Doha, Qatar: Mesaieed Petrochemical Holding Company (“MPHC” or “the Group”; QE ticker: MPHC), yesterday announced a net profit of QR585m for the six-month period ended 30 June 2023, representing a decline of 44 percent compared to 1H-22.
Macroeconomic context remained wavered by several challenges affecting the commodity markets, including geopolitical uncertainty, recessionary fears linked to inflation related pressures and higher interest rate environment. Additionally, slower than expected global economies recovery, along with reduced energy prices is bringing an additional layer of uncertainty to the commodity markets. Furthermore, a cautious approach from buyers is weighing on the commodity prices globally. On overall, commodity prices for MPHC’s basket of products declined on a year-on-year basis, following last couple of year’s significantly high price environment.
MPHC’s operations continue to remain robust and resilient with total production for the current period reaching 533 thousand MTs. Production for 1H-23 slightly declined versus 1H-22, mainly due to a maintenance turnaround carried out at QVC facilities during 1Q-23 which affected production volumes for 1H-23.
On a quarter-on-quarter basis production volumes for 2Q-23 increased by 23 percent in comparison to 1Q-23, mainly due to an increase noted in production volumes from petrochemical and chlor-alkali segment, linked to lower shutdown days during the 2Q-23.
MPHC reported a net profit of QR 585 million for the six-month period ended 30 June 2023, down by 44 percent compared to the same period of last year. This decline in profitability was mainly linked to lowered Group revenue, which declined by 27 percent and reached QR1.5bn.
Decline in Group revenue was mainly linked to the decrease noted in average blended product prices, which declined by 25 percent compared to 1H-22, translating into a decline of QR 578m in MPHC’s current period net earnings as compared to the same period of last year. Suppressed commodity demand linked to macro- headwinds, coupled with additional supply resulted in lowered commodity prices.
Sales volumes also declined marginally by 3 percent versus 1H-22, mainly driven by lowered sales volumes reported by the chlor-alkali segment, being partially offset by higher volumes reported by the petrochemicals segment. Negative movement in sales volumes translated into a decline of QR10m in MPHC’s 1H-23 net earnings versus the same period of last year. EBITDA for the current period amounted to QR797m with a decline of 36 percent versus 1H-22, mainly due to lower revenue. EBITDA margins for 1H-23 reached 52 percent versus 59 percent achieved during 1H-22.
MPHC’s bottom-line profitability increased by 18 percent sequentially, mainly due to higher revenue noted on a quarter-on-quarter basis which increased by 13 percent.
Increase in revenue was mainly linked to higher sales volumes by 20 percent, offset by lower selling prices which decreased by 5 percent versus 1Q-23, as lowered demand continues to affect most of commodity prices globally. This downward movement in selling prices led to a negative contribution of QR42m to MPHC’s net earnings for 2Q-23 in comparison to 1Q-23.
On the other hand, higher production volumes led to an overall growth in sales volumes, which increased by 20 percent sequentially. Higher sales volumes contributed by QR135m positively to MPHC’s net earnings on a quarter-on-quarter basis. Profitability, as measured by EBITDA declined by 39 percent predominantly linked to lower product prices. Net earnings for 2Q-23 decreased versus 2Q-22 due to lower revenue.
Liquidity remained robust with cash and bank balances standing at QR3.5bn as at 30 June 2023. Decline in cash and bank balances was mainly due to dividend payment for the financial year 2023, being partially offset by positive cash flow generation during 1H-23. Total assets as at 30 June 2023 amounted to QR17bn and total equity amounted to QR16.6bn.
Segment’s revenue declined by 10 percent to reach QR1.2bn during 1H-23 versus 1H-22, as lowered selling prices is being partially offset by higher sales volumes. Growth in sales volumes was mainly linked to higher production which increased by 14 percent, as the segment carried out a large-scale turnaround at Q-Chem facilities during 1Q-22 which affected segment’s production volumes for last year’s same period. On the other hand, product prices declined by 21 percent, mainly due to macro-volatilities echoed from last year, which affected current period’s price trajectories for most of the commodities in comparison to the same period of last year.
On a quarter-on-quarter basis, profitability for 2Q-23 declined by 21 percent versus 1Q-23 mainly due to increase in operating costs. Increase in revenue was mainly linked to higher sales volumes which has contributed by 41 percent.
