(MENAFN- The Peninsula) The Peninsula
Doha: Industries Qatar (IQ or the Group), yesterday reported a net profit of QR5.4bn for the six-month period ended 30 June 2022, representing an increase of 57 percent compared to 1H-21.
Macroeconomic environment remained uneven during the first half of 2022, where demand for most of the downstream products slightly inched downward mainly due to China's COVID linked lockdowns and cautious approach from buyers. On the other hand, supply side was affected by Russia-Ukraine conflict enforcing sharp rise in energy prices challenging plant economics specially for the European producers.
On an overall basis, commodity prices were essentially balanced to bearish during 1Q-22. During Q2-22, despite uncertainties over recessionary fears, prices slightly improved on back of persistent higher energy prices and supply side constraints.
Group's operations remained strong as production volumes for the six-month period improved by 5 percent to reach 8.1m MT's. Restart of the previously mothballed DR-2 facility with a larger capacity, together with, higher plant operating days noted within the Fuel Additives segment contributed towards an overall increase in production volumes during 1H-22. Plant utilization rates for the six-month period stood at 97 percent, while average reliability factor stood at 98 percent.
On a quarter-on-quarter basis, a growth of 6 percent in production volumes was noted mainly due to higher number of operating days during 2Q-22 compared to 1Q-22, despite an unplanned shutdown reported within the Fertilizer facilities during the current period.
Group reported a net profit of QR5.4bn for the six-month period ended 30 June 2022, demonstrating a notable growth of 57 percent, versus the same period of last year. Revenue for 1H-22 significantly improved by 56 percent to reach QR14.3bn as compared to QR9.2bn reported for 1H-21. Earnings per share (EPS) for 1H-22 was QR0.90, versus QR0.57 for the same period last year.
Group's financial performance for the six-month period 30 June 2022 in comparison to the same period of last year was largely attributed to multiple factors, including:
Blended product prices significantly surged by 51 percent versus 1H-21 and reached USD 786/MT. Growth in product prices translated into an increase of QR5.0bn in Group's net earnings.
The price increase was mainly linked to elevated market prices across all the segments, on account of constructive macroeconomic drivers.
Sales volumes for the period increased by 3 percent versus the same period of last year, primarily driven by higher plant operating rates, leading to improved production volumes.
Group operating cost increased by 57 percent versus same period last year. The increase in the operating cost was primarily linked to higher variable cost on account of increased sales volumes and end-product price indexed raw material cost.
During 2Q-22, Group revenue and net profit remined flat versus 1Q-22, where growth in selling prices were offset by lowered sales volumes. Decline in sales volumes was mainly linked to lower fertilizer sales volumes during 2Q-22, as QAFCO's 1Q-22 sales volumes were boosted by additional volumes on account of timing of shipments carried forward from 4Q-21. Prices slightly improved on back of persistent higher energy prices and supply side constraints, despite recent demand related concerns.
Group's financial position continue to remain robust, with cash and bank balances at QR14.8bn as of 30 June 2022, after accounting for a dividend payout relating to the financial year 2021, amounting to QR6.0bn. Currently, the Group has no long-term debt obligations.
Group's reported total assets and total equity reached QR41.6bn and QR38.9bn, respectively, as of 30 June 2022. The Group generated positive operating cash flows1 of QR5.1bn, with free cash flows1 of QR4.6bn during the first six months of 2022.
Petrochemicals segment reported a net profit of QR1.5bn for the six-month ended 30 June 2022, marginally up by 1 percent versus the same period of last year. This marginal increase was mainly due growth in segmental revenue being almost offset against higher operating costs.
Blended product prices for the segment improved by 17 percent versus the same period of last year, against a backdrop of firm demand and higher energy prices, coupled with supply deficits. Sales volumes also improved by 6 percent compared to 1H-21, in line with growth in production volumes. Growth in selling prices combined with higher sales volumes, led 1H-22 segmental revenue to reach QR3.9bn, with an improvement of 24 percent versus the same period of last year. On a year-on-year basis, production volumes increased by 6 percent, as the segment's fuel additive operations were on a commercial shutdown during 1Q-21.
Revenue for the current quarter was up by 10 percent versus 1Q-22. This increase was primarily driven by improved selling prices which increased by 8 percent and higher sales volumes which increased by +2 percent. Growth in selling prices at the segmental level was mainly due to higher MTBE prices which increased by 23 percent, while LDPE prices slightly improved by 5 percent during 2Q-22 versus 1Q-22. Improved revenue aided segment's net profit to grow by 24 percent.
Fertilizer segment reported a net profit of QR3.3bn for the six-month period ended 30 June 2022, with an increase of 115 percent, versus the same period of last year. This increase was primarily driven by growth in revenue. Segment's revenue grew by 107 percent for the current six-month period versus 1H-21, primarily due to improved selling prices. Selling prices improved significantly by 100 percent versus the same period of last year and reflected positively on the segmental performance. Restricted supply from key exporting regions, together with inflationary pressures amid higher crop and energy prices remained key factors for elevated fertilizer prices on a year-on-year basis.
In June 2022, based on an internal review, QAFCO's Board of Directors decided to transfer Qatar Melamine Company's (QMC) assets to QAFCO through a business transfer agreement (merger scheme). The process is planned to be completed before end of December 2022 and the related formalities are in progress. QMC is a 100 percent owned subsidiary of QAFACO and involved in production of Melamine. The merger is expected to benefit the Group in terms of operational and administrative synergies.
Steel segment reported a net profit of QR621m, up by 25 percent versus 1H-21. Improved segmental profits was mainly driven by higher revenues, which increased by 11 percent versus 1H-21. Additionally, segment's associate that produces iron oxide pellets, Foulath Holdings, reported commendable financial results against a backdrop of improved operations.
Growth in revenue was mainly driven by higher selling prices which increased by 13 percent on a year-on-year basis, mainly driven by higher steel and iron ore prices prevailing internationally. Sales volumes remained relatively flat, against a backdrop of softening domestic demand.
Industries Qatar will host an IR Earnings call with investors to discuss the latest results, business outlook and other matters on Tuesday, 9th August 2022 at 1:30 pm Doha Time.
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