Industries Qatar, a leading industrial conglomerate, announced its financial results for the first quarter of 2023, reporting a net profit of QR 1.2 billion. This represents a decline of 57% compared to the same period last year.
The company faced a challenging macroeconomic environment during the first quarter of 2023. Geopolitical uncertainty stemming from the Russia-Ukraine conflict, concerns over inflationary pressures leading to a potential recession, and the hawkish stance on interest rates by central banks all contributed to reduced demand for commodities.
In the fertilizers sector, prices continued to fall due to downward pressure on grain, energy, and other commodity prices, as well as general inflation. Additionally, European fertilizer production resumed following capacity reductions in 2022 due to the energy crisis.
The performance of the petrochemical sector was influenced by market sentiments surrounding China’s reopening, volatility in oil prices, and global macroeconomic uncertainty.
While certain petrochemical prices slightly improved compared to the previous quarter, overall market conditions remained uncertain. The steel sector showed some resilience internationally, with China’s post-Covid recovery phase slowly taking shape. However, sluggish growth in the Chinese construction sector persisted. Domestically, the steel market showed signs of recovery after subdued construction activity in the latter part of 2022.
Despite the challenging environment, Industries Qatar’s operations remained stable and strong. Production volumes increased by 11% compared to the first quarter of the previous year, reaching 4.4 million metric tons.
This improvement was primarily driven by higher operating rates and improved plant availability across all segments. The company achieved a plant utilization rate of 105% during the first quarter of 2023, with an average reliability factor of 99%, showcasing its commitment to operational excellence and health, safety, and environmental standards.
On a quarter-on-quarter basis, production volumes increased by 1%, mainly due to improvements in the steel segments. However, slightly lower production was reported in the petrochemical segment, offsetting some of the gains.
Industries Qatar reported a consolidated net profit of QR 1.2 billion for the first quarter of 2023, representing a decline of 57% compared to the same period last year. Earnings per share (EPS) for the quarter were QR 0.19, down from QR 0.45 in the first quarter of the previous year.
Group revenue also declined by 32% to reach QR 4.8 billion compared to QR 7.1 billion in the first quarter of 2022. The decline in revenue was mainly attributed to lower product prices, reflecting the challenging macroeconomic conditions.
Despite the decline in revenue, sales volumes increased by 3% compared to the first quarter of the previous year, driven by higher plant operating rates. This increase in sales volumes contributed positively to the group’s net earnings.
Operating costs decreased by 14% compared to the same period last year, primarily due to lower variable costs driven by price-linked feedstock costs, partially offset by increased volumes and general inflation.
Compared to the previous quarter, the group’s net earnings declined by 34% in the first quarter of 2023, mainly due to lower revenue. Selling prices decreased by 22% as the global economic context remained under stress, leading to downward price trends for most commodities.
However, sales volumes increased by 10%, primarily driven by improved production in the steel segments, partially offset by lower volumes in the petrochemical segment.
Industries Qatar maintained a robust financial position, with cash and bank balances of QR 13.9 billion as of March 31, 2023, even after accounting for a dividend payout of QR 6.7 billion relating to the previous financial year. The company currently has no long-term debt obligations.
Fertilizer segment reported a net profit of QR 510 million for 1Q-23, with a decline of 71% versus 1Q-22. This decline was primarily driven by lowered segmental revenue.
Segment’s revenue decreased by44% for 1Q-23 versus the same period of last year, due to lowered selling prices.
Selling pricesdeclined by 45%, amid macro-pressures affecting fertilizer markets. Sales volumes marginallyincreased by 3% during 1Q-23, mainly due to improved production levels which increased by 11% onyear-on-year basis, amid relatively lower shutdown days reported for 1Q-23 versus 1Q-22.
Segmental performance analysis – 1Q-23 vs 4Q-22On a quarter-on-quarter basis, segmental revenue decreased by 35% versus the previous quarterowing to lower selling prices. Selling prices declined by 38% on a quarter-on-quarter basis, amidcontinued weakness in the fertilizer markets amid challenging supply-demand dynamics.
On the otherhand, sales volumes improved and a growth of 6% was noted in sales volumes on a quarter-on-quarterbasis. Segment’s net profit for 1Q-23 decreased by 57% mainly due to comparatively lower sellingprices realized during 1Q-23 versus the previous quarter, as well as the segment reported higheroperating cost on account of unfavorable inventory movements linked to higher sales volumes.Industries Qatar posts net profit of QR1.2 bn in Q1 .