Hello, everyone, and welcome to Mesaieed Petrochemical Holding Company conference call. Please note that this call is being recorded. I'd now like to hand over to our moderator for today, Roy Thomas. Please go ahead.
Thanks, Ellie. Hello, everyone. This is Roy Thomas from QNB Financial Services. I want to welcome everyone to Mesaieed Petrochemical Holding Company's second quarter and first half 2024 financial results conference call. On this call from Mesaieed Petrochemical Holding Company, we have Abdulla Yaqoob Al-Hay, the Manager, Privatized Companies Affairs, QatarEnergy. Sami Mathlouthi, the Assistant Manager of Financial Operations, Privatized Companies Affairs, QatarEnergy. Rashid Hamad Al-Mohannadi, Head of Investor Relations and Communications, Privatized Companies Affairs, QatarEnergy. Saud Sayeddeen, Senior Financial Management Analyst, Investor Relations and Communications, Privatized Companies Affairs, QatarEnergy. We will conduct this conference call with management for distributing the company's results, followed by Q&A. I will turn the call now over to Rashid Al-Mohannadi. Go ahead, Rashid.
Thank you, Roy. Good afternoon, and thank you all for joining us. Before we go into the business and performance update, I would like to mention that this call is purely for the investor of MPHC. No media representative should be attending this call. Kindly note that the MS Teams 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. Please note that this call is subject to MPHC disclaimer statement as detailed on slide number two. First, let me further share with you that for the first time, MPHC Board of Directors decided to distribute an interim dividend. This is a clear instance of MPHC unwavering commitment to its shareholders and to the capital market in general.
The decision was made while prudent care was taken to maintain adequate liquidity for CapEx requirements, debt obligation, and unexpected adversity and regulatory requirements. Moving on to the call. On Monday, 12th of August, MPHC published its result for the six-month period ending 30th of June 2024. Today in this call, we will 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 Yaqoob Al-Hay, Manager for Privatized Companies Affairs. Mr. Sami Mathlouthi, Assistant Manager for Financial Operations. We have structured our call as follow. At first, I will provide you a quick insight into MPHC ownership structure, its competitive strength, and overall governance structure by covering slide five till 10, and slide 41 and 42. Secondly, Abdulla will brief you on the microenvironment update and the dividend decision.
Sami will brief you on MPHC key operational and financial performance matrices, including the segmental performance. To start with, as detailed on slide five of the IR deck, the ownership structure of MPHC comprises of QatarEnergy with approximately 57.9% stake, and the rest is in the free float held by various domestic and international corporate and individuals. QatarEnergy, being the main shareholder of MPHC, provide most of the head office function through a service level agreement. The operation of MPHC joint venture are independently managed by their respective board of directors along with senior management team.
In term of the competitive advantages, as detailed on slide eight of the IR deck, MPHC group companies are strategically placed in term of competitively priced and assured feedstock supply under long-term arrangement, solid liquidity position with strong cash generation capability, and the presence of the most profitable joint venture partners. Additionally, its partnership with Muntajat acts as a catalyst for its access to the global market. As detailed on slide 10, from competitive positioning perspective, MPHC ranks among the top-tier companies in the regional chemical space across most of the matrices, especially lead the chart in term of their profitability margin. In term of the governance structure of MPHC, you may refer to slide 41 and 42 of the IR deck, which cover various aspect of MPHC code of corporate governance in detail. I will now hand over to Abdulla Al-Hay.
Thank you, Rashid. [Foreign language]. Good afternoon, and thank you all for joining us. Reflecting on the year-end of last year, QatarEnergy successfully honored its IPO commitment by allocating the second and final tranche of incentive shares to the eligible MPHC shareholders. This significant milestone involved transferring 948 million ordinary shares from QatarEnergy to eligible IPO shareholders, as outlined in the IPO prospectus of MPHC. Additionally, following the new ownership structure after the incentive shares allocation, a total annual dividends for the fiscal year 2023 was issued, amounting to approximately QAR 1.1 billion, which equal to QAR 0.086 per shares, representing 100% payout of the 2023 net profit. With the half year result of 2024 and considering the latest regulatory update, QatarEnergy announced its support for the initiatives of distributing interim dividends by its listed companies.
This is a crucial step in the blossoming efforts and initiatives aimed at fulfilling the national economy by developing Qatar capital market in line with top regional and international standards. In response to QatarEnergy announcement, MPHC evaluated its financial and legal ability to issue semi-annual dividends. Consequently, the board of directors on August 12th, 2024, resolved its distribution cash dividends totaling QAR 339 million for the period ended June 30th, 2024. This distribution represents an 85% payout ratios of the net profit for the current period, amounting to QAR 0.027 per share for the shareholders registered at the closing date on August 20th, 2024. This distribution marks a strategic effort to enhance shareholder value while upholding a robust and resilient financial position to safeguard the company against potential future market volatility. Moving to the macroeconomic analysis.
The macroeconomic climate remained wavered during the first half of 2024, as the market sentiment remains driven by uncertainty about the global economic recovery, in addition to recessionary fears linked to inflation related to pressure and higher interest rate environment. Overall, commodity prices for MPHC basket of products declined year-over-year, mainly due to buyers' caution approach amid macro headwinds, coupled with comparative lower energy prices. On a quarter-over-quarter basis, the prices have inched up as the global economy are showing a sign of gradual recovery. My colleague, Sami, will further take you through the operational aspects as well as financial performance of the company.
Thank you, Abdulla. Good afternoon, and thank you all for joining us. Comparing MPHC financial performance for first half 2024 versus the first half of 2023, as referred to in slide 16, MPHC reported net profit of QAR 398 million for the six-month period under 30th of June 2024, down by 32% compared to the previous year. The decline in profitability was mainly linked to a 13% decrease in selling prices, resulting in lower revenue by 7% to reach QAR 1.4 billion. The drop in group revenue was mainly linked to the decrease noted in average blended product prices, which declined by 13% compared to first half 2023. This translated into a negative price variance of QAR 126 million in MPHC current net earnings compared to last year. Subdued product demand amid macroeconomic uncertainties resulted in lowered commodity prices.
On the other hand, sales volumes increased by 8% versus first half of 2023, mainly driven by higher sales volumes reported by the Chlor-alkali segment, partially offset by lower sales volumes reported by the Petrochemical segment. This positive movement in sales volumes translated into an increase of QAR 27 million in MPHC first half 2024 net earnings versus the same period of last year. While EBITDA for the current period amounted to QAR 627 million, it noted a decline of 21% compared to first half 2023, mainly due to lower revenues. EBITDA margins for first half 2024 reached 44% compared to 52% during last year, mainly affected by the decline in selling prices.
Comparing financial performance of second quarter 2024 compared to first quarter 2024, MPHC bottom line profitability increased by 5% versus first quarter of 2024, mainly due to higher revenue, where an incline of 3% was noted on a quarter-on-quarter basis. The revenue increase was mainly linked to 2% higher selling prices and marginally higher sales volumes by 1% compared to first quarter of 2024 as a result of increased production volumes from the Chlor-alkali segment, which was fully offsetting the decline in the Petrochemical segment linked to maintenance turnaround during the quarter. This translates to a positive volume variance of QAR 5 million. Selling prices improved marginally by 2% compared to the previous quarter, mainly due to a relatively enhanced supply-demand dynamics, which translated to a positive price variance of QAR 15 million.
Regarding the financial position as exposed on slide number 15, liquidity remained robust, with cash and bank balances standing at QAR 3.4 billion as of 30th of June 2024. The decline in cash and bank balances was mainly due to dividend payments for the financial year 2023, which is partially offset by positive cash flow generation during the first half of 2024. Total assets as of 30th of June 2024 amounted to QAR 16.8 billion, and total equity amounted to QAR 16.4 billion. Moving to segment review, we will start with Petrochemical segment, as covered in slides number 2021 till 2025. The segment performance analysis for first half 2024 compared to first half 2023 revealed that Petchem segment reported a net profit of QAR 289 million for the current period, representing a 42% decline from the same period of last year.
The decrease in profitability was largely driven by lower revenue. Segment revenue for first half 2024 declined by 15% compared to first half 2023, reaching QAR 1 billion. Low selling prices and reduced sales volumes primarily drove this decrease. The drop in sales volumes was mainly due to a 12% reduction in production, resulting from decreased plant availability. Additionally, product prices fell by 8%, reflecting deteriorating macroeconomic conditions compared to the same period of last year. Regarding the segmental performance for second quarter 2024 compared to first quarter 2024, the segmental profits increased by 9%, primarily due to a 4% rise in revenue. The revenue growth was driven by a 6% improvement in selling prices as supply and demand dynamics in the polyethylene market greatly strengthened. Despite lower production, sales volumes only saw a marginal decline of 2% quarter-on-quarter basis. Chlor-alkali segment.
Moving on Chlor-alkali segment, as detailed on slide 26 till 30. The Chlor-alkali segment reported a net profit of QAR 36 million for the first half of 2024, marking a 15% increase compared to the same period of last year. Although selling prices dropped by 6% due to the ongoing macroeconomic uncertainties, the segment saw a significant boost in sales volumes. This increase was driven by higher production levels, supported by improved plant availability in Chlor-alkali facilities. As a result, revenue surged by 31%, reaching QAR 383 million. Regarding the Chlor-alkali segment performance quarter-on-quarter basis, profitability for second quarter remained flat compared to first quarter 2024, reflecting stable revenue levels. The increase in sales volumes was fully offset by a decline in the average selling prices, resulting in comparable performance between the two quarters. I will now hand over to Rashid.
Thank you, Sami. I think that concludes our presentation, and we can open the floor for the Q&A.
Ellie, you can go ahead and open it for Q&A.
Thank you. We are now opening the floor for question and answer session. If you'd like to ask a question, please press star one. Our first question comes from Seki Mutuk wa from Ashmore. Your line is now open.
Okay, thanks for the call. Just questions relating to QVC, please. I was trying to just get a sense in that by the middle of next year, should we expect that in the second half we would not be seeing any external VCM sales? It will all be PVC? Could you talk a little bit about what sort of ramp-up in utilization you may be expecting in the second half of the year of when that happens? A second question is just, in the second quarter, what did you observe in the market as sort of average PVC prices per ton, please? Thank you.
Thank you so much for your question. I think in terms of QVC, basically as you mentioned in the beginning, we are in the process of developing the PVC plant. It is expected to start mid-2025, as you have explained. That will be the planned shipment. So far from the reports that we are receiving, there are no delays and cash calls are planned as expected. We do expect that the full VCM to be converted to PVC, as you highlighted, and that's the plan so far. So far, we have invested around QAR 282 million in the PVC plant. That's the portion of Mesaieed and the contribution inside in this PVC plant, which is 55.2%. We don't expect at the moment any delays. We'll give you more updates by the end of this year.
We hope that this will add additional value to the shareholders of Mesaieed. For your second question, I think for the PVC pricing, we don't see any changes compared to the previous quarter. PVC prices are almost stable, and this has been impacted as well by the pricing VCM. Normally we follow this by the difference between the PVC pricing and the VCM pricing, which is stable, and it is always standing at a specific level, which is around between $170 and $180. I think this is in terms of pricing of PVC. Definitely, this will have an impact on the net profits of QVC because that additional value will be impacted to the net profits. We will save the transportation cost, we will save different kind of costs that will be transferred directly into the PVC production.
Okay. Thank you. I will get back in the queue.
Our next question comes from Nikhil Patel from CBFS. Your line is now open.
Thank you for taking my question. Just wanted to know in terms of your any planned shutdown for the second half of 2024. As you mentioned, in HDPE, some plant shutdown took place, 12%. Also, suppose you can provide us a trend in your VCM, your normal alpha olefins prices and caustic soda for second half. That will be welcome. Thank you.
I will take the first part of the question, my colleague, Rashid, will take the second part. During the second half of this year, we do expect some plant shutdowns, especially at the QVC plant. This will be for Q3, it's an average 15 days, and Q4 it will be 11 days. There are no plant shutdowns for the petchem segment. The plant shutdowns will be mainly for the petchem in 2025. We will have Q-Chem II with a plant shutdown of 45 days. This will be planned during the last quarter of 2025. During 2026, we expect 40 days of plant shutdown in Q-Chem. That's for the first part. Rashid will give you some updates in terms of the evolution of pricing during the next half.
First, I have to clearly state that the company doesn't give any outlook, this is based on reports we have read from the market. On the VCM side, you would see that the VCM prices have gradually been holding their levels across quarter-over-quarter. The trajectory for those will depend on the evolution of the economy going forward. We've heard about initiative taken at China level, where China is trying to stimulate the economy, in particular the construction sector. That could provide some kind of a boost to the construction and could provide some kind of a boost for the use of PVC products, et cetera. Hence it could provide some support for the VCM. The downside would be if the inflation is higher than expected, the buyer confidence is not regained, the economy wheel sort of doesn't move forward.
That's kind of an upside or downside on the VCM. I think more or less the same story would go for the petrochemical as well. It will depend how the economy will evolve in the future. Of course, if you have, let's say, a cut in the interest rate, that will give some kind of a kick to the consumer demand, that could help the buying power to regain again. At that stage, it's difficult to predict what will be happening in the future and how those initiatives taken at China and at various global economy will evolve and how it will cascade to the supply-demand dynamics. I hope I answered your question.
Fine, sir. Just wanted to know, you mentioned in your last slide, in terms of a new plant which you are building up, which has got to do with Just a new salt plant project. Just wanted to understand, what is this? Because you mentioned it is going to be largely for industry salt demand within the country, local demand of table salt. Just wanted to understand, what is the need for this in the first place? Having a joint venture with this, because you do have a surplus amount of money on your balance sheet, of course. Is there any intention where exactly you've already secured demand for all this going forward, what could be the timeline for this? Can you give us an idea? Yeah.
Okay. Thank you for the question. This is Abdulla. A salt project is a project that we are trying to produce a chemical salt within state of Qatar. The aim of it is to localize our need of the raw material for our operation. If you look at QVC, you will see that we import salt from different producer to Qatar, while we have the opportunity here in Qatar to get that chemical salt from the seas. Qatar has a very, I would say, or the industrial city of Mesaieed has a good logistic place where we can allocate the salt project. It has been decided that the salt project will be allocated in Umm Al Houl. This is to give it a location where we can transport the product easily to our QVC operation.
Basically, we will having the advantage of having the chemical salt been produced in Qatar. We will be having the control over the prices. We have engaged with the partner that we have all the know-hows and the technology to operate in Qatar. Good things that I would assume that around 80%-85% of that product will be sold in Qatar. I think this is an opportunity for MPHC to invest in such projects. Further detail, this is at very early stages of discussion and negotiation with all partners. However, whenever we have further details or if the matter has been resolved, we will update the market. Sami would like to say something else.
To add on what Abdulla said. As you know, salt is one of the raw materials for the production of caustic soda, and it's very important ingredient for the Chlor-alkali production. Importing this kind of specific raw materials to Qatar, from what we have seen in the past, we have seen a huge increase in terms of pricing, a huge increase in terms of transportation cost, and then this could impact as well the profitability of the business. That's one of the motivation as well, since we have availability of, let's say, raw materials to produce salt, which is the brine, and this is available, it's easily available, that will have a great impact. First, to have good access to salt with a reasonable price, and then this will at least streamline the production costs for the Chlor-alkali business, going forward.
Okay. Now, given the fact that you mentioned about salt plant, can we expect this to be sooner than later? Can we expect that timeline of maybe six months?
No, no. We are still in discussion. I think as a listed company, we need to disclose any initial discussions regarding any projects, and this is why we have disclosed this. It's still at the initial stage. It will take time, so it cannot be done in the next six to one year time. A discussion will need to take place with shareholders. Discussion will need to take place regarding the funding and regarding the technical aspect as well. It's too early at this stage to give additional details, but maybe the initial cost of the project, so it's around QAR 290 million. Additional information will be provided whenever we do any additional, let's say, step in this project.
Okay. Thank you. Thank you for that detailed information.
Our next question comes from Sheena Aggarwal from TFI. Your line is now open.
Hello, gentlemen. Thank you for taking my question. Just a follow-up on this new salt plant project. Can you offer us how much does your salt feed currently constitute as a percentage of your revenues?
At this stage, I think as a percentage of revenue, I don't think it's huge in terms of cost of raw material, because salt is only one of the ingredients that we use in the caustic soda production. Materiality is not huge. What we can confirm, our consumption of salt represents around 50% of the announced capacity of the new project. Basically, it's around 500,000 tons will be consumed at the Chlor-alkali production from the total capacity of 1 million tons.
All right. The balance 50%, you will sell it in the open market?
Yeah. It's available, there are available buyers for this specific product in Qatar, remaining could be sold in the local market as well or outside.
Okay. All right. Thanks a lot.
Our next question comes from Seki Mutukwa from Ashmore. Your line is now open.
Okay, thanks again. Just a reminder, please, on the expiration dates on the sort of JVs, please, or maturity dates, particularly within Q-Chem, and maybe even RLOC, possible? Thank you.
Yeah. For the QVC, it's normally mid of 2026. For Q-Chem I and Q-Chem II, I think it's still longer period. The first one, Q-Chem, will be around before 2030, and then the Q-Chem II, it's extended beyond 2033.
Okay. Thank you.
Thank you.
I think for QVC, it has been decided that MPHC would remain the shareholder and stay on the IR slide as well.
Thank you. As of right now, we do not have any pending questions from the attendees. I would now like to hand back over to the moderator for the final remarks.
If there are no further questions, we would like to thank Abdulla Yaqoob Al-Hay, Sami Mathlouthi, and Rashid Hamad Al-Mohannadi for the results update and answering all the queries. We look forward to speaking to you all for the third quarter results. I will hand over the call to Abdulla Yaqoob Al-Hay for his final comments.
Thank you all for joining us. Thanks a lot.
Thank you for attending today's call. You may now disconnect. Have a wonderful day.