Industries Qatar (IQ), a leading industrial conglomerate in Qatar, has reported a net profit of QR 2.3 billion for the six-month period ending 30 June 2024. This represents a 12 percent increase compared to the same period in the previous year.

Despite operating in a challenging macroeconomic environment marked by high interest rates, inflation, and geopolitical uncertainties, IQ has demonstrated resilience and strategic adaptability.

The global macroeconomic environment improved slightly in early 2024 but remains fraught with challenges. High interest rates and persistent inflation have dampened global demand, while geopolitical conflicts and supply chain disruptions have added layers of uncertainty. These factors have significantly impacted various sectors, including petrochemicals, fertilisers, and steel.

The petrochemical sector has faced substantial demand and supply challenges, driven by weakened consumer demand and stable crude oil prices. Structural capacity additions and macroeconomic pressures have eased supply constraints to some extent.

However, recent policy measures by the Chinese government could provide some stability to the market. Despite these challenges, the petrochemical segment reported a net profit of QR 721 million for the first half of 2024, a decrease of 13 percent compared to the same period last year. This decline was attributed to reduced segment revenue and margins. On a quarter-on-quarter basis, the segment saw a 4 percent improvement in net earnings due to enhanced gross margins.

The fertiliser sector has shown notable resilience, with net profit increasing by 39 percent to approximately QR1 billion for the first half of 2024. This improvement was driven by a reduction in operating costs and a 2 percent rise in sales volumes.

The macroeconomic environment stabilized after peaking in 2022, with restored European production improving supply conditions. However, the segment experienced a 5 percent decrease in revenue compared to the previous quarter, and net profit fell by 43 percent due to lower gross margins and higher operating costs.

The steel segment reported a 29 percent increase in net profit to QR 359 million, primarily due to the recognition of a one-off income related to the reversal of a bank guarantee. Despite this positive development, the segment experienced an 18 percent decline in revenue due to lower prices and volumes, reflecting ongoing challenges in the construction sector. On a quarter-on-quarter basis, steel segment profit improved by 29 percent due to non-recurring income, although production and sales volumes declined due to planned maintenance and muted demand.

IQ’s operations remained robust, with production volumes increasing marginally by 1percent to 8.4 million metric tons (MT) compared to for the first half of 2023. This improvement was driven by stable operating rates and better plant availability. The Group’s plant utilization rates stood at 98%, with an average reliability factor of 96 percent, reflecting a strong commitment to operational excellence.

However, production volumes saw an 11 percent decline quarter-on-quarter, primarily due to planned and unplanned shutdowns. This decline was evident in the Group’s financial performance for the second quarter, with net earnings falling by 18 percent to QR 1.1 billion.

Group revenue for H1 2024 decreased by 7 percent to QR 8.3 billion, driven by declines in both prices and volumes. Despite this, IQ’s EBITDA increased to QR 3.4 billion, with an EBITDA margin of 41 percent, up from 35 percent in the first half of 2023.

This growth in EBITDA reflects the Group’s ability to maintain profitability despite a challenging revenue environment. The blended average product prices declined by 5 percent to $448 per MT, impacting net earnings by QR407 million. However, product prices have stabilised in recent quarters following a peak in late 2022.

Operating costs for the first half of 2024 decreased by 11 percent compared to the previous year, due to lower variable costs and favorable inventory movements, though general cost inflation partially offset these reductions.

For the second quarter of 2024, IQ’s net earnings declined by 18 percent compared to the first quarter of 2024, reaching QR 1.1 billion. This decrease was primarily due to lower gross margins in the fertilizer segment, driven by increased operating costs. Despite this, the steel segment saw a partial offset due to improved one-off income from a bank guarantee reversal. The petrochemical segment’s performance improved slightly due to better net margins, though selling prices remained stable across most segments.

IQ’s financial position remains robust, with cash and bank balances of QR 12.4 billion as of 30 June 2024, after a dividend payout of QR 4.7 billion for the 2023 financial year. The Group reported total assets and equity of QR 41.5 billion and QR 38.4 billion, respectively. The Group generated positive operating cash flows of QR 1.6 billion and free cash flows of approximately QR 0.7 billion during the first six months of 2024. IQ has no long-term debt obligations.

S&P Global Ratings affirmed IQ’s AA- rating with a stable outlook on 2 July 2024. The rating agency highlighted the Group’s strategic importance to Qatar, strong profitability, robust cash flows, high asset utilization, and strong liquidity. However, challenges such as asset concentration in Qatar, exposure to cyclical industries, and commodity price fluctuations remain key considerations.

The board of directors has declared an interim cash dividend of QR 1.9 billion, equating to QR 0.31 per share, for the period ended 30 June 2024. This represents 31 percent of the nominal share value. The dividends will be paid to shareholders as of 20 August 2024, with Edaa handling the payment in accordance with relevant regulations.

Industries Qatar will hold an earnings call with investors on 15August 2024 at 1:30 PM Doha time.

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