demobilized. There were some delays on that because of difficulty in evacuating people. And so there's significant costs that we have to incur in the month of March, be able to deal with this situation. I can tell you that, post March, we're much more focused on managing these costs, much more focused on replacing the revenue that we've lost, but again, March was more of a -- when you get sucker-punched, you're trying to recover on that one, you figure out what was the damage? How has that impacted? And then coming up with plans on how to deal with it. And this is exactly what we've done.

Okay. So just to follow up on that. So I mean, if it wasn't for the conflict, is it reasonable to assume an EBIT margin of 20%, 19%, is similar to the previous year for the first quarter, if things were normal? Or that might even be slightly higher given the revenue increase that we have been this during the month of Jan and Feb?.

Honestly, we've never given guidance on those margins. But again, our growth trajectory, we've said that again, historically, we've invested -- we've announced and we mentioned the market how much CapEx we're investing in Offshore. And again, you've seen March and February, the result of the acquisition of the new vessel, and there's plenty of work in Qatar. I mean, everybody knows that in the market. It's still a growing market and a significant potential, obviously, before the war. And so we were at a good growth trajectory, and we got primarily impacted because of the more. And so that's really -- that's all I can comment at this point. I cannot disclose much about margins because we've never discussed that publicly. But again, we were a good growth trajectory. And again, our view as management, once the conflict is over, we will come back -- I mean this business will come back roaring and, there's going to be plenty of work locally and as well as regionally. So we're quite optimistic that once this conflict is over, and hopefully, it's over soon, we will see significant recovery in this business.

Your next question comes from the line of [indiscernible] with [ Asmar Group. ]

So just a quick question, kind of in the same segment of Offshore and Marine. When we're looking at utilizations across vessel chartering and services, I mean where did the -- where does the utilization come in for the first quarter?

Well, we listen, it's difficult to give you an accurate utilization. I'll tell you why. Utilization was high for the first couple of months. And then in the month of March, we had some vessels that were temporarily suspended -- but again, those vessels are being called in and out. So it's not a number that I want to disclose right now in the market just simply because the liquidity of the situation and because of the fact that some vessels were suspended temporally but then they brought back to support the business. So it's really one of those situations where it's a really fluid number. So month of March was a tough month for us, some vessels were ended, but there were still working. So that number continues to evolve on a daily basis, to be frank with you..

Your next question comes from the line of [ Nikhil Butta ].

Good to know that you guys are taking Q&A and you're not able to [indiscernible] the bullet Okay. Coming back to in terms of your operating expenses, which has gone on the high. But on the other flips side, I wanted to understand in terms of managing your cargoes between Dubai and Oman, how is it going on right now? And maybe on the [indiscernible] also the port. So what is the current scenario right now? Can you tell us?

Well, listen, I mean, I think you probably are well aware that when the situation happened with solutions to serve our clients. I mean at the end of the day, we worked with our clients and suppliers to find alternative logistics routes through Saudi and Oman. And so we've been able to -- let's put it this way, we've been able to create trade corridors through Oman and through Saudi to serve our clients. And that's [indiscernible] we already have our platform with strong capabilities, and we were nimble enough to jump in, create solutions and execute. So we are moving cargo from Oman to Qatar as well as Saudi. And the other thing as well is that today, we have some vessels a vessels that were basically stuck outside of the Strait of Hormuz. And we are leveraging those coater ships to be able to complete the supply chain. So that's the only thing that we've done. Again, we remobilized our vessels. We have able to use those vessels to support creating a supply chain that can serve opacity. So this is an area that we've done very well on. We're able to come up with creative solutions, support the country, support our clients. And we believe that even those relationships that we were able to develop during this crisis and our ability to show what we could deliver is going to actually translate into long-term relationships which could help grow this logistics business.

Okay. So just a word on in terms of your insurance premiums, which you mentioned, have increased. So how you are seeing [indiscernible] the right now in the month of February and March. How do you see that?

I mean it's really more or less at the same level. And again, I think you know how insurance premiums are. So for some, on average, I would tell you, we've increased in March by a couple of million dollars. in April, it could go up a little bit more. So it's still evolving, but more or less, it should be within that range.

Your next question comes from the line of [indiscernible] with [indiscernible]. Please go ahead.

I have a couple of questions following up to the previous questions related to offshore. So one question is related to the CapEx program. Do you expect any delays in the CapEx that is expected to be deployed? So I think you've mentioned QAR 3 billion of CapEx. And has the time line changed?

Well, listen, right now, it's very difficult to tell you. I mean, we already have some new builds in the process that we've already contracted, and that will be deliverable throughout the year. But the rest of the CapEx, it's very difficult to really opine on how we're going to handle that. We are looking at the situation month by month, and we have plans. So if we reach the end of April, there are certain plans that will be triggered and executed. We reached the end of May, there are certain plans that are going to be triggered and executed. So in general, we've got a plan month-by-month plan of how to deal with CapEx items, OpEx items. And on top of that, to be frank with you, even revenue. I mean I can tell you coming out of the gates, we are pushing hard right now on growth. So this is an area that we're really focused on because again, we're not going to sit here and continue to take punches. And we did in the month of March, but we are actually right now on the offensive, trying to grow the business within Qatar and outside of Qatar, to be frank with you. And you will see from this over the next 6 months. But realistically speaking, it's difficult for me to come and tell you right now how this is going to play out in terms of CapEx. We need to see how the situation evolves. We're optimistic with this conflict will get resolved soon. And then at that point in time, we can give you a little bit more visibility. But I can tell you that we already have some contracted vessels that will be delivered effectively the second half of the year.

Got it. And if I could follow up. As of today, how much of the let's say, CapEx that went off hire and back and operational? Have you seen some...

We can't really comment on that right now just because of the -- again, the confidentiality, we can't. And the situation is fluid, to be honest with you, it's in and out on a regular basis. But I can tell you that what we're doing is working closely with our clients, making sure that we support them. And you understand the situation and the difficulty of the situation. So what we committed to do is making sure that operationally, we're always a standby to respond to the call whenever the client calls as we need you. So this is our commitment right now to our clients in Qatar.

Okay. And one last question about the Maritime & Logistics segment. So do you have any plans to turn around the segment in the future because it looks like with the commerce nature of this segment, you've been facing some pressures. So what's the long-term plan for the segment?

Well, I mean, I mentioned at the beginning of the call that we restructured the organization, right? And so that should sort of give you an indication that we are restructuring because we're positioning ourselves for growth. I mean this is something that we have been working on, which is building -- if you look at logistics, container shipping and the port business, we are looking at building an integrated platform that we can -- and again, the reason putting it together is because we want to be able to build a platform that we can grow regionally as well as internationally. So part of the restructuring was to position the business for growth. and to divest from noncore activities or distractions, but we are very keen on growing that logistics and container ship in business. And you will see, again, I think the second half of the year, we'll continue to see good results from logistics as we continue to support the country and the region in terms of dealing with the situation. But the plans for turning around that division started already 1 year, 1.5 years ago, and I've mentioned that on previous calls. And I also mentioned that we hired a an executive -- seasoned executives to give that business division and to turn it around. And in fact, that turnaround plan has been working. And that turnaround plan, including restructuring the business, refocusing and looking at growth opportunities within Qatar as well as international. Again, our main focus right now is supporting the country, supporting our clients and making sure that we support the country and maintaining its supply chain and being able to bring food and products into the country, and that's our primary goal right now.

Your next question comes from the line of [indiscernible] with [indiscernible].

My question is on the Gas & Petchem outlook. As a majority shareholder in [indiscernible], what are your expectations for the CapEx program? And do you guys expect that Qatar Energy will be able to fulfill the payments over the long term?

Unfortunately, we really can't comment [indiscernible]. That's something I unfortunately, I cannot comment on this call, but we have the absolute confidence in [indiscernible] and the Qatar Energy that they will continue support the CapEx plans [indiscernible]. Unfortunately, there's not much more I can say about that.

Sure, sure. I mean maybe on your own LNG carriers, which you have, both the jointly and the fully owned ones. I mean you say that the outlook is stable. Do you expect the clients may default on any payments or the payments may be delayed if they're not being used or these contractually -- okay. So that contractually has to be paid...

Listen, the vessels are contracted. The LNG market today, if you look at the spot market, they're phenomenal today. So you're really in a fantastic market. The LNG market is a fantastic market to be in today. And so -- but more importantly, I'm not really worried about delay in payments or default. We're confident in our quality to be able to pay.

Thank you, everyone. That concludes our Q&A session for today. I would like to turn the call back over to Bobby for the closing remarks.

Thank you, Gail. If this is all the questions we have for today. I want to thank Akram and Sami for taking the time to go over the presentation and then answering your questions. Thanks, everyone, and we'll pick this up again next quarter.

Thank you. Thank you all for joining. You may now all disconnect. Have a nice day ahead.