Hello, welcome to Industries Qatar conference call. Please note that this call is being recorded. You will have the opportunity to ask questions to our speakers later on during the Q&A session. If you'd like to ask a question by that time, please press star one on your telephone keypad. Thank you. I would like to hand the call over to Bobby. You may begin.
All right. Thank you, Angela. Hi. Hello, everyone. This is Bobby Sarkar, Head of Research at QNB Financial Services. I wanted to welcome everyone to Industries Qatar's second quarter and first half 2025 financial results conference call. On this call from QatarEnergy's Privatized Affairs group, we have Abdulla Yaqoob Al-Hay, who is the Manager for Privatized Companies Affairs. We have Rashid Al-Mohannadi, who's the Head of IR and Communications, and let's welcome Mr. Ahmad Zakri, who's the Assistant Manager, Financial Operations. We will conduct this call with management first going over the company's results, followed by Q&A. I would like to turn the call over to Rashid. Rashid, please go ahead.
Thank you, Bobby. Good afternoon, thank you all for joining us. Hope you are doing great. Before we go into IQ business and performance updates, I would like to mention that this call is purely for IQ investors, no media representatives should be attending this call. Moreover, please note this call is subject to disclaimer statement as detailed on Slide 2 of the IR deck. We can go into the call. On Thursday, 7th of August, IQ published its results for the six-month period ended 30th of June 2025. Today on this call, we'll go through these results and provide you with key updates on financial and operational highlights. Kindly note that the MS Team link is to display the IR deck on screen.
In case you want to participate in the Q&A session, you must dial in through the telephone lines on the phone number provided as part of the invitation. Today on this call, along with me, I have Mr. Abdulla Yaqoob Al-Hay, Manager for Privatized Company Affairs, and we also have Mr. Ahmad Zakri, Assistant Manager for Financial Operations. We have structured our call as follows. At first, I will provide you with a quick insight on IQ ownership structure, competitive advantages, and overall governance structure. Secondly, Mr. Abdulla will brief you on IQ key macroeconomic and dividend aspects. Later, Mr. Ahmad will provide you with an update on the company's financial performance, then I will guide you through the segmental performance. Finally, we'll open the floor for the Q&A.
To start with, as detailed on Slide 5, IQ ownership structure comprises of QatarEnergy with 51% stake, the rest is in free float, held by various domestic and international corporate and individuals. Rating agencies such as S&P affirmed IQ's issuer credit rating at AA- with a stable outlook, confirming IQ Group's strong business and financial position. QatarEnergy, being the main shareholder of IQ, provides most of the head office functions through a service-level agreement. Operations of IQ Group companies are independently managed by their respective board of directors along with senior management team. In terms of competitive advantages, as detailed on Slide 8, the group is well-positioned with several competitive advantages within its domain, strategically, operationally, as well as financially.
These strengths include an efficient and well-maintained asset base, a qualified, skilled, and highly trained workforce, assured supply of feedstock and competitively priced energy sources, lower operating costs, a dedicated marketing team in the form of QatarEnergy Marketing to market the group's petrochemical and fertilizer products, a reputable joint venture partner, and most importantly, a well-experienced senior management team. As detailed on Slide 10 from a competitive position and perspective, IQ ranks among the top-tier companies within regional downstream space across most of the matrices. In terms of the IQ governance structure, you may refer to Slide 50 and Slide 51 of the IR deck, which covers various aspects of IQ corporate governance in further detail. I will now hand over to Abdulla to cover macroeconomic operations and year-on-year financial performance. Over to you, Abdulla.
[Non-English content] Thank you, Rashid. Good afternoon, and thank you for joining us. Let me begin with a quick look at the macroeconomic environment. The global conditions remain subdued during the first half of 2025. Geopolitical tensions, tighter monetary policy, and post-election uncertainty in a key market continued to weigh on growth. While inflation showed signs of easing, elevated production costs and ongoing supply chain disruptions kept pressure on economic activities. Moving on to the petrochemical sector, we saw continued softening in demand coupled with oversupply and margin pressure. Ethylene and its derivatives prices were particularly volatile, driven by weak downstream demand and fluctuations in crude oil, especially for naphtha-based producers. Environmental regulations also added cost burden, especially for operators of older assets. Turning to the fertilizers. The nitrogen fertilizer market remained relatively stable. Prices held firm, thanks to the balanced supply-demand dynamic and export restrictions.
Farmer affordability remained a concern in some of the regions. As for the steel sector, continued to face challenges from overcapacity and weak demand, particularly in construction and real estate. Seasonal slowdowns, especially in the GCC, along with high inflation and interest rates added further pressure, leading to price decline and some capacity closures. Looking at our financial performance, the group reported a consolidated net profit of QAR 2 billion for the six-month period ended 30th June 2025. This reflects a decline of 27% compared to the restated net profit for the same period last year. When you excluded a one-off item from the first half 2024, such as the reversal of a financial guarantee provision and gain from a subsidiary's acquisitions, the decline is moderate and mainly driven by lower operating margins.
Revenue, on the other hand, showed a slight improvement on year-on-year basis. On the interim dividends front, the board of directors has approved an interim cash dividend of QAR 0.26 per share, representing 80% of the net profit for the period. This generous payout reflects our strong financial position and operational excellence. The dividends will be distributed to the shareholder registered as of 17th of August, in combination with Eid al-Adha. With that, I will now hand over to Mr. Ahmad to walk you through the financial and operational update for the period.
Thank you, Mr. Abdulla. Good afternoon, everyone. Diving into the financial performance as reported on Slide 15, the group reported a consolidated net profit of QAR 2 billion for the six months period ended 30th June 2025, which is a decline of 27% versus restated first half 2024 results. Earnings per share for the first half of 2025 was QAR 0.32 versus QAR 0.44 for the first half of 2024. EBITDA for the period is QAR 3 billion with an EBITDA margin of 35%, compared to an EBITDA of QAR 3.4 billion for the same period of last year, with a reported EBITDA margin of 41%. Group revenue for the first half of 2025 increased by 5% to reach QAR 8.7 billion as compared to QAR 8.3 billion reported for the first half of last year.
Improvement in revenue for the current period was due to an overall increase in prices while sales volume stabilized. Going through IQ's net earnings for the first half of 2025 versus the same period last year, as you can see on Slide 16, the group's financial performance for the six months period of 2024 was largely attributed to the following factors. In terms of product prices, blended average product prices marginally improved by 5% versus first half of 2024, reaching $472 per metric ton. This contributed positively to the group's net earnings by QAR 172 million compared to last year's period. This improvement was primarily driven by improved nitrogen fertilizer prices, which fully offset the reduction in average realized prices in other segments. Fertilizer prices have stabilized in recent quarters following the volatility seen throughout 2023.
This trend was supported by renewed demand from key markets such as India, falling inventory levels, and supply side constraints, including export restrictions from major producers such as China. Additional pressure came from production shortfalls due to facility shutdowns and cost escalation. Looking at sales volumes, sales volume figures for the first half of 2025 remained relatively stable compared to the same period last year. This performance was achieved despite challenging market conditions characterized by relatively weaker demand across all operating segments, volatile macroeconomic factors, regional instability, and ongoing uncertainty around global trade. The group's ability to maintain sales volumes was supported by improved production levels and more effective sales planning. Operating costs for the first half of 2025 have increased compared to the same period last year.
The rise was primarily driven by higher price-linked variable costs, elevated fixed operating costs associated with maintenance shutdowns, and the impact of general inflation. Looking at other income, the group's financial performance for the period was also impacted due to lower non-operating income as a result of a lower interest rate environment. Absence of one-off gains on reversal of provision for financial guarantee, as well as gains recognized on acquisition of a subsidiary in the first half of 2024. Moving on to the statement of financial position, as detailed on Slide 15, the group's financial position remains robust, with proportionately accounted cash and bank balances of QAR 9.9 billion as of 30th June 2025, after payment of dividend relating to 2024 amounting to QAR 2.6 billion. Currently, the group has no long-term debt obligations.
The group's reported total assets and total group equity reached QAR 41.4 billion and QAR 357.3 billion respectively as of 30th June 2025. The group generated positive operating cash flows of around QAR 1.8 billion and invested around QAR 1.2 billion in capital expenditure and projects under development, thereby generating free cash flow of around QAR 0.6 billion. Now we can move on to the segmental review, and I will hand over back to Rashid.
Thank you, Ahmad, let's dive in with the segmental review and start with the petrochemical segment. As detailed on Slide 24, the petrochemical segment reported a net profit of QAR 488 million for the first half of 2025, representing a 32% decline compared to the same period of last year. This decrease was primarily linked to lower revenues and a contraction in operating margin, which was contributed by increase in operating cost and lower average selling price. Revenue declined due to a 4% drop in sales volume and a 2% decrease in average selling price. These reductions were driven by a combination of factors, including a persistent demand weakness, oversupply conditions, geopolitical tension, and crude price volatility. Buyers remained cautious, further softening the price compared to 1H 2024. Additionally, volume were impacted by unplanned shutdown in both polyethylene and the fuel additive segments.
On a quarter-on-quarter basis, net earnings decreased by 15%, mainly due to a 10% drop in average selling price and continued margin pressures. The impact of lower selling price was partially offset by a 6% increase in sales volume, resulting in a marginal reduction in revenue. Now we can move on to the fertilizer segment as shown on Slide 30. The fertilizer segment delivered a net profit of approximately QAR 1.1 billion for the first half of 2025, marking an 8% increase compared to the same period of last year. This growth was primarily driven by higher revenues, supported by 18% increase in average selling price. Price strength was underpinned by tightened global supply, export restrictions, logistical challenges, and geopolitical uncertainty. Demand also improved, particularly from large agricultural economies.
Sales volume declined moderately by 10% due to lower production levels, impacted by both planned and unplanned shutdown, as well as further microeconomic pressures. On quarter-on-quarter basis, the segment revenue improved by 3% marginally, supported by a 5% increase in sales volumes. This was driven by a stronger demand, tighter supply, and temporary production curtailment amongst certain producers. The increase in volume partially offset a 2% decline in selling price. However, higher operating costs associated with increased volume slightly affected the profitability. Now we move to the last segment, steel segment, as detailed on Slide 36. The steel segment reported net profits of QAR 265 million, reflecting a 26% decline compared to the same period of last year.
While gross and operating margin improved approximately by 1%, supported by cost efficiencies, the net profit margin declined due to absence of one-off gains of QAR 143 million related to a reversal of financial guarantee recorded in the same period of last year, along with lower contribution from associates. On like-for-like basis, profitability remains stable and aligned with historical averages. Segment revenue increased, driven by a 37% rise in sales volume following the restart of previously mothballed production facility. This partially offset by 13% decline in average selling price, impacted by softening demand across key steel and metal markets. A global oversupply and continued weaknesses in construction activities due to reduced real estate investment and project delays. Despite some monetary easing by central bank, construction demand remains subdued.
On quarter-on-quarter basis, the segment reported a 29% increase in net profit, primarily driven by a 64% increase in sales volume. Average selling price declined by 13%, reflecting ongoing macro challenges, geopolitical volatility, and supply chain disruptions. Production during the quarter declined slightly by 4% compared to the previous quarter, mainly due to increased number of maintenance-related shutdown days, which reduced overall operating capacity. We would like to thank you for your attention. That concludes our presentation, now we open the floor for the Q&A.
Thank you. We will now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. Your first question comes from the line of Jonathan Chung with Morgan Stanley. Your line is now open.
Hi. Thank you for taking my question. I've got two, please. The first one is on your unplanned outages, unplanned shutdown. Could you give us a bit more color on your Q2 unplanned shutdowns? How long did they last? Are there any unplanned shutdowns during July? My second question is around your domestic steel demand. Could you give us some insight into what you see in the steel market going forward for the rest of the year? Thank you.
Unplanned shutdowns, usually, sometimes when you do planned shutdowns, unplanned shutdowns are basically part an extended part of planned shutdowns. Sometimes, you plan for say a 30-day shutdown. Sometimes due to extended delays in arrival of spare parts, you may have to extend those shutdowns. You get these unplanned shutdowns. Sometimes, due to some unexpected events happening in the plant and machinery, you get this unplanned shutdown. This mainly happened in a couple of petrochemical and fertilizer plants. Other than any shutdown you plan at the beginning of the year, if anything happens other than that, you consider unplanned shutdown. Anything going forward, any unplanned shutdown, you cannot plan. We don't have any visibility from unplanned shutdowns.
With respect to demand, on the domestic demand for steel, with the summer is getting over, the demand for the domestic market will start to recover.
Can I just follow up on your unplanned shutdowns? Were there any events in July that has happened?
To our knowledge, no.
Okay. Thank you.
Again, if you would like to ask a question, please press star one on your telephone keypad. Your next question comes from the line of Sashank Lanka with Bank of America. Your line is now open.
Yes. Thank you very much for the presentation and the opportunity to ask questions. I have three questions, if that's okay. The first one is basically on shutdowns that you have for the remainder of the year, planned shutdowns. Can you give us some guidance around that? The second is just related to urea and the pricing outlook there. We've seen some strong Indian tenders, so just wanted your view on sustainability of this strength in prices. The third one is on your dividend that you announced for the first half. Obviously, your net cash, your cash balance has only been going up in the last few years, given urea prices have remained strong, and you haven't had any major expansion. So, just wondering your dividend policy here, because I think you paid around 80% payout.
In the second half last year, you paid more than 100%. How should we be thinking of your payout ratio first half versus second half? Is second half always going to be higher than the first half? Thank you.
Thank you for your questions. Regarding the planned and unplanned shutdown, here we need to consider that we have a huge facility, these kind of shutdowns are normal activity for the continuation of the operation and for the business excellence. Does not mean something wrong. I see everybody is highlighting a shutdown. Basically, we have a shutdown that will take place in the fourth quarter. It is in one of our assets, petrochemical assets. This is based on the best practice to maintain the excellence of that asset. Usually, such planned shutdown would not have a severe impact or major impact on our production. This is a normal routine shutdown, will slightly maybe have an impact. It is a 90-day shutdown. This number of days is facility days, so it's different from the calendar days, and we shouldn't worry about it.
Second question related to the about the outlook, correct? What is your question, the second one?
It was related to the outlook for urea.
As you have seen, our prices compared to last year went up already by 18% to 20%. This is based on many factors that we have highlighted earlier. One of the factors is the supply demand. We just mentioned that there is a huge demand in India. Another factor is the restrictions that China has. I think now China has placed a threshold of prices where they can, or they are allowed to export above such prices. I believe the price is strong right now, and it will remain at the same level for the following two quarters. This is our thought on the prices. We don't give an outlook number, but this is how the market is giving us as feedback from the prices. In terms of the dividend that we have paid last year, we have not paid more than 100%. This is not correct.
What we have paid almost it is the same, compared to this year. Last year, we paid 80% of the total net profit. This time we paid also the same. I believe, once we approach the year-end, things will be much more clear on how our payment is going to be. Such decision will be discussed with the board, having the full-year results. The decision will come, definitely it will be generous. The historical track record demonstrates the strong dividend payout that we have. I think business is as usual, and things will be fine, inshallah.
Yes. Just one clarification on the dividend. I actually didn't mean you paid a higher payout in the first half. I meant your second-half payout ratio is what we saw last year was higher than the first-half payout ratio. Should that be a trend going forward? I think my question was more related on that angle.
No. Basically, as I have explained, such decision will come after taking all the consideration of the business need for its operations, for its capital injection and projects. We consider the dividends, how the dividends will be impacting the shareholders, and how this will impact also the market. There are a lot of factors. There are macro-economic factors, there are operational factors. We all have these factors, and we discuss it during the board meeting, we came up with a decision. If you can refer to the historical trend of how we are behaving toward paying dividends, this should give you a clear understanding of how strong we are. You shouldn't have a big concern on how we're going to pay.
Clear. Thank you.
Your next question comes from the line of Wei Chow with Al Rayan Investment. Your line is now open.
Thank you for the presentation. This is Wei from Al Rayan Investment. Could you give us some sense of what is happening with the selling prices for steel? It seems it has declined by about 13% this quarter. In fact, the first quarter was also lower. Could you give us some sense of what is happening and how do you see this for the remainder of the year? Thank you.
Thank you so much. If you look at the steel prices across the globe, it's all under the pressure. You can see other smelter are selling their steel maybe lower than their cost. This is what we have seen in the past. However, we have taken, I would say, a strategy there to protect our steel unit, where we are focusing on the local market. Where we are trying to make money from the semi-finished products, where you can gain some of the margin, and selling the DRI and HBI to the regional market. Basically, this is the global trend of the pressure on the steel. If you look at other local markets, we have a very limited market. Most of our construction of projects been completed.
I would say that right now we are focusing on selling our products, the semi-finished products to our regional consumer.
Okay. Basically, it's the regional consumers where you're seeing lower prices, which is leading to this decline, correct? That's what my understanding.
No. If you look at the regional smelter, they are selling maybe beyond their cost because such products, rebar products or the steel products, are under pressure. If we follow the similar approach, we would be having even further losses. However, we have taken an initiative to sell the semi-finished products where there is a good margin, where we are maintaining, I would say, a better position compared to others.
These semi-finished products are of lower value because your profitability in this segment is, if I'm not wrong, lower this year. Right?
You know the rebar, the final product, if you see the rebar and coil, these are really under pressure. If you look at the regions, they don't make money from them. They make money from the value-added products. You have either way, either to produce value-added products, sheet, et cetera, or to maintain a balance between your rebar coil sales regionally, where you have a control over the price, and to sell your remainder of your products in the DRI and HBI products where you can continue having your operation with such higher production to reduce your overall cost. Our unit by itself, it's making around more than QAR 256 million. This is a great achievement for a steel smelter, to be honest.
Okay.
If I may add. Sorry, Rashid here. Just if I may add. Yes, last year, steel segment had the impact of reversal of financial guarantee, which is non-cash. That account for QAR 143 million. If you reverse that impact, you'll see that our net profit has almost stabilized, if not increased, compared to last year. Due to this strategy, we were able to sustain net profit at a higher level and sell more semi-finished products. The strategy has paid off on that segment.
Okay. On the fertilizer prices, how do you see that panning out? I mean, considering Sorry, not fertilizer. Petrochemical prices. We already talked a lot about the fertilizer. The petrochemical prices, how do you see me panning out? I mean, considering there is a lot of news flow around oil prices and increased production. What is your outlook or insight into this? Thank you.
Yes. On the petrochemical segment, it's quite a complex segment to look at because within our segment you have also MTBE, methanol. MTBE is linked to crude. We realize lower MTBE prices since the crude has went down in term of price, and it will evolve in the future depending on how the crude movement. On the LDPE and LLDPE, we're seeing a steady, but let's say more of a gradual growth, which will depend how the things will evolve in the future, whether interest rate goes down, whether certain producers that are producing based from naphtha are facing difficulties. We've seen in the last few quarters, certain producers, they were producing from naphtha. They've faced difficulties running their operations. They're looking at options to shift to the ethylene mixed cracker or even a mixed cracker between ethylene and naphtha.
For us, being an ethylene-based producer, I think we are sitting at the lower side of the curve when it comes to the cost. How things will evolve into the future will not even harm us to the point where we'll see net losses, hopefully. We are hopeful that the future will bring more demand from consumers, more usage of plastic in different industries, and hopefully the global economy could kick off in second half, and we can see better demand, better price, et cetera. It all will depend on the global consumption on those aspects.
Sounds good. Thank you.
That concludes our question and answer session. I will now turn the conference back over to Bobby for closing remarks.
Thank you. Thank you, operator. If this is all the questions we have, we can end the call for today. I want to thank IQ management for taking the time to answer our questions, and we will pick this up again next quarter. Thank you very much.
Thank you all. Thanks, Bobby.
Thank you.
Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.