DOHA: Industries Qatar, one of the region’s industrial giants with interests in the production of a wide range of petrochemical, fertiliser and steel products, yesterday announced a net profit of QR2.7bn and QR3.4bn revenue (reported under IFRS 11) for the period ended September 30, 2016. Net profit was down by 29 percent compared to the corresponding quarter last year while revenue was down 16 percent from a year ago.
“The reported results can be considered highly competitive as the group operated in a highly challenging macro-economic and competitive market environment. All segments of the group operated under uncertain market conditions that have been prevailing for at least the last twelve to eighteen months, where the group’s operations were hampered by a number of variables including volatility in the prices and excess supply of end products in the key markets,” said Industries Qatar yesterday.
The year-on-year decrease in revenue (reported under IFRS 11) was driven by a marginal decrease in the prices of the group’s steel products together with lower sales volumes on account of lower demand and the absence of the sales of certain intermediate steel products in the current year.
On a like-for-like basis, management reporting revenue - assuming proportionate consolidation - was QR10.2bn, a decrease of 17 percent, versus the same period of 2015. This year-on-year variance was primarily due to a general decrease in the product prices across all segments, most notably in the prices of fertilisers and fuel additives.
“This year-on-year decrease in net profit was driven entirely by the lower revenues due to a notable price deflation across all operating segments most notably in the fertiliser segment. The reduction in revenues was somewhat offset by the operating costs improvements due to the benefits gained on account of ongoing cost optimisation initiatives,” added Industries Qatar.
Product prices in all segments continued to remain weak – most notably, the prices of fertilisers and fuel additives where fertiliser prices have recorded significant reduction. Nevertheless, the group was able to witness laudable financial and operating results with stable production and sales volumes together with improved operating costs thereby significantly exceeding the group’s budget expectations.
Prices of polyethylene products have remained stable after recovering substantially from their lowest level in early 2016.
The demand for the petrochemical products appears to be promising with renewed interest shown in some key markets together with the tightening of supply due to delays in launching new capacities. Together with improved market dynamics and higher polyethylene production, the group was able to increase its sales volumes compared to the last year. The polyethylene production improved moderately on the previous year as some of the key polyethylene facilities were on maintenance during the last year. On the other hand, fuel additive prices and sales volumes were down on last year.
Fertiliser prices on the other hand continued to remain weak due to a combination of factors including current and expected level of elevated supplies, weaker demand, and currency depreciation in some fertiliser exporting countries. Nevertheless, fertiliser sales volumes were marginally upon last year in line with the flat year-on-year production.
Prices in the steel segment were also slightly down on 2015 due to muted demand in the major regional markets following the decision to reduce capital expenditure, together with availability of low priced steel from non-GCC producers.
