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Doha, Qatar: Industries Qatar (“IQ” or “the Group”; QE Ticker: IQCD), yesterday reported a net profit of QR2.1bn for the six-month period ended 30 June 2023, representing a decline of 62 percent compared to 1H-22.
The macroeconomic environment continues to remain challenging during the first half of 2023 as geopolitical uncertainty persisted, along with recessionary fears linked to hawkish monetary policies resulted in subdued demand for most commodities.
Concerning performance within petrochemical segment, slower than expected recovery in the global economy, oil price volatility, and uncertainty in the global macro-outlook negatively weighed on petrochemical sector performance in the first half of the year. On the other hand, buyers’ cautious approach mainly linked to recessionary fears exacerbated an already oversupplied market.
On the nitrogen-based fertilizers, the prices continued its downward trajectory, mainly due to cautious approach from buyers with high inventory levels among crucial markets as supply disruptions have eased from 2022 challenges. This occurred amidst downward pressure on grain, energy, and other commodity prices along with restrictive credit policies affecting small-scale farmers in developing countries. Demand for domestic steel continue to recover following a muted demand during later part of 2022 on the backdrop of restrictive construction activities. On the global front, steel prices remained somewhat wavered, with China’s slow paced post-Covid recovery phase started to take shape on one side, subsiding by a continued sluggish phase in the construction sector mostly affected by high interest rate environment. As result, this places a severe burden on the construction sector.
Group’s operations continue to remain strong as production volumes for the current period improved by 3 percent to reach 8,362 million MT’s versus 1H-22. This improvement in production was largely driven by higher operating rates, and better plant availability across the group. Plant utilization rates for 1H-23 reached 100 percent, while average reliability factor stood at 98 percent. This reflects the Group’s commitment to operational excellence, while ensuring plant reliability and unwavering importance to HSE.
On a quarter-on-quarter basis, production volumes declined by 10 percent versus 1Q-23, with fertilizer segment reporting a notable reduction in production on account of facility maintenance shutdowns during Q2-2023. These maintenance shutdowns are of utmost importance as they ensure the reliability, continuity of operations, and enhancement of product quality.
Group reported a consolidated net profit of QR 2.1bn for the six-month period ended 30 June 2023, with a decline of 62 percent versus 1H-22. Earnings per share (EPS) for 1H-23 was QR 0.35 versus QR0.90 for 1H-22. Group revenue for 1H-23 declined by 38 percent to reach QR8.9bn as compared to QR14.3bn reported for 1H-22.
Group’s financial performance for the six-month period ended 30 June 2023 was largely attributed to the following factors: Blended average product prices declined by 40 percent versus 1H-22 and reached USD 473/MT. Decrease in product prices contributed QR 5.9bn negatively to the Group’s net earnings, mainly on account of lower price trajectories noted across the Group’s basket of products amid macro-challenges. Fertilizer prices remained the key contributor for overall decline in blended average product prices, as fertilizer prices witnessed a decline by more than 50 percent versus last year and contributed QR4.3bn to reduction in group’s bottom line.
Sales volumes increased marginally by 3 percent versus 1H-22, primarily driven by higher production volumes. Improved sales volumes contributed QR 0.4bn in the overall growth of Group’s net earnings for 1H-23 compared to the same period of last year.
Operating cost for 1H-23 decreased by 20 percent versus 1H-22. The decrease in the operating cost was primarily linked to lower variable cost driven by end-product price indexed raw material cost, partially offset by increased volumes and general inflation.
During 2Q-23, the Group’s net earnings declined by 21 percent versus 1Q-23 and reached QR0.9bn, mainly due to lowered revenue where a decline of 16 percent was noted on a quarter-on-quarter basis.
Decline in Group revenue was mainly driven by a combination of both reduction in both selling prices, and sales volumes. Selling prices which declined by 9 percent sequentially, with global markets remained stressed resulting in downward price pressures for most of the commodities. Lower selling prices contributed QR0.4bn negatively to the Group’s net earnings on a sequential basis. Sales volumes, on the other hand declined by 8 percent, and contributed QR0.4bn negatively to group’s net earnings. The lower sales volumes were primarily attributed to lower production within the fertilizer segment during Q2-2023 due to lower operating days amid facility maintenance.
Compared to 2Q-22, the Group revenue for the current quarter decreased by 43 percent, primarily due to notable decline in selling prices against a backdrop of persistent negative macroeconomic fundamentals across all operating segments of the group. Product prices on average declined by 45 percent versus same quarter of the last year, where lower price trajectories were noted across all operating segments. Sales volumes, on the other hand, improved slightly by 3 percent, on the backdrop of improved production within the steel segment. Profitability, as measured by EBITDA declined by 56 percent versus last year predominantly linked to lower product prices, being partially offset by Group’s lowered operating costs.
