Good day. Good day and welcome to the Qatar Navigation Q1 2022 results conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Bobby Sarkar. Please go ahead, sir.
Thank you, Sergei. Hi. Hello, everyone. This is Bobby Sarkar, Head of Research at QNB Financial Services. I want to welcome everyone to Qatar Navigation's, or Milaha's, first quarter 2022 results conference call. On this call, we have Akram Iswaisi, who's the EVP of Finance and Investments, and Sami Shtayyeh, who's the VP of Financial Planning and Analysis. We will conduct this conference call first with management reviewing the company's results, followed by a brief Q&A. I would like to turn the call over now to Akram. Akram, please go ahead.
Thank you very much. Thank you everyone for joining Milaha's first quarterly earnings call for 2022 and your interest in the company. As usual, I will start with our consolidated financial results and then dive into the segment results. After that, I'll turn it over to Sami to go over our outlook, and we will end the call with questions and answers. Key highlights of our financial results. Milaha's operating revenue came in at QAR 913 million for the first quarter of 2022, compared with QAR 675 million for the same period in 2021, for an increase of 35%.
Operating profit came in at QAR 194 million for the first quarter of 2022, compared with QAR 131 million for the same period in 2021, for an increase of 48%. Net profit for the first quarter of 2022 was QAR 360 million, compared with QAR 297 million for the same period in 2021, for an increase of 21%. Lastly, our earnings per share was 0.32 QAR for the first quarter of 2022, compared with 0.26 QAR for the same period in 2021. Now on to our business segments, starting with Maritime and Logistics. This segment had one of its best performing quarters in recent times, led primarily by continued strong container shipping rates.
Top line revenue increased by 53% or QAR 126 million, with variable expenses flowing very much in line, resulting in an operating profit increase of QAR 57 million. To a lesser degree, our logistics business also picked up as a result of increased volumes and jobs. At the non-operating level, we had a drop of QAR 12 million coming primarily from our QTerminals joint arrangement. All in all, we ended the quarter up 180% in net profit of QAR 46 million. Moving on to offshore, similar to maritime and logistics, operating revenue soared by 52% or QAR 99 million versus the same period in 2021. We had more vessel capacity from third party chartered in vessels.
The employment of our liftboat, which was idle last year, and additional project work in our diving unit drove the increase in revenue. With respect to operating expenses, however, increased by QAR 95 million, which ate into the top line growth. We faced multiple COVID instigated issues in Q1 of 2022 that not only added costs but in fact inhibited further revenue growth. Overall, operating profit grew QAR 16 million, and net profit increased from QAR 3 million to QAR 8 million for Q1 in 2022. As for Gas & Petrochem, the performance can be summed up in two parts.
On the operational side, we saw a decrease of QAR 11 million in operating revenue versus the same period in 2021, but an even larger decrease of QAR 18 million expenses, and that is attributable to us selling two tankers last year and converting the third to an FSO. Those tankers performed poorly last year due to near record low shipping rates in the tanker market, and the divestment helped us boost our operating profit from QAR 15 million to QAR 23 million. On the non-operating level, income increased by QAR 14 million, with QAR 29 million additional coming from Nakilat and in a slightly reduced by QAR 16 million coming from our VLGC joint venture, Gulf LPG. That's attributable primarily to lower shipping rates.
Net profit for the segment ended up QAR 21 million, from QAR 143 million to QAR 164 million. Moving on to our trading segment. 8% decrease in revenue coming mainly from our bunker sales unit, which negatively impacted the bottom line. Bottom line went from a negative QAR 1 million in 2021 to negative QAR 2 million in 2022. Lastly, Milaha Capital. Investment income increased by QAR 11 million, and real estate increased by QAR 5 million, coming from the villa compound, which was rented out in Q3 of 2021. However, both were offset by a QAR 16 million bad debt provision. Basically that wraps up the segments, and I will now turn it over to Sami, who will discuss the outlook for the rest of the year. Sami?
Thank you, Akram. Starting with Maritime and Logistics, we expect the strong shipping rates to continue through at least mid-2022, but we have begun to see signs of rate pullback. How fast that pullback happens, particularly in the routes we operate, is difficult to predict. In logistics, we expect uplift in warehousing and freight forwarding activities from new global network partnerships, as well as work related to the North Field expansion. In Offshore, on the vessel side, we expect improvement in financial performance due to deployment of vessels that were under maintenance in the first quarter. On the services side, we also expect further scaling up in specialized subsea services and maintenance, modification and operations, and thus improvement in that area as well. In Harbor, we don't expect any major deviations in performance from what we witnessed in Q1.
In Gas and Petrochem, the performance of the majority of our operating business units are fairly predictable due to the long-term nature of contracts. We will be having one scheduled dry docking for one LNG vessel, but aside from that, we expect no major deviations. On the non-operating side, our VLGC JV is difficult to predict as rates are exposed to very volatile spot prices. In Trading, we remain cautiously optimistic on growth in the ship chandlering space and improving operating margins across the board. Lastly, on to Capital. On the investment front, we will continue to focus on yield enhancement. In real estate, we will continue to see through the third quarter of this year, the positive year-over-year impact of the villa compound that was rented out in Q3 of last year. With that, we'll now open up for questions and answers.
Thank you. Ladies and gentlemen, if you wish to ask a question at this time, please signal by pressing star one on your telephone keypad. Please make sure the mute function on your phone is switched off to allow your signal to reach our equipment. Again, please press star one to ask a question. There are currently no questions in the queue. As a reminder, to ask a question, please signal by pressing star one. Our first question comes from Nikhil Phutane from CBFS.
Hi. Hi, sir. Thanks for the presentation. It was wonderful. I will just like to know in terms of your Offshore, in which you mentioned about, you know, support vessels, which is going to be adding up. How much, you know, revenue increase do you see in this Offshore business? And of course, on your expenses, will you going to be seeing a decrease, which has largely been, you know, part of your maintenance and other things? Overall, just wanted to get an idea in terms of revenues and operating profit, please.
I'm sorry. The question, can you repeat the question? You're asking what were our results for the segment or what is the outlook for the segment?
We just like to know the trend on your offshore business in terms of your overall, you know, revenue business. I mean, given the fact that you mentioned about some support vessels, which is going to be adding up. Also in terms of, you know, expenses which had been quite high, relatively in terms of your revenues. Will you see a drop down in that in second quarter as we see? Can you
Sure. Listen, I think the outlook for Halul or offshore is promising. You know, we're winning a lot of contracts. Q1, you know, the projections for Q1 actually were higher than results. I mean, we got impacted by, as was alluded to, just operational issues. You know, we have a pipeline of projects. The liftboat that was idle last year is working. A lot of the assets now are working. You know, we have a much more optimistic view on Halul's performance for the rest of the year. Aside from the outlook for the sector overall, the sector in general is much more promising than it was before, you know, on the back of strong oil prices, if you will.
From our perspective, you know, optimistic on the sector, but Halul, again, you know, it's much more promising for the rest of the year than it has been, you know, last year, if you will. This quarter, you know, we have positive earnings, but it's not where we wanted it to be, but we're much more optimistic that the trend will look better, in subsequent quarters.
Okay. You can't, I mean, you can't push a number on the revenue side likely for the second quarter?
I mean, if you look at the revenues, I mean, again, revenues have gone up, you know, significantly. We're focused now on, you know, optimizing costs and improving, you know, margins much more. We are picking up a lot of contracts. A big part of this now is how do we continue to optimize margin. I can't give you an exact number.
Okay. Thank you. Apart from that, in terms of your LNG, you mentioned about docking of one, you know, LNG vessel which is going to be there largely. Will that impact on your LNG, you know, revenues? Can we have some color on it?
Uh-
Yeah, I can take that.
On the LNG. Go on.
It will have an impact, but it's not a major impact. I just wanted to give you as much information and be as transparent as possible. Nothing major that's gonna throw the segment off.
Okay. Thank you, sir. Thanks a lot. Okay.
Wei Zhao, Qatar Insurance Company, please go ahead.
Hello. Hi. Thanks for the call. I just have two question. The first one is on the Capital segment. Just wondering where the non-operating income was down by QAR 4 million. Oh, sorry. Sorry, there was a bad debt provision of QAR 16 million. I'm sorry. I'm just wondering where that is coming from. The second question is on the Maritime segment, where the non-operating income was down QAR 12 million. So could you just provide us some color on that?
Yeah, sure. The impairment, or the bad debt we took, we had some legacy investments, you know, from a number of years ago. We sold some of these investments and part of the sale was a contingent, you know, part of the price was contingent about achieving certain milestones, and some of these investments were in shipping sector. You know, there was cash plus contingent payments based on achieving certain milestones. And these investments were in the shipping space. And based on the outlook of that specific segment, you know, we were, let's say, we're cautiously optimistic about the payments, but we have doubts on the ability of Milaha to collect these contingent payments.
That's why we took a bad debt on that.
Yeah. On the second question.
Sure.
On the Maritime. Hi.
What's the question on Maritime?
No, the second question.
Sorry.
On Maritime, the non-operating income was down by QAR 12 million, which is coming from the QTerminals joint arrangement. Could you just provide us some color on that?
Yeah. I mean, listen, QTerminals is currently making investments, you know, into. It has an expansion strategy, an aggressive expansion strategy, and it's making investments, you know, throughout the world. You know, as part of that, there is some, you know, some initial investments that you have to make to ramp up for that growth. As a result, you know, QTerminals was impacted slightly, in terms of some of their admin expense, and operating expenses because they're building up and beefing up their team. Obviously, you know, as they make investments, there are certain costs that they have to incur as a result of making these investments. In terms of volumes, you know, if you look at the volumes, the volumes are still healthy.
where, you know, the impact slightly is mostly on expenses tied to growth initiatives or building up the organization. Which is really expected when you have a company like this that's still really in the growth mode, right?
Got it. Thank you.
Thank you. We're gonna move now to our next question from Shabbir Kagalwala from Al Rayan Investment. Please go ahead.
Gentlemen, thank you for your for the call. This is Shabbir Kagalwala from Al Rayan Investment. I had a couple of questions, if I may. In the maritime and logistics segment, you mentioned about that there are higher shipping rates from the container shipping side of the business. In terms of outlook, are we expecting to see any pullback coming in from this rate? The second question is on the bunkering-
Uh-
volumes. Sorry, if you can
L-
Go ahead, sorry. I'll ask the bunkering little later.
Let's answer one at a time. Yeah. I think on the shipping rates, if you guys are tracking the global rates and the various indexes out there, you'll see that there is you know, we reached a peak, and now we're coming off that peak. We expect shipping container shipping rates to moderate, start decreasing. Now, we don't have a view on you know, what will the rates look like next quarter or the quarter after, but we expect that the rates will start coming down. They may not come down to pre-COVID levels, but they will come down.
Generally in terms of our segment, 'cause we are a feeder, a shipping company, there's usually a lag between what you see, you know, you know, on the global arena, if you will, and what really then trickles down to us. We do anticipate that rates will come down from here on, basically, and towards the end of the year. By how much?
Right.
It's difficult to predict. Again, that also depends on COVID, what happens with COVID. If we start having, you know, increasing COVID and port congestion and port lockdowns, then that has a, let's say, positive impact, if you will, on container rates. Again, other things being equal, we do see container rates coming down.
In terms of the volume decline in the bunkering, bunker sales, is this because of you're losing market share to some other players, or it's like the overall business is fallen? The market has fallen, basically.
I mean, honestly, in terms of bunker, you know, we are expanding. We're expanding our market share. We're growing. It really depends on, you know, on a variety of different factors. The reality is, if you think about this business, it's a very, very thin margin business. All right. The impact on bottom line is, I would say, insignificant. It has a much bigger impact on top line, but the impact on the bottom line is insignificant. It's more about the change of mix in our business and our client base. That's what it's about.
Right. My final question on the logistics side, with the World Cup coming up, are we seeing improvement in the utilization of warehouses and the logistics business? What's the outlook and what do you see from now till the end of the year?
Sure. I wanna emphasize something else on the bunker that is critical. Now, this business is strategic for us because we are building up our ship chandlering business. When you look at ship chandlering, these are services or portfolio of services that are offered to vessel owners and ship owners. You know, bunker lubricants are part of you know, a portfolio of offerings that we are offering as part of this ship chandlering platform that we launched last year. Even though the margins are thin, it's an enabler you know, and it's part of an offering that we have to provide to vessel owners. I just wanted to articulate that point just to make sure that it's clearly understood.
Now, as it relates to, you know, FIFA, you know, our utilization, you know, if you look at, you know, during COVID, you know, our utilization went up significantly, and we've been able to pick up some large clients. Large clients who are looking for a stable name, like Milaha. What has happened is, over time, we have focused on profitability and, you know, in warehousing, again, it's about movement of inventory. The more that we touch the product, whether it's stuffing, destuffing, value-add services, labeling, you know, all these things, for us, the more we touch it, the more the inventory turns, the more that we make money.
We made a conscious decision to focus on certain segments of the market that have higher margins, and therefore, you know, they contribute to our profitability. You know, that's a conscious decision now. It's not about, you know. In other words, you know, it's not necessarily about just filling the warehouse, it's about filling the warehouse and achieving a much higher profitability. We've been able to change our client mix, and that's working quite well for us. We've got a pipeline of clients, you know, on the back of a lot of the FIFA activities that are coming on board, and we'll be boarding these clients next few months.
Right. With the competition catching up, do you expect margins to be diluted, or you expect the margins to stay strong in the logistics business?
Well, when you say competition catching up, what do you mean? In warehousing or logistics overall?
Logistics overall with warehousing and
What does that mean? Well, I mean, listen, we
Like in the same vein.
We have a bonded warehouse. I don't know of anyone else that has a bonded warehouse, any of the competition has a bonded warehouse in Qatar, and that gives us a competitive advantage. There's always been competition. You know, we've always competed with other players. You know, we're trying to focus now on, you know, again, the margins, you know. The competition is fierce. There are players in the market. There's always been competition, but we do have a competitive advantage. Like I said, you know, we have a bonded warehouse. We're more embedded in the shipping value chain, owning a container shipping company, being able to provide bundled services rather than just one or two services. That gives us competitive advantage.
We're really focused more on, you know, providing solutions to our clients and becoming much more value add. You know, I think the name of the game has changed where, you know, in the past, I think the competition, there's plenty of business, and so it went around to everybody. Now it's about value creation, and we're really focused on how do we add value to our clients. Like I said, bonded warehouse gives us a very much competitive advantage, and we're beginning to see the value of that.
All right. Thank you. That's really helpful.
Yeah.
That's all from my side.
Thank you. It appears there are no further questions in the phone queue at this time.
Oh, okay, great. This is Bobby Sarkar again. If there are no further questions, we can end the call for today. I wanna take a moment to thank Akram and Sami for taking the time to answer our questions, and we will pick this up next quarter. Thank you very much.
Thank you.
Thanks very much.
This concludes today's.
See you next quarter.
Con-
Thank you. Thank you, everyone.
Thank you.
This concludes today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.