Hello, welcome to the Mesaieed Petrochemical Holding Company fourth quarter 2022 earnings call. I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Vivian McElwain to begin the conference. Vivian, over to you. Vivian, over to you.
Hi, this is Rashid. I will do the introduction. Here we have Mesaieed Petrochemical Holding Company management. I have alongside me, Mr. Abdulla Yaqoob Al-Hay, Acting Manager for Privatized Companies Affairs in QatarEnergy. We also have Sami Mathlouthi, Assistant Manager for Financial Operation, myself, Head of Investor Relations in Privatized Companies Affairs. Good afternoon, everybody, thank you for joining us. Hope you all are doing great. We'll start with the disclaimer. Before we go into the business performance updates, I would like to mention that this call is purely for the investors of MPHC, no media representatives should be attending this call. Moreover, please note that this call is subject to MPHC disclaimer statement as detailed on slide number two of the IR deck.
Moving on to the call, on Wednesday, February 15th, MPHC published its result for the year ended December 31st, 2022. Today in this call, we will go through these results and provide you an update on key financial and operational highlights. Today on this call, alongside me, as I mentioned, Mr. Abdulla Yaqoob Al-Hay, Acting Manager for Privatized Companies Affairs, Sami Mathlouthi, Assistant Manager for Financial Operation. We have structured our call as follows. At first, I will provide you with a quick insight on MPHC ownership structure, its competitive strength, overall governance structure by covering slides five till 10, slide 41 and slide 42. Secondly, Sami will brief you on MPHC key operational and financial performance update. Alongside him, Abdulla will also provide you an update on this. Later on, I will provide you the segmental performance update.
Finally, we'll open the floor for the question-and-answer. To start with, as detailed in slide number five of the IR deck, the ownership structure of MPHC compromises of QatarEnergy with approximately 65.4% stake, the rest is in the free float held by various domestic and international corporates and individuals. QatarEnergy, being the main shareholder of MPHC, provides most of the head office functions through a service level agreement. The operation of MPHC joint venture are independently managed by respective board of director alongside senior management team. In term of the competitive advantages, as detailed on slide number eight, all of the MPHC groups are strategically placed in term of competitively priced and assured feedstock supply under long-term arrangement, solid liquidity position with a strong cash flow generation capability, presence of most of well-known joint venture partners.
Additionally, its partnership with Muntajat acts as a catalyst for its access to global markets. As detailed on slide number 10, from competitive positioning perspective, MPHC ranks among the top-tier companies in the regional chemical space across most of the matrices, and especially leads the chart in term of the profitability margins. In term of the governance structure of MPHC, you may refer to slide 40 and slide 41 of the investor relations deck, which covers various aspects of MPHC code of conduct and code of corporate governance in details. I will now hand over to Abdulla.
[Non-English content] . Thank you, Rashid. Good afternoon, and thank you all for joining us. Starting with macroeconomic environment, as detailed on slide number 12, macroeconomic climate remained weathered throughout the year, marked by geopolitical conflict and recessionary fears linked to the inflationary pressure and higher interest rate environment. Unabatedly high energy prices in Europe weighted on European producers. Chinese strict zero-COVID policy is bringing additional layer of pressure to the commodities. Overall, commodity prices slightly declined on a year-on-year basis, especially within the petrochemical segment following last year's slightly higher price environment, mainly due to cautious approaches from buyers and macro headwinds coupled with comparatively lower crude prices. In term of top line, our revenue remained flat compared to last year, as slightly higher sales volume entirely offset the impact of a slight decline on average realized blended selling price, as detailed on slide number 16.
In term of bottom line, for the year ended December 31st, 2022, MPHC recorded a net profit of QAR 1.8 billion, down by 5% versus last year. On dividend distribution front, you may refer to slide number 36, where you may notice that the board of directors proposed a total dividend distribution of QAR 1.38 billion for the year ended December 31st, 2022, equivalent to QAR 0.11 per share. Despite the uneven market condition, which is a testimony of MPHC financial strength. The proposal would be subject to general assembly approval. I will now hand over to Sami to cover the rest of the presentation.
Thank you, Abdulla. In terms of group financial performance for the current year, it was largely attributable to slightly lowered product prices, which on an average declined by 6% and translated into decrease of QAR 40 million in group's net earnings, as you can see on slide 17. On the contrary, sales volume slightly improved by 2% versus last year, mainly driven by better plant operating rates. Improvement in sales volumes translated into an increase of QAR 53 million in MPHC net earnings. On the operational performance front, MPHC operations continue to remain resilient, with total production for the year reaching 1 million metric tons. Current period production volumes remained flat versus 2021, mainly due to a large-scale turnaround carried out at Q-Chem facilities during the first quarter of this year.
Entirely offset the lowered volumes due to a planned preventive maintenance shutdown carried out at the chlor-alkali facility during the fourth quarter of last year. Moving on to quarter-on-quarter performance, MPHC revenue declined by 13% and net profit decreased by 32%. The key contributors towards the downward trend in revenue and net earnings was mainly lower selling prices realized during the current period versus third quarter of 2022. Decline in selling prices was mainly linked to downward trajectory noted in commodity prices amid macro headwinds affecting global markets and comparatively lower crude prices. Sales volumes also declined by 7% compared to third quarter of 2022, due to lower production, presumably linked to lower volumes reported by the chlor-alkali segment.
On overall basis, our base case strategy will be to continue our focus on the strategic drivers of operational reliability in terms of continued improvement in efficiency and achieving cost optimization, which would enable the group to contain costs while making strategic investments for unlocking further growth potential. I will now hand over to Rashid to cover the segmental performance.
Thank you, Sami. Starting with petrochemical segment, as covered in slide 22- slide 26. Petrochemical segment reported a net profit of QAR 1.2 billion for the current year, down by 13% versus last year. This decline in profitability was primarily driven by lower segmental revenue, decreased by 6% on year-on-year basis. Segment sales volume declined by 6% on year-on-year basis, as segment carried out a large-scale turnaround at Q-Chem facilities during the first quarter of 2022, which affected the segment production volume, which in turn declined by 7%. Product prices remained flattish and partially offset the negative impact of lower sales volume to an extent. Current year realized selling price remained affected throughout the year by overall macro volatility, which affected the current year price trajectory for most of the commodities.
In term of the segment revenue by geography, as detailed on slide number 25, Asia remain a key market for the segment, along with Indian subcontinent and Europe. We can move to the chlor-alkali segment as detailed on slide 27-slide31. Chlor-alkali segment reported a net profit of QAR 504 million for the year ended December 31st, 2022. Increased by 6% compared to last year. Growth and bottom line profitability was driven by improvement in sales volume, which increased by 16% amid better plant operating rates as last year volume were affected by a large-scale shutdown carried out during the fourth quarter of 2021. On the other hand, average QAR selling price remained flat versus last year, as end product industries such as alumina, aluminum, and PVC, et cetera, remained under pressure due to macro volatilities.
In term of segment revenue by geography, as detailed on slide number 30, Indian subcontinent remain market for this segment. Since we covered all operational and financial aspects of the company, we would like to open the floor for the question-and-answer.
If you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. That is star one if you wish to ask a question. Your first question comes from Ankit Mehta of Commercial Bank Financial Services. Your line is open.
Yeah. Hi. Good afternoon, sir. Thanks for the presentation, a detailed one. My questions are pertaining to two specific things. One has got to do with Q-Chem. In terms of, we can understand your revenue is coming down because of selling prices, particularly related to your fourth quarter. The cost associated with that has also gone considerably. It has been flat, actually, in terms of quarter-to-quarter. Indirectly, your gross margins have been affected quite negatively. Just wanted to have any color on this. What has been the reason behind this? It's been inventory push or it is something else. Can you please explain on this? Yeah. Thank you.
Yeah, I think in the fourth quarter, in the chemical segment, you can see that the net profit has reduced by 13%. The main impact was basically despite having floods in places, I think it's a little bit of higher direct cost, which is impacting the production.
It has got to do with inventory holding, that's what you're saying, which has gone through into fourth quarter. That could be the reason?
Yes.
Okay. Second, suppose you can provide a highlight in terms of your other income under your QVC segment. There has been a loss the way it looks like. Can you explain that? What has been the reason behind that?
Sorry, can you repeat the question again?
Under your QVC division, the other income as such has shown a loss in fourth quarter. Am I right in that prognosis? Why is that so, if it was that?
Can I ask you, from where you got this information? Is it from the financial statement?
We have seen from your statutory performances, anyway, we have just correlated with your last three quarters and accordingly come out with We have just seen that some kind of a loss on the other income. That's what exactly we felt. In case, suppose you are not yet fine, we can come back to you on this later on, not an issue. The last question.
I think.
We will just come back to you.
You can come back to us later on this one specifically.
Definitely, sir. Of all your product prices, what we have seen, your caustic soda to a certain extent had been holding on quite well. It has come down, but not to that extent. It is also been reflected in your graph, which you have here. Can you just highlight and what exactly been the reasons for that, the demand, and what likely you see it going forward? One last question, typically on your maintenance cycle. 2023, what likely, are we going to be following the same schedule what we have seen in 2022 or it will be different? Thank you.
On the shutdown schedule, for 2023, we are not expecting any planned or unplanned shutdowns for Q-Chem and Q-Chem II. However, for QVC, we are expecting some shutdowns. In other words, it will be around 44 days for the whole year. In Q1, we are expecting around 11 days in QVC plant.
Okay. Your caustic soda, sir, can you just give an idea about what we see it going forward for 2023 also? In case, suppose you can help us out on this. Thank you.
In terms of future prices, normally we don't disclose any future prices. As you can see in the Q4, we're seeing slight decline in prices. I think Q1, we don't expect a huge difference compared to what we have seen in Q4.
Now, if you are talking about the prices, the prices for us is market-driven. What we need to focus on is the operational excellence, where the historical records can demonstrate that we are doing very great in the operational excellence as a lean user. The market prices will be something not in our hand, we believe we are doing much more than the other years, sir.
Okay. Just last one question pertaining to any inventory which is still left high or which has been holding on, as compared to the average inventory cycle, which could be carried forward in the first quarter, in the current quarter. Are you seeing that?
No. As you can see, most of the production that we are producing, it's sold. We don't expect any huge inventory. That will be sold in Q1 2023, I think.
Okay. Thank you, sir.
Thank you.
As a reminder, to ask a question, please press star one on your phone. Your next question comes from the line of Hisham Kabbani of Abu Dhabi Investment Authority. Your line is open.
Yes. Hi, thank you for taking the time. Just a quick one on the QVC operating rate, because that was a little bit slower in Q4. Also the sales volume as a percentage of your capacity. This time there was a little bit of a personal affair that was a little bit of a turnaround. Just wanted to understand as well, how many days, like the sales volume just seems a little bit on the low side. Just to get a little bit more clarity there.
I think your question is centered around QVC. I think in QVC, we witnessed a plant shutdown in Q4, which is within the planned schedule and within the
The budget that we already agreed at the beginning of the year. That's business as usual for us. That's why you're seeing the impact of production cascading to sales volume impact. Going forward, we expect that this cycle will remain. As you know, that QVC will always be in a shutdown cycle throughout the year, totaling to around 40 days- 44 days, as Sami mentioned. You always have to keep this in mind when you are reviewing QVC specifically.
Great. That's clear. Could we always expect the majority of them being in Q4?
Can you repeat your question?
I'm just saying, if the majority of the days, the shutdown days, are they going to be in Q4? I know you said that there's a little bit coming in Q1, the rest is usually left to Q4 then?
No, no, for this specific year, the main shutdown would be in Q1, the budgeted shutdowns will be spread over the next quarters on a similar way.
Got it. That's clear. Thank you.
Thank you.
Once again, if you do wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. That is star one if you wish to ask a question. Currently there are no further questions. I'd like to hand back to Phibion.
Hello, it's Phibion here from QNB Financial Services. Hope you can hear me. If there are no further questions, it brings us to the end of our conference call. Thank you all for joining us and for your questions. I would also like to thank the management team for answering all your questions. Please join us again in Q1 2023 and have a good afternoon. Thank you.
Thank you all for joining us for this call. Much appreciated. Thanks a lot.
That does conclude our conference for today. Thank you for participating. You may now all disconnect.