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

Good day, and welcome to the Qatari Investors Group Third Quarter 2021 Results Conference Call. Today's conference is being recorded. And at this time, I'd like to turn the call over to [Indiscernible]. Please go ahead, sir.

Good day, everyone. I'm [ Ead Thorpe ] from QNB Financial Services. I want to welcome everyone to Qatari Investors Group Third Quarter 2021 Financial Results Conference Call on this call from QIGD company, we have Alex Aclimandos, Chief Financial Officer. We will conduct this conference call with management first, reviewing the company's results followed by a Q&A session. I will turn the call over to Alex. Go ahead, Alex.

Thank you, [ Ead ]. Ladies and gentlemen, good afternoon, good morning, good evening, wherever you sit around the globe. It is my pleasure to welcome you to the Q3 2021 earnings call of Qatari Investors Group that is thereafter referred to as QIG. As Mr. [ Thorpe ] just mentioned, my name is Alex Aclimandos, I'm the Chief Financial Officer of the group, and we can go ahead. As usual, I would like to remind you all that during this call and the following Q&A session, I'll be making some future-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. As you all know, we started the year with some cautious optimism guided by the [ lunar ] announcement in the first week of January as well as by the rollout of the nationwide and, I would even say, global-wide vaccination campaign. We've seen there are recirculation of coronavirus variants and some restrictions being reinstated by authorities. Some countries went as far as imposing new lockdowns. At home, here in the State of Qatar, we lifted many of the restrictions. We all remain hopeful that we shall not face another wave of the pandemic and a lockdown affecting many business areas. We're also cautiously seeing positive signs of regain of global economic activity. Oil prices are up from the beginning of the year and so are all energy prices. This is also reflected locally on WOQOD published price list. Raw material prices are up too. Cost of services are up following labor reforms. As I mentioned in our last quarter earnings call, we continuously monitor both leading and lagging inflation indicators. We also monitor the persisting tensions in and around the Persian Gulf. As we communicated early, our strategy remains around 3 priorities; the resilience, the liquidity and the growth. The restrictions imposed last year, many of which are still in place, as well as the ones reinstated in the last announcement, they presented challenges to the fast and full recovery from COVID-19. They may have different impact on each of the 3 priorities. We had to revisit some earlier made decisions in light of those developments, and we continuously monitor all indicators to find a suitable and timely sustainable mix between the measures. At this point in time, we are here in a sound position to withstand further shocks should they materialize. We have resources to invest for the future and to seize opportunities. During the quarter, QIG delivered QAR 32 million of profit, indexing QAR 3.90 and an increase of 290% versus the same period a year ago on revenues of QAR 147 million, which were 20% lower than a year ago. On a year-to-date basis, we achieved almost 100 -- QAR 99.7 million of profit. That's up 112% versus the same period a year ago, on the revenues of QAR 497 million, which are 5% lower than the same period a year ago. Profit per share is QAR 0.08 versus QAR 0.04 a share a year earlier, also up 112%. While in Q2, we increased the selling price of cement bags. We increased the selling price of bulk in September. We note the slowdown in the downward pricing activities that marked the previous year. 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 revenues. Gross margins stand at 35%. G&A expenses are down QAR 45 million versus last year and some of the activities related to the early stages of COVID-19 had an impact on last year's results. Financing costs are down QAR 16 million, reflecting the drop in interest rate witnessed post COVID. As a result, the net profitable attributable to shareholders is up QAR 53 million and net margins are up 11 points, reaching 20%. As you can see in the presentation made available to you earlier and in 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 now down [ 38% ] from the beginning of the year, equivalent to QAR 160 million. Receivables are flat. And after payment during the year-to-date period of a loan installment and the annual dividend, we have QAR 627 million of unrestricted cash, up QAR 101 million from December and QAR 366 million from March 2020. During 2021, we generated a positive net cash flow of QAR 331 million. Our reported profit could have been higher if global transportation prices were kept unchanged. QIG companies are not in isolation of the global supply chain disruption. And we're closely monitoring how and when it is all going to unfold as well as how to minimize its impact on us. All segments of activities are showing results in line with expectation. In the past 20 months, there was significant disruption in other competitive activities in the Qatari cement industry. We tend to believe that dust has settled and that you can now work on regaining a comfortable market share. A key contributor to this is the government of Qatar's decision to remove some COVID-related restrictions, allowing us to restart operations to produce clinker in the next couple of weeks. We are seeing a favorable return to pre-pandemic levels as well on [indiscernible]. This is all great news, especially as we get ready to the Qatar '22 events. 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 tax on the investments as per the Qatari tax laws. Kindly get in touch with our investor relations officer for some important communication. I thank you for your attention. I'll make the statement in Arabic and, we'll gladly take the questions thereafter.

[Operator Instructions]

I'll just make the statement in Arabic before we move to the questions, please. [Foreign Language] Thank you very much all. I'm ready to take questions.

[Operator Instructions] We'll now take the first question from [ Anastasios Dalgiannakis ] at Al Faisal.

Basically, I just want to set a little bit the situation with the inventories. So we have gone from close to QAR 0.5 billion down to QAR 100 million in 2 years. And as you observed already in these 2 years now, costs have escalated rapidly. So can you give us a bit of sense of where do you see inventories going? And what will be the impact of rebuilding inventory at this higher level in the gross margin?

Okay. Thank you for your question. It's tough to predict where inventory will end because as I was also mentioning in my call, with the disruption that happens in the international supply chain, the direction on how is it going to be to safeguard the operations of QIG companies is a case by case from each of the companies in the group to decide on whether we rebuild inventory or we keep it where it is or we further go down. You will probably note that if we've gone down from close to QAR 500 million to close to QAR 100 million, if we went down QAR 400 million in our inventory, we cannot go another QAR 400 million. We don't have the room anymore to do so. However, we've secured to bring cash to the business by lowering our level of inventories, and we're proud of this. How is that compatible at this point in time with the disruption we're seeing on the international supply chain is something that will probably have an impact on inventory, but it's too early to assess or is currently being assessed.

[Operator Instructions] We'll now take the next question from [ JM Abavi ] at Al Rayan.

This is Zohaib from Al Rayan Investment. Just to follow up actually to my earlier participant. He was talking about the inventories. So the inventories are now at like QAR 120 million, which is like 2015 levels. So do you plan on restarting your cement plant considering the inventories have gone so low?

The restarting of the plant, as I said, was -- as I announced in the call, Zohaib, is planned and scheduled for the next couple of weeks to 3 weeks. So that's something that, yes, we are planning and we are doing. That's not -- this is not exactly the only driver in building or in having inventory as I already replied to, if I'm not mistaken. It was -- it's a decision that takes into account what is going around the globe in terms of supply chain disruption. And of course, when you have such disruption in supply chain, any just in time doesn't work.

So just to understand this, how -- what -- which business is impacted by the supply chain for you by the global supply chain issues?

Well, I'm trying to think which is not. All my businesses are.

I thought, cement, all the -- all your like raw material was local, right?

This is not a 100% accurate statement. The number of raw materials are imported, a number of spare parts are imported. We are -- for us, for our suppliers, for our clients, everyone being impacted.

Okay. Okay. All right. Okay, makes sense. My second -- my last question is basically on the revenues. For the third quarter of this year, the revenues are QAR 150 million compared to QAR 183 million in the same period last year, it's like down 18%. Could you give us some color on what led to this decline?

Sure. We clearly had a significant change in the dynamics of the market. And there are a couple of them coming into the equation. On the cement side, we have sold less demand than we did in the same period of last year. That has definitely put a lot of pressure on the top line. With focusing on the receivable of being paid on lesser marketing activities, this has contributed to a slowdown/regression in the cement sales. As I said during the call, we are happy to see that these type of activities that took place are settling down or moving down. And that at this point in time, we can start to work on bringing profitable business and profitable revenue to our shareholders.

[Operator Instructions] It appears there are no further questions at this time, [ Ead ]. I'd like to turn the conference back to you for any additional or closing remarks.

Thank you, operator. I have only 1 question. Given the cash on the balance sheet, do you consider a share buyback program?

There are many options that are being considered to how to utilize this cash on the balance sheet, whether it is an acquisition, whether it is the payoff debt, whether it is just any sort of investment, improvement in shareholder's value, et cetera, are all being considered and studied and which I'll come back to you with the answer once a decision is made.

Well noted. Thank you very much, Alex. This concludes today's call. Thank you all for your participation. You may now disconnect.

Thank you very much to all.