Hello, welcome to Industries Qatar conference call. Please note that this call is being recorded. I would now like to hand the call over to our moderator, Bobby Sarkar. Please go ahead.
Okay. Thank you, operator. Hi. Hello, everyone. This is Bobby Sarkar, Head of Research at QNB Financial Services. I wanted to welcome everyone to Industries Qatar's fourth quarter and year-end 2024 financial results conference call. On this call from QatarEnergy's Privatized Affairs Group, we have Abdulla Al- Hay, who's the Manager for Privatized Companies Affairs. We have Rashid Al- Mohannadi, who's the Head of IR and Communications, and we have Saffan Mohammed, who's the Senior Financial Management Analyst. We will conduct this conference with management first reviewing the company's results, followed by Q&A. Let me now turn the call over to Rashid. Rashid, please go ahead.
Thank you, Bobby. [Non-English content ] Good afternoon, thank you all for joining us. I hope you are doing great. Before we go into IQ business and performance update, I would like to mention that this call is purely for IQ's investors and no media representative should be attending this call. Moreover, please note that this call is subject to the disclaimer statement as detailed on slide number two of the IR presentation. Kindly note that the MS Teams link is to display the IR deck on screen only. 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. We can move into the call. On Sunday, 2nd of February 2025, IQ published its financial results for the year ended 31st December 2024.
Today in this call, we'll go through these results and provide you with an update on key financial and operational highlights. Today on this call, along with me, I have Mr. Abdulla Al-Hay , Manager for Privatized Company Affairs, and Mr. Saffan Mohammed, Senior Financial Management Analyst. We have structured our call as follows. At first, I will provide you with a quick insight on IQ ownership structure, competitive advantage, and overall governance structure. Secondly, Abdulla will brief on IQ dividend and key macroeconomic updates. Later, Saffan will provide you with IQ financial performance consistence with an update about the segment performance. Finally, we'll open the floor for the Q&A. To start with, as detailed on slide number five, IQ ownership structure comprises of QatarEnergy with 51% stake, and the rest is in free float held by various domestic and international corporate and individuals.
IQ is a credit-rated entity by S&P with A A - and Moody's with double Aa 3 credit rating, both with stable outlook. This rating were further affirmed by S&P recently. QatarEnergy being the main shareholder of IQ, provides most of the head office function through a service level agreement. Operation of IQ group companies are independently managed by its respective board of directors, along with senior management teams. In term of the competitive advantages, as detailed on slide number eight, 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, a sure supply of feedstock and competitively priced energy sources, lower and competitive operating costs, a dedicated team in form of QatarEnergy Marketing to market the group with petrochemical fertilizer product and a greater global presence, a reputable JV partner, and most importantly, a well-experienced senior management team. As detailed on slide number 10, from competitive position and prospectus, IQ ranks among the top-tier companies within the regional downstream space across most of the matrices. In term of the IQ governance structure, you may refer to slide 51 and 52 of the IR deck, which covers various aspects of IQ code of corporate governance in further detail. That conclude the introduction. I will now hand over to Mr. Abdulla.
[Non-English content] . Thank you, Rashid. Good afternoon, and thank you all for joining us. I am pleased to announce that board of director proposed second half dividend distribution of QAR 2.6 billion, equivalent to QAR 0.43 per share, representing more than 120% of the net earning for the second half results. This brings the total dividend distribution for the year to QAR 4.5 billion, equivalent to a payout of QAR 0.74 per share, representing 100% of the net earning for the year. During this year, the global economy faced challenging sentiment from difficult conditions faced by global economies during late 2022 and 2023. Elevated energy prices, geopolitical uncertainty, stricter regulatory requirements led policymakers to maintain tight monetary and fiscal policies to combat inflation.
This approach, especially in the first half of 2024, prolonged the economic recovery and affected various segments differently. In 2024, the petrochemical sector faced demand challenges due to economic slowdown in China and Europe, high interest rates, and reduced consumer affordability. Supply issues arose from oversupply, especially in olefins and polyolefins due to capacity additions in China. Low cost ethane producer in North America and in the Middle East increased supply while regulatory pressure delayed sustainability investments. The fertilizer market was influenced by natural gas prices volatility, corn prices fundamental, farmer affordability, trade policies, and weather conditions. Natural gas prices declined from 2022 peaks to a fertilizer production resumed after temporary closure. Now, fertilizer prices is within its historical long-term averages. The steel segment saw volatility due to tightened monetary policies, leading to slump in construction activities and a downturn in real estate sector.
However, regulatory intervention in the second half of the year, such as lowering lending rates and supporting infrastructure project, helped stabilize the steel prices. I will hand over to Saffan to cover the financial performance of the group.
Thank you, Abdulla . Thank you all for joining the call. Continuing on the group's financial performance. The group reported a consolidated net profit of QAR 4.5 billion for the year ended 31st December 2024, with an earnings per share of QR 0.74, showing a marginal decline compared to the year ended 2023. EBITDA for the period was slightly increased versus the last year. Group revenue for year ended 2024 also saw a slight decline compared to the previous year. This reduction in revenue was mainly due to a marginal decline in average selling prices, which was nearly offset by a marginal improved sales volumes. Now we can dive into financial performance as reported on slide number 15.
Group reported EBITDA for the period is QR 6.4 billion with an EBITDA margin of 38%, compared to an EBITDA of QR 6.2 billion for the last year, with a reported EBITDA margin of 37%. Group revenue for the period marginally declined by 1% to reach QR 16.8 billion as compared to QR 16.9 billion reported for the last year. Reduction in revenue for the current year was due to marginal decline in selling prices that was partially offset by a slight improvement in sales volumes. Going through IQ's net earnings for 2024 versus last year as detailed on slide number 16, group financial performance for the year was largely attributed to the following factors. Product prices. Blended average product prices were marginally declined by 3% versus year-end 2023, reaching to $457 per metric ton, negatively impacting group's net earnings by QR 635 million.
Despite this, prices stabilized over the last few quarters after peaking in the second half of 2022. This stability was due to supply challenges from regional geopolitical uncertainty, plant turnarounds, export restrictions, production shortfalls, and fiscal and monetary policy interventions. Demand for downstream products was also affected by tepid economic forecasts, aggressive monetary policies, and limited domestic and regional demand for certain products. Some promising trends emerged recently due to improving macroeconomic fundamentals. Sales volumes. On the other hand, sales volume for the year 2024 improved marginally by 2% versus year ended 2023, owing to broadly improved production and stabilization of demand resulting from gradual easing of macroeconomic challenges and supply bottlenecks. Despite ongoing regional uncertainties and variation in shipping timing across some segments, overall sales volumes have marginally improved. Operating costs. The operating costs for the year ended 2024 marginally improved versus year ended 2023.
This decrease in the year-on-year operating cost was primarily linked to lower variable cost, driven by price linked feedstock cost and raw material cost and favorable inventory movements, partially offset by higher general cost inflation. The group's current year financial performance was also impacted due to comparatively lower one-off non-operating income as the group recorded this year QAR 143 million pertaining to reversal of a bank guarantee that was previously provided to group's steel associate, Gulf Steel. While in 2023, the group recorded QAR 610 million related to reversal of impairment of non-current asset and investment in associate within the steel segment. The group also recognized this year QAR 144 million relating to fair value gain on remeasurement of previously held interest in joint venture, QAFAC. Comparing IQ's net earnings of fourth quarter versus the previous third quarter 2024, as detailed on same slide.
The current quarter, fourth quarter 2024, IQ's net earnings declined moderately versus third quarter of 2024 to reach QAR 1 billion. This decline was primarily due to lower sales volumes, primarily within the fertilizer segment, owing to lower production together with lower profitability within the petrochemical segment due to higher operating costs. From a segmental perspective, petrochemical segment's performance declined versus last quarter on the backdrop of heightened operating costs. Petrochemical prices broadly improved versus the previous quarter and helped to offset the impact of heightened costs. Profitability within the fertilizer segment declined moderately on the backdrop of decreased revenue on account of lower sales volumes amid lower production. In line with the lower sales volume, operating costs too have improved versus the last quarter. Average product prices have marginally improved on the backdrop of enhancement witnessed in the fertilizer markets.
Steel segment's financial performance for fourth quarter of 2024 moderately inclined on the backdrop of improved other income, including better associate performances. Nevertheless, operating income declined versus previous quarter due to increased operating costs linked to higher volumes. Financial performance. As detailed on slide 15, group's financial position continued to remain robust, with proportionately accounted cash and bank balances of QAR 11.4 billion as of 31st December 2024. After accounting for dividend payout relating to the financial year 2023 and 2024 interim dividend. Currently, the group has no long-term financial debt obligations. The group reported total asset and total group equity reached QAR 37.7 billion and QAR 42.4 billion respectively as of 31st December 2024. The group generated positive operating cash flow of QAR 4.6 billion with free cash flows of QAR 1.3 billion during the year. Now we can move to the segmental review.
The petrochemical segment reported a net profit of QAR 1.4 billion for year-end 2024, showing a marginal improvement of 1% compared to 2023. This increase was primarily attributed to higher segmental revenue driven by improved volumes, while prices continued to recover and stabilize. Despite challenging macroeconomic conditions, the segment witnessed signs of recovery during the year. Effective navigation of market conditions, capitalizing on improved macroeconomic factors, and maintaining operational efficiency contributed in maintaining segment's profit. This recovery was reflected in a moderately improved sales volumes, although average selling prices were slightly lower than last year. Production improved as volatility operations were on planned maintenance in the fourth quarter of last year, while it reached a milestone by producing highest volume of MTBE since its inception. This segmental achievement was partially offset by few planned and unplanned shutdowns within other polyethylene facilities during the year.
On a quarter-on-quarter basis, the segment's net earnings declined primarily due to lower operating margin on account of high operating costs. Revenue marginally declined versus the previous quarter on the backdrop of lower sales volumes, while prices marginally increased. Production marginally down versus the previous quarter due to few unplanned facility maintenances within the polyethylene segment. On an overall basis, lower sales volumes together with an increase in operating costs resulted in a quarter-on-quarter decline in the segmental net profit. Fertilizer segment reported a net profit of QAR 2 billion for year ended 2024, showing a marginal improvement versus year-end 2023. This moderate increase in net profit was primarily driven by reduced operating costs associated with reduced raw materials, feedstock costs, and favorable inventory changes. Despite an improvement in net profits, segmental revenue decreased marginally during the year compared to the previous year.
This decline was due to a slight decrease in selling prices, partially offset by marginally increased sales volume. Selling prices declined marginally versus year-end 2023, as nitrogen fertilizer prices have stabilized to their long-term averages since peaking during second half of 2022. Sales volumes remained relatively stable as the macroeconomic conditions in the fertilizer segment have started to strengthen further. Production have also stabilized despite a few unplanned outages during the year, in addition to the routine planned facility maintenance in the fourth quarter of 2024. On a quarter-on-quarter basis, segmental revenue declined versus the previous quarter, primarily due to moderately lower sales volumes. The reduction in sales volumes was primarily due to lower production amid plant shutdown during the current quarter. Selling prices improved slightly compared to last quarter and continue to trend of stabilizing towards their long-term averages.
The segment's net profit for fourth quarter declined notably compared to the last quarter, driven mainly by lower revenue resulting from lower volumes. Profitability measured by EBITDA margin broadly remained unchanged in line with improved operating cost. Moving on to steel segment, as shown on slide 36. The steel segment reported a net profit of QAR 565 million, notably lower versus the full year of 2024. This reduction in net profit was primarily driven by lower gross margin, together with comparatively lower one-off other non-operating income. Segment's gross margin affected due to lower revenue driven by lower prices, together with marginal decline in volumes. Steel prices declined broadly on account of higher supplies and the softening of demand in both domestic and international demand. Simultaneously, sales volumes were also down due to challenging demand conditions.
Construction demand continued to remain a key constraint due to macroeconomic environment prevailed mostly during the year, with most central banks continued to persist with their hawkish monetary policies. Although conditions started to improve since second half of 2024 as a result of gradual global recovery, and particularly China, a larger contributor to construction and real estate economy, has taken a series of policy measures to reignite the domestic construction sector. In year ended 2024, the segment recognized a one-off non-operating income of QAR 143 million from the reversal bank guarantee previously provided to one of its associates. In contrast, in year ended 2023 included a higher one-off non-operating income of QAR 610 million from the reversal of an impairment of property, plant, and equipment at Qatar Steel facilities, together with reversal related to an impairment of an investment in an associate.
This movement was the main driver for the profit variance between this year and last year. On a quarter-over-quarter basis, segmental profit inclined significantly with a third quarter, mainly on improved income from share of associates. The operating income declined due to sequential increase in operating costs despite a marginal increase in revenue, resulting in lower operating margin. Segment's revenue increased marginally, primarily due to moderately higher sales volumes. This improvement was largely attributable to enhanced production on account of better plant availability and reliability following the restart of DR1 during the fourth quarter of 2024. Selling prices have declined moderately versus the previous quarter, reflecting relatively volatile state of the global and regional steel market. With that, the segmental and group performance review is completed. I will now hand over to Rashid.
Thank you, Saffan. That concludes our presentation. I believe we can open the floor for the Q&A.
Thank you. As a reminder, if you would like to ask a question, please press star and the number one on your telephone keypad. Your first question comes from the line of Abhinav Sinha from Lesha Bank. Please go ahead.
Yeah. I have a couple of questions. One is, are there any guidance in terms of, well, I understand it's commodity price driven, but are there any guidance on the top line or are you on the bottom line? Second question is on the blue ammonia plant, which is going to come in 2Q 2026. Just wanted to understand, the 1.3 million ton capacity, will it be majorly used for the urea, like how it is done now? Or will it be sold more in open market? Thank you.
The question on your prices and volume. Prices, generally, we don't give guidance on prices because prices is more kind of related to market demand and supply.
Yeah.
Our view, prices will be something more likely linked to oil prices and with so many things, so many moving parts across currently, we don't have long-term visibility on the prices. Our view, fertilizer prices will stabilize with the second half of the year. Monetary policies got better, chemical also on the same view. Our view is second half of the year, prices, those stability will start to continue. On urea, QAFCO-7, what was your question?
Will the capacity be used majorly for internal purpose, like how it is used now, or will it be sold more in an open market or something?
We already announced that ammonia 1 and 2 will be revamped. That's a separate project that we announced last year. Currently the blue ammonia project production will be dedicated to the blue ammonia, basically.
It will be basically sold as blue ammonia. The 1.2 million capacity will be.
Okay
Sold as blue ammonia.
Okay. Thank you.
Thank you. Our next question comes from the line of Sashank Lanka from Bank of America. Please go ahead.
Yes. Thank you very much for the presentation. I have three questions, if that's okay. The first question is on the blue ammonia project, which the person before asked as well. Just wanted to understand how has the contracts been agreed on this. Are you going to charge a premium versus the gray ammonia market? Where are you selling these volumes? Have you secured 100% volumes contracts? That's the first one. The second question is, when I look at the urea pricing in the second quarter, I think the realized pricing was around $340 per ton. Just wondering if there was any shipments that got delayed. I know it's a weighted average kind of a price you realize. Should we assume because of the shutdowns, there could be more volumes sold in Q1?
I think prices for urea started to go up quite a bit towards the later part of Q4. The third question is, Q4 historically has always been a heavy turnaround period, both for pet chems and fertilizers. Should we assume a normalization of volumes in Q1 and the subsequent quarters this year? Thank you.
With respect to blue ammonia volumes, that is handled by QatarEnergy Marketing. Now, the project will be operational only in the second quarter of 2026, and once it's ramped up, it'll be third quarter, and real commercial operations will be third quarter, fourth quarter. Still, it's too early to comment on the customers, the volumes and the contracts. It's very too early and also it's completely handled by QatarEnergy Renewable Solutions. From IQ's perspective and from QAFCO's perspective, we have an offtake with QatarEnergy Renewable Solutions. Apparently, what we hear, blue ammonia should attract a premium. Right now, we have no comment on that. Technically, blue ammonia, given that its energy efficiency, other benefits, it should attract a premium. Right now, it's not marketed by anyone.
On a very large scale, we are the one who will first start selling, other than the 50,000 that test marketing done by someone. There is no history. With respect to other.
Yeah. Thanks.
Go ahead.
Sorry, if I can just follow up on that. Saffan, thank you for that. How will you get compensated? Is it like a fixed margin kind of a contract you have with QatarEnergy? I understand they take the offtake pricing risk and all of that. How will you be compensated? How should we be factoring this in our models?
For QatarEnergy, we have these CCs. We will get a price. QatarEnergy will market, QatarEnergy will sell, whatever the price they realize, they will pay to QAFCO. Right? Now, all this carbon is captured into the ground. For that, QAFCO will pay a fee. Whatever the price that is sold will be paid to QAFCO. Let's say whatever the price, $ 600, $500, $700, to manage the carbon capture, there will be a separate fee.
Okay, which you need to pay, basically. QAFCO needs to pay to QatarEnergy for that.
Yeah.
Yeah. I think if the project works well for you, and obviously blue ammonia premium is higher than what gray ammonia prices are. Is that understanding correct?
Yes. It has to be. The whole economics is based on that, right?
Okay. Clear. Sorry about that. My second question was related to basically your urea prices in Q2 and then the volumes going into the rest of the year.
Basically, always between month and months and quarter on quarters, due to various reasons, shipment at the last year, sometimes due to vessel availabilities and various weather conditions, sometimes the shipments get delayed. It works both ways. Sometimes, depending on if the prices are better, it helps you. If the prices goes down, it works the other way. We have noticed there were a few thousands of metric tons got shipped in the first quarter of 2025 as well. Because the prices have gone up, that would work well for you in this quarter. I think that's what your question, right?
Yes. That's clear. Thank you, Saffan. Are there-
I apologize. Let me bring him back to the queue real quick. I apologize, Mr. Lanka. Please go ahead.
Yes. No, I was just following up on the volumes question. We should assume that the volumes in the first three quarters should be similar to the levels that we saw last year, right? Just to be clear.
No. It depends. In 2024, we had a shutdown in the fourth quarter. Next year it depends on which quarter the shutdown will be. That all will be aligned with QatarEnergy upstream shutdown also. If QatarEnergy is going to have a major shutdown in, say, for example, Q2, QAFCO will align on that shutdown. It's not necessarily Q4.
Yeah. Okay, understood. Any guidance you can give us on volumes?
Right now, we don't have, but we can give it separately.
Okay. Thank you, Saffan.
Thank you. Our next question comes from the line of Dalal Darwich from Goldman Sachs. Please go ahead.
Yes. Hi, everyone. Thank you very much for the opportunity to ask. My question has been mostly answered, but I just have maybe a follow-up on it. Just to clarify, we don't have today visibility on when the shutdowns could happen in 2025. This is just to confirm. The second part of the question is that, is it possible to quantify the impact of the shutdowns that took place in 4Q, whether it's on revenues, volumes, any metric?
I'll answer you with regards to the Q4 shutdown. I think Q4, we witnessed a shutdown within the fertilizer segment, that impacted our production volume. However, we benefited from selling more since, as we discussed before, any plant turnaround will ramp up certain production to dampen the effect. The effect of the shutdown was dampened due to that, and that's why we are reporting comparable profitability in quarter-over-quarter in fertilizer, even if the raw margins are comparable on quarter-on-quarter. With regard to the future guidance, I think Saffan has mentioned that we can give it separately if you want. We will provide you with that for guidance for the following quarter.
Thank you. Our next question comes from the line of Anoop Fernandes from SICO. Please go ahead.
Yeah. Hi. My questions have been answered. Thank you.
Thank you. Our next question goes back to the line of Dalal Darwich from Goldman Sachs. Please go ahead.
Yeah, sorry for that. Just maybe one more follow-up on our end. Could you provide some details on the QAFCO contract and where we stand on that topic today?
You are referring to the end of term? The joint venture expiry?
Yes, please.
Following the expiry of the contract term, basically the legal formalities have been done. Once it's completed, it will be transferred to the related party of QatarEnergy IQ. Currently, it's under completion of the legal formalities. In 31st December, financials, as you would have noted, we have consolidated QAFCO as a subsidiary.
Once those formalities are done.
Completed, we will announce to the market of the actual position.
Miss Darwich, would you be asking any more questions? Your line might be on mute.
Oh, sorry. Okay, can you hear me? Sorry. Yeah, that was on mute. Yeah, just also a follow-up on this. The JV, should we expect the company to acquire the remaining stake in it?
Basically, right now, the stake, as we announced in the financial, will go to a related party, to IQ. Once this formality is done, we'll announce the party that will take the stake. From thereafter, we don't know whether this will be offered to IQ or not. As we discussed, the structure is that once the joint venture expires, the stake goes to basically the founder. Once the founder has it, then it's upon the founder whether to keep it, whether to delegate it, whether to sell it. This has not gone back to the founder. Basically, it has to go first to the founder, and then we'll announce to the market that it went, and then we'll report back to the market whether it's offered to IQ or not.
Once the legal formalities are completed, we'll announce the transfer, to whom it will be transferred.
Okay. That's clear. Thank you.
Thank you. Our next question comes from the line of Seki Mutukwa from Ashmore. The line's open.
Hi. Thanks for that. Two questions, please. First one, going back to QAFCO-7. Any global blue ammonia projects in 2025 coming on stream you think it would be wise to keep an eye on, just to get a sense of the potential premium one could be talking about? Would be helpful just to know what you might be looking at. The second question was just in terms of the board either pushback to management or conversation with management about the dividend per share, which whilst being 100% in absolute terms is lower than it was last year, and you've got a pretty healthy balance sheet which can easily sustain the CapEx, including the cash flow it generates. Just wondering how that sort of conversation, how we've put that out in terms of paying a lower absolute dividend whilst still a high payout. Thank you.
Answer to first question. To our knowledge, based on various analysts from other sources, we have not heard of any major projects. Although we have heard of various fertilizer capital expenditure projects, but we have not heard of any blue ammonia projects. Also with respect to premium, as I mentioned in one of the previous question, since it has not been physically sold, we haven't heard of any premiums. In theory, it should attract a premium. With respect to your second question, in our view, the board was quite generous in paying 100%. The reason being why we consider this generous, IQ's cash flows are pretty much commodity-driven. Cash flows are quite cyclical. Free cash flows. See, if you look at our profits, QAR 4.5 billion versus QAR 4.7 billion last year.
If you look at the free cash flow, although we made QAR 4.6 billion operating cash flow, we spent out of that QAR 3.3 billion in capital expenditure, retaining only QAR 1.3 billion as free cash flow. Right? We used fair amount of opening balances in paying the dividend. Therefore, board was more prudent in paying that dividend. It's not, how do I say? Our EPS or the profitability is not a retail business, it's not like a telco or an electricity business where you're earning some stable. Our earnings are volatile, we want to maintain certain buffer in our cash flows so that we can ensure future dividends are also covered. It's again, our view, board would have had much more deeper thinking and deeper discussion in deciding on that dividend.
With regard to your blue ammonia question, I think 2025 will have a lot of projects from other regions is expected to be FID. There is one project that is expected to be FID with one of our regional peers.
The blue one?
Yeah, for the blue ammonia. We have one project in the U.S. that is expected to be FID this year. We have one project in Europe for CF Industries, which is under the HOA. Our project seems to be a leading project in terms of blue ammonia, in terms of the scale as well, given we will produce 1.2 million tons of blue ammonia. It will be one of the pioneer projects, and it will set the tone for the market.
Perfect. Thanks.
Thank you. Our next question comes from the line of Nikhil Phutane from CBFS. The line's open.
Hi. Good afternoon, gentlemen. Thanks for taking the call. Actually, this is regarding your steel plans. You have mentioned about switching in mothballing facilities between DR-1 and DR-2. We wanted to understand whether when you mentioned that, then DR-2 could be seeing a decrease in production output in case, suppose we go to DR-1. Secondly, how much DRI do you see in 2025 from DR-1 plant as you go for low carbon steel product? And will it be margin accretive compared to your existing other products, rebar, DRI, HBI?
Basically, we are operating both. In addition to DR-2, we are operating DR-1 as well. The idea is to make use of the opportunity coming from markets where you have low carbon steel demand. That's why we have started from Q4 operating the plant that was previously mothballed, the DR-1. That will produce additional DRI and HBI, and we will use them to sell in their CBAM implementation, the CBAM restrictions which are being placed when the regulation will be starting. The strategy was to capture those market, sell those DRI, HBI in those market, and realize some strategic benefits in selling those markets. That was basically because we are electric arc furnace operator, right? Our carbon emission is, I think, probably one-fourth to one-third compared to a blast furnace operator.
We benefit from that and use that as a strategy to penetrate those markets.
Okay. On your total capacity, 800,000 metric tons, which you have mentioned under DR-1, can we expect significant amount start rolling from 2025 in terms of production capacity? Yeah.
The idea is to operate at full capacity. That is the intention. The plan is to operate the DR-1 and DR-2 at 100% capacity, and sell as much as DRI based on the demand that arises. Again, there is a caveat with the new Trump administration, with duties and taxes coming in in different forms, the strategy could change also. As at this point in time, our business plan, the revised model basically suggests we will operate both DR-1 and DR-2 in order to benefit from various opportunities present in the market.
Yeah. Also the Trump new, let's say, tariff set, it will have either direct or indirect impact on a lot of products as well. This is something to keep in mind going into Q1 and Q2.
The market very dynamic. Evolving.
Okay. You did mention about low carbon steel product, in terms of being much more margin accretive as compared to your existing product. That could be also one of the reasons where you are going for this product.
When you say margin, DRI on the value chain, you have DRI, HBI, billets, then you have rebar. Usually, when you go further on the value chain, margins are higher. Here you have a niche market. You sell more volumes and realizing more contribution. It's not necessarily the margins are higher. There are other factors to consider. What we try to do, you try to attract a niche market, a low carbon steel market. Usually, rebar is more profitable on a conventional basis.
Okay. Regarding in your shutdown, can you just give a guidance in first quarter 2025, any shutdowns in any of your plants?
Yeah, we can give that, but can you write an email to our IR desk so that we can send you?
Okay. Thank you. Okay. Thank you, sir.
Thank you. Our next question comes from the line of [inaudible], Morgan Stanley. The line's open.
Hi, good afternoon, and thank you for taking my questions. I have two, if I may. The first one is about the maintenance CapEx. You have raised guidance for the next five years, and we were wondering, is the increase related to inflation? The second question, you already spoken a little bit about it, but we were wondering if you could give us an idea of your expectation about urea prices in the second half of next year. Thank you.
Maintenance CapEx is usually we spend around QAR 400 million-QAR 500 million a year capitalized. As the price become bigger, obviously with completion, obviously your own, right? 2027, 2028, we have QAFCO-7 coming in, and a couple of major turnarounds are there in those two years. We have QAFAC, a major turnaround is in 2027, and QAFCO is in 2028. Those turnaround will add some value. Typical maintain and cost is around QAR 400 million-QAR 500 million. On top of that, we have specific turnarounds, major turnaround. Those adding up to QAR 3 billion, which we don't see as a bigger number.
Okay. Clear. Some outlook for the urea prices?
Generally, we don't give outlook from a company perspective, but we see from general analysts from market perspective. They expect the prices of second half, unless unusual things don't happen, the second half prices will continue to prevail with slight variations.
The tariff if imposed by the U.S. could have an impact on our pricing. For instance, the slide that we have, we see that we sell to North America, around 31% of our revenue comes from North America. If there is a tariff that is imposed by the U.S., that could divert those quantities, and you could have some kind of a shift in product or destination. It could also have an impact on price. On top of that, it will depend on the gas price, how it will evolve moving into the second half of next year. Also, you should be on the lookout for how the India will structure their tender for the upcoming season.
Which is next year. There are a lot of uncertainty, things to keep on the radar. It's quite difficult to predict, but we are hopeful that the prices would not sank to the bottom end, because right now we have inflation that is expected to grow. Basically, when inflation grows, we have a growing appetite of spending for the consumers. Given that it's a necessity thing to use agricultural product, it will remain within normalized level. We are hoping for that. Again, the company doesn't give any guidance or give any projection for the future.
Okay. Thank you very much. It's a clear answer. Thanks.
Thank you. Our next question comes from the line of Prateek Bhatnagar from HSBC. The line's open.
Yeah. Hi. Thanks for taking my question. Most of them have been answered. I just have one remaining. In your petrochemical segment, the margins declined sharply. Were they all because of the unplanned shutdowns or was there any other thing at play as well? Any color there would be helpful. Thanks.
There are a couple of reasons. One was, because of these shutdowns, we have capitalized the assets and depreciated them. Most of them were done in the fourth quarter. That was one of the reasons. Because in fourth quarter, their productions were low because of shutdowns, we have to use previous quarter's inventory. There was adverse inventory movement. These two are the main reasons. Generally in the fourth quarter, there are audit adjustments take place. There were certain accrual bookings taking place usually. These factors have impacted your fourth quarter operating expenses, that impacted your margin. While the revenue remained flat, your operating cost increased, affecting your operating margins.
Got it. Thanks. Very helpful.
Our next question comes from the line of Ravi Musa from Epicure. The line's open.
Hi. Thank you. Thank you for the call. I just have one question on blue ammonia. Say if blue ammonia is priced at a premium, how much do you expect that premium to be?
That's a very difficult question to answer because still there is no physical market to explore. I mean, this kind of arrangement is taking place at QatarEnergy Renewable Solutions. Us being in IQ is difficult to answer the question because we are not prevailed or we don't know what all the commercial discussion happening at that front. We are guaranteed an offtake from them, but once the project is up and running. We are hopeful that you can be patient with us. Hopefully, we'll have more views, going into 2025, last quarter. Coming closer to the start update, we'll have more of a view on this.
Okay. Thank you.
Thank you. Seeing as there are no more questions in the queue, I'd now like to return the call back to our moderator, Bobby Sarkar, for closing remarks.
Okay. Thank you, operator. If there are no further questions, we can end the call for today. I want to thank Abdulla, Rashid, and Saffan for taking the time to go over the presentation and then answer all our questions. Thanks, everyone, and we will pick this up again next quarter.
Thank you all.
Thank you.
The meeting is now concluded. Thanks all for joining. You may now disconnect.