Qatari Investors Group Q.P.S.C. (QIGD) Earnings Call Transcript & Summary

Good day, and welcome to the Qatari Investors Group Q2 2021 Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Alex Aclimandos. Please go ahead, sir.

Thank you very much, Holly. Ladies and gentlemen, good afternoon. It's my pleasure to welcome you to the Q2 2021 earnings call of Qatari Investors Group, that I'll thereafter refer to as QIG. My name is Alex Aclimandos, and I'm the Chief Financial Officer of the group. With me on this call is Mrs. Diala Saliba, our Investor Relations Officer. As usual, I would like to remind you all that during this call and the following Q&A session, I'll be making some forward-looking statements, which, as you all know, are subject to factors of uncertainty and judgment. Those statements are based on assumptions, which are subject to risks and uncertainties that may cause results to differ materially from those expressed. Shall those assumptions change, we will not provide an update or revise publicly any statements made. We started the year with some cautious optimism, as we said last time, guided by the lunar announcement in the first week of January as well as by the rollout of the global vaccination campaign. We've seen thereafter the circulation of coronavirus variants and some restrictions being restated by authorities. Some countries went as far as imposing new lockdowns. At home here in Qatar, the state imposed restrictions in Q2. Today, many [ work ] are being lifted, and we all remain hopeful that we shall not face another wave of the pandemic by next fall. We have seen that the local authorities have slowed down the lifting of the restrictions by extending Phase 3 of the lifting of restrictions and postponing the start of Phase 4. We are also pleased to receive last month's news that the government would resume issuing business visa and reopen borders. We do expect that this will help the economic activity to restart. Not only this is good for the top line or some sectors, it also means that some of critical activities requiring foreign expertise can now be conducted, allowing us to start to plan, resume full-scale operations. We are also cautiously seeing positive signs of again of global activity. Oil prices are up from the beginning of the year and from the beginning of the second quarter, too. This is also reflected locally on the Woqod published price list. Raw material prices are up, too. Cost of services are up following labor law reforms. We continuously monitor leading and lagging inflation indicators. We also monitor the existing tensions in and around the Persian Gulf. As we communicated earlier, our strategy remains our 3 priorities: resilience, to be the first; the liquidity; and the growth being the second and the third. The restrictions imposed last year, many of which are still in place as well as the ones being stated in the latest announcements, represent a challenge to the fast and full recovery from the COVID-19 pandemic. They may have different impacts on each of the 3 priorities. We had to revisit some earlier-made decisions in light of those developments, and we are continuously monitoring in all indicators to find a suitable and timely sustainable mix between the matters. At this point in time, I have confirmed that QIG is in a sound position to withstand further shocks should they materialize. We have resources to invest for the future and seize opportunities once the pandemic subsides. During the quarter, QIG delivered QAR 30.5 million profit, indexing QAR 2.53, which is an increase of 153% versus the same period a year ago, on the revenues of QAR 155 million, which are up 4% versus the same period a year ago. On a year-to-date basis, QIG delivered QAR 67.6 million of profit, that's 74% higher than the same period a year ago, on revenues of QAR 347 million, but 4% higher than period year. Profit per share is QAR 0.05 per share and that's as we compare to the QAR 0.03 per share a year ago, of course, up as well 74%. While in Q2, we've seen a price increase of cement bags and a slowdown in the downward pricing activities that mark the previous 3 quarters, pressure remained on gross margins, mainly driven by the clinker manufacturing units being down and by the reclassification of rental income to the top line, coupled by the reclassification of the associated charges to the cost of revenue. Gross margins are down 3 points to almost 35%, 34.9%. G&A expenses are down QAR 23 million versus last year as some of the activities relating to the early stages of COVID-19 had an impact on last year's results. Financing costs are down QAR 15 million, reflecting the drop in interest rates witnessed in the post-COVID environment. As a result -- or in the COVID environment. As a result, net profit attributable to shareholders is up QAR 28.8 million and net margins are up 8 points. As you can see in the presentation made available to you earlier and on the published financial statements, many of our balance sheet indicators are favorable. During the quarter, we continued to lower the inventories on hand. They are down 42% from the beginning of the year, equivalent to QAR 120 million. Receivables are down QAR 12 million. And after payment during May to June [ of the year, through the period ], to serve the loan installment as well as the payment of the annual dividend, we have QAR 609 of unrestricted cash, that's up QAR 82 million from December and up QAR 347 million from March 2020. During 2021, we generated a positive net cash flow from operating activities of QAR 232 million. All segments of the activities are showing results in line with expectations as provided on the segment grouping of our published financials. Last, but not least, I would like to take the opportunity to address, on behalf of the companies we invest in, a call to shareholders [ subject to back from investments ] as per the Qatari laws to kindly get in touch with our Investor Relations Officer for some important communications. I thank you for your attention, and I make now the statements in Arabic. And later on, we'll be gladly taking questions. [Foreign Language] Ms. Holly, we're ready to take questions.

[Operator Instructions] We will now take our first question from Zohaib Pervez from Al Rayan Investment.

I've got 3 questions. Firstly, in your industrial and cement segment, I'm looking at the segmental information, the first half, we've seen sales improving. Is this more volumetric-related, probably because last year was a low base? Or is this price-related? Could you give us some idea on that? That's my first question. The second question is related to the real estate segment. We've seen that the net profit for this segment has improved quite a lot from like the loss of QAR 13 million to QAR 6.2 million. Is this related to -- especially the revenues have also gone up, but not in the same promotion -- proportion. So is this related to occupancy improving, pricing? Again, if you could give us some information on that. My third question is related to your inventories. Now inventories have reached QAR 161 million. I think these levels were last seen in 2015. So how do you see -- what is your reading on the inventory levels, considering that your plant still remains shut down? Are you still deciding to reduce it further? What's your strategy on the inventory levels?

Thank you, Zohaib, for the questions, many questions. Allow me to take one by one. And if I, for whatever reason, miss, or by the time I'm onto the third one, I would have forgotten the third one, I -- let me know. Anyway, your first question was related to the growth in the industrial sector and whether that was a volume or price-related. If I take the year-to-date, the net impact would be mainly volume, followed by pricing. If the only price increase that we have was on bags, they do not represent the majority of the business. So it's mainly on volume gross. The activities as well as the commercial activities that we've had in Q1, we're setting the prices of the net that we're getting from our sales [ down ]. When it comes to the second question on real estate, yes, it's related to the occupancy and mainly the occupancy of the new tower that were removed in the third quarter of last year and where other tenants are -- have started to move in and pay their rent. So that's purely the occupancy. In fact, the prices are, generally speaking, on a downward trend in terms of rent. Inventory -- some -- the right level of inventory is probably yet to be achieved. So on one hand, we have -- we've had the opportunity to use strategic inventory for having this long period of a shutdown. And this, as a matter of fact, has -- is coming to an end, by the fact that we'll be able to conduct the maintenance that requires foreign expertise and the lifting of the [ longest ] restrictions around -- or generated by COVID-19. So yes, this is to be a turbulent one, but it's definitely going to come in not too long of a time, not before either. It's not a decision that I -- we can take today and say we're starting tomorrow morning. But it's not -- I don't think that that's a decision that will be taken in a year from now. So it's in between. Did I answer your questions?

Okay. So -- yes. Just on the second question, the real estate question that I asked. So you're saying that the occupancy is leading to this improvement in your bottom line, I mean, lesser of loss or pricing?

Okay. No, I said, that, yes, I said, generally speaking, overall pricing is downward. So that's not what is helping. What is helping is ...

Pricing is downward. Okay. Okay.