Go ahead, sir.
Thank you, operator. Hello, everyone. This is Bobby Sarkar, Head of Research at QNB Financial Services. I wanted to welcome everyone to Qatar Navigation or Milaha's fourth quarter and 2021 results conference call. On this call we have Akram Iswaisi, who is the EVP in Finance and Investments, and Sami Shtayyeh, who's the VP of Financial Planning and Analysis. We will conduct this conference with first 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 Earnings Call and your interest in the company. Let me start by saying that we closed 2021 on a high note, despite various hurdles faced throughout the year. Net profit came in at the highest level we've seen in six years and provides us with good momentum going into 2022 and beyond. Now, as usual, I'll get into consolidated financial results and then we will move into the individual business segments. Sami will go over our outlook and we'll end with questions and answers. The key highlights of our financial results. Milaha's operating revenue came in at QAR 2.78 billion for the full year of 2021, compared with QAR 2.27 billion for the same period in 2020, for an increase of 23%.
Operating profit before impairments came in at QAR 253 million for the full year of 2021, compared with QAR 279 million for the same period in 2020, for a decrease of 9%. Net profit for the full year of 2021 was QAR 724 million, compared with QAR 59 million for the same period in 2020. Lastly, our earnings per share was QAR 0.64 rials for the full year of 2021, compared with QAR 0.05 rials for the same period in 2020. Now moving on to our segments, starting with maritime logistics. Operating revenue increased by QAR 257 million or 30%, and operating profit before impairments increased by QAR 109 million.
Very similar to what I discussed in the previous quarters in 2021, our container shipping unit drove most of the increase as it benefited from higher shipping rates. To a lesser degree, revenue grew in our logistics units as well as volumes and job disruptions from 2020 due to COVID-19 eased up. Overall operating expenses increased QAR 149 million versus 2020 and were mainly variable in nature and grew as a result of the increased revenue. At the non-operating level, we had an increase of QAR 12 million from lower vessel impairments compared to last year, and higher profit from our QTerminals joint arrangement. Overall, our net profit ended up being 157% higher than last year. Moving on to offshore. Operating revenue increased by QAR 202 million or 27%.
However, as seen for much of 2021, the strong top line performance was more than offset by a higher increase in operating expenses. Increased revenue came from the addition of both owned and chartered-in vessels and more diving and engineering services income. Expenses being out of alignment with revenue are essentially for the same reasons explained last year with the following being the main four categories. Due to COVID-19 restrictions and outbreaks, our dry dockings took longer than usual, meaning the assets couldn't return to employment and earn the same revenue as it did in the past, thus not reaching its full potential. Although COVID-19 expenses started coming down in the second half of 2021, they crept back up again after the Omicron outbreak. Quarantines and accommodation of crews and special salary increases shot up, among others.
In addition, we reported a QAR 16.4 million Rial VAT provision, which is a one-time charge that will not recur next year. The lift boat that was employed off the coast of West Africa was off-hired essentially most of 2021, thus negatively impacting the top line as well as the bottom line. Transfer and mobilization costs to get her to Qatar, readiness and other costs made the situation much worse. We had no revenue increase but increased expenses. Lastly, we have QAR 473 million in lower impairments recorded in 2021 versus 2020, which boosted overall performance for the segment by 79%. Moving on to Gas & Petrochem. Revenue dropped QAR 44 million and operating profit before vessel impairments dropped QAR 47 million, primarily as a result of lower tanker rates versus 2020.
We sold two tankers mid last year, mid-2021, and we only have one tanker remaining, which is currently being converted into an FSO unit and will be essentially going live mid-2022 on a long-term charter. On the non-operating level, income increased by QAR 119 million, with higher profit from our share of Nakilat and lower overall vessel impairments, more than offsetting QAR 8 million in losses on the sale of two tankers in the second quarter of last year. Our trading segment posted an 87% increase in revenue, with the majority of that coming from increased bunker sales. However, reduced margins decreased overall performance of the segment by QAR 1 million.
Lastly, capital investment income decreased by QAR 23 million with QAR 48 million in lower dividends income, partially offset by an increase in QAR 15 million in fixed income and other income and QAR 10 million in reduced losses recorded last year in our held-for-trading portfolio. Real estate revenue decreased by QAR 50 million, driven by lower rental income as a factor of changing market conditions. On the expense side, there was a decrease of QAR 5 million in depreciation, mainly from our new Villaggio Compound, which is now on a five-year lease. At the non-operating level, neither the QAR 163 million impairment nor the QAR 82 million gains on sale of properties we recorded in 2020. We didn't have those. They didn't recur, which contributed heavily to the year-over-year improvement. That wraps up the segment.
In addition to the financial results, I would like to highlight a few non-financial achievements that were accomplished this year. The first bullet point is expansion of services. In Maritime and Logistics, the container shipping business unit expanded its network into the Far East by introducing a new China-India Express service, connecting the Far East with India and the Arabian Gulf. In logistics, our warehousing hub, Milaha Logistics City, became the first customs bonded zone in Qatar, enabling us to offer bonded logistics services and operate as an international shipment hub. In Offshore, we entered and signed agreements in the geophysical and geological space, furthering our focus on specialized services. In Gas and Petrochem, in line with our strategy to expand into the FSO and FPSO segments, we've been awarded our first FSO contract that will commence mid this year.
In trading, we've expanded new offerings in the ship chandlering field. In addition, as a company, we embarked on this journey a few years ago and successfully completed the transformation to Oracle Fusion Cloud ERP for our main ERP modules and select operational systems. This is a journey, a digital transformation journey, that we started and that will take multiple years to complete, but we're confident it will enhance client and supplier experiences and give us more efficiencies internally. It's in line with our objective and our goal to do more with less by leveraging technology going forward. In 2021, we undertook a major optimization initiative to create a leaner, more agile organization.
As part of this optimization initiative, we streamlined our container shipping and freight logistics operations through a lean transformation, where we disposed of underperforming assets, both vessels and equipment, renegotiated major supply contracts, and reduced structural organizational costs. I wanted to highlight these non-financial achievements because they basically set the stage for next year. We've signed a lot of agreements, entered into new initiatives, developed new products that will yield benefits in 2022 and the following years. With that, I will hand it over to Sami to discuss outlook for the year.
Thank you, Akram. Starting with maritime and logistics. On the container shipping side, we expect the strong shipping rates that we witnessed thus far last year to continue until at least the middle of 2022. In logistics, we expect an uplift in volumes and business based on new global network partnerships signed last year, as well as North Field expansion projects that should contribute positively to the segment. In offshore, we believe a lot of the issues we faced in 2021 are behind us, and we're optimistic on the unit's prospects going forward. We'll continue to look at optimizing the fleet and its composition. On the services front, grow specialized engineering and subsea offerings.
In Gas & Petrochem, without the volatility posed from the tankers that have been sold or being converted to an FSO unit, the business becomes very fairly predictable due to the long-term nature of contracts. In Trading, we expect positive benefits from the segment reorganization and investments made in our commercial capabilities. We grew the ship chandlering business, and we'll continue to focus on this marine service offering going forward. Lastly, on to Capital. On investments, our focus will continue to be on enhancing yields. On the real estate front, we don't foresee any major changes. With that, now, operator, we'll open up for questions.
Thank you, sir. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, please press star one to ask a question, and we'll pause for a moment to allow everyone an opportunity to signal. We can take our first question from Ashish Prajapati from United Securities. Please go ahead.
Hello. First of all, congratulations. You know, for achieving your net profits, you know, one of the best in last six years. Many congratulations on that. I had one query-
Thank you.
On your impairments. You know, what would be the size of, you know, what would be the trend there, if you can give little more guidance? Because that was one concern, you know, what we have been seeing since last, you know, few years. A little more clarity on that would be highly appreciated. Thank you.
Okay. Thank you very much for your comments. Appreciate it. First off, I mean, if you look at the impairment trends, it is significantly lower than the prior year. Going forward, obviously this is an accounting exercise that we have to go through every year, and obviously vetted as well and looked at by our external auditors. I think, you know, we're in a position, you know, I'm quite confident in saying that, you know, going forward, our impairments should be immaterial, negligible. Obviously, you know, impairments are tied to future cash flows of assets, so value in use. You know, barring any unforeseen events, or major events or black swans, you know, I expect impairments to be negligible, to be frank with you.
Thank you.
Thank you.
Thank you. As a reminder, ladies and gentlemen, if you would like to ask a question, please signal by pressing star one. We can take our next question from Riyas Abdul Kader from Integra Asset Management. Please go again. Please go ahead.
Yes. Hi, guys. Thank you for the call. I have two questions. One is, you know, you mentioned some cost reduction initiatives and optimization exercises. Could you tell us what sort of impact we can expect from this in this year?
I'm sorry, what?
The second question is.
Can we take one question at a time? Can you repeat that question?
Yeah.
I mean, honestly.
What sort of impact?
We haven't disclosed that into the market, to be honest with you. But we've had, you know, part of this cost reduction initiative. Number one was looking at all our supplier contracts, looking at our OpEx base, and going back and renegotiating a lot of the contracts. That's number one. We felt like there was value there in going back and renegotiating contracts. Number one. Number two, we've looked at our manpower and organizational cost structure. Where we had some fat, we went ahead and cut that fat out, and also, you know, we put the foundation as well.
I mean, again, if you can see from all our press releases, we're very much focused on technology and embedding technology into everything we do with the idea that we wanna be able to do more with less and build scalability into operations. There's no reason that transactions or transactional work cannot be automated. Our vision is to continue to invest in technology to be able to do more with less. I can't, to be frank with you, because we have not disclosed it. You know, it was, you know.
I would say that, because of the impact of COVID, which again, in our view, 2021 was supposed to be a better year, but again, with Omicron and again, additional precautionary measures that we had to take, issues with crew changes, you know, the logistics aspect of managing shipping operation is quite complex. So when you throw that, a pandemic like COVID into that, it makes things far more expensive and makes it much more expensive to operate. So the impact of the cost-cutting initiative we did this year helped us mitigate some of that cost. Now, our results in my opinion could have been much better, you know, had it not been for the pandemic.
We're optimistic that as, you know, the pandemic disappears, it will have a positive impact on us in terms of lower operating costs and our ability then to turn vessels around fairly quickly when it comes to maintenance. Vessels that take longer, you know, to get repaired or to do the usual maintenance obviously cost us money because they're idle. If it's not available, it can't work. These things have had an impact on our business this year. The cost-cutting we've done has helped us mitigate, you know, the losses from. Or let's say partially mitigate some of the losses from the, as a result of the pandemic.
Okay. Right. The other question was on, you know, given the size of your balance sheet, you have a sizable balance sheet and, you know, and listed equities, et cetera. What's the strategy on this? Wouldn't you be better off perhaps, you know, looking at other strategic assets, you know, just in your line of business, for example to probably, you know? I'd guess there are a lot of distressed assets, for example, you know, which you can, given your balance sheet strength, get it bargain?
There are a lot of what? Distressed assets?
Yeah. In the sector, you know, marine services and offshore, et cetera.
You know, listen. Our
I'm just looking at the financial. Because you have a sizable equity book. QAR 3 billion.
No, I understand your question. In terms of our equity book, you know, we will deploy this capital where it makes sense, where we can make money. You know, we're constantly looking at strategic assets. Just because there's a distressed asset, it doesn't mean it's a good investment. You know, we've been looking at, we've mentioned earlier that we won our first FSO contract, and that's a segment we're looking to invest in. If we find a good asset, we will deploy our balance sheet to acquire this asset. You know, again, distressed assets doesn't mean, again, we look at the sector, we look at strategic fit.
Can we make money or not at the end of the day? We're not gonna deploy capital where we don't make any money. In terms of offshore, like I said, our focus right now, there's a lot of business in the region. And you guys see that from a lot of the activities in oil and gas sector, you know, basically recovering from the impact of COVID from last year. That's our primary focus. And like I said, like that was mentioned earlier, Sami mentioned as well, you know, we're expanding our portfolio of services and offerings into more, you know, services. If you look at MMO, you know, we're expanding at MMO because it allows us to leverage our asset base to continue to generate more margin, and that's the direction we're headed.
There's a lot of low-hanging fruit that we're focusing on right now. That's where we're going. Going out and buying a distressed asset is not necessarily the right approach going forward.
No, I don't mean distressed in the.
Go ahead.
No, I do know. I understand your point. I just don't understand-
Yeah.
Because the QAR 3 billion- I understand your point. Deploy- maybe 1% the last year, right? Yeah.
Well, even this portfolio, and we're working right now on optimizing that portfolio, and you'll see the results of that over the next 12 months and next year. Yield enhancement is a focus for the financial portfolio as well. Again, we will deploy, reallocate this capital to strategic investments where it makes sense. Otherwise we will continue to focus on yield enhancement, which is sort of a mandate over the next few years, as it relates to the portfolio. Okay. All right. Thank you. Thank you.
Thank you. We can take our next question from Mustafa Amir from Al Rayan Investment. Please go ahead.
Hi, gents. Good afternoon. Thank you for the call.
Hello, Mustafa.
Just wondering. Hi. Just wondering on your CapEx plans for this year, you know, what are they like? You know, how substantial are they? You know, in relation to that, your dividend policy, I mean, your clean payout ratio has been sort of similar to what was there last year. Will you continue on that trend? I'll have a couple of questions more, but I'll ask them once we're done with this. Thanks.
Listen, in terms of CapEx, we, you know, if you look at our business in general, it's a CapEx-based business. In order for us to grow, we have to invest in CapEx, be it vessels, be it equipment. Those investments will come either through M&A, inorganic or organic, through the acquisition of assets and equipment. We do have a CapEx program that's, let's say, more aggressive than this year. That's really all I can comment. We don't typically disclose the number, but I can tell you it's much more aggressive than this year.
Again, provided that, you know, there's a rigorous process for, you know, for capital budgeting within Milaha, provided it achieves the minimum acceptable return, we will deploy that capital accordingly. That's the answer to the CapEx. The second question is on dividends, right?
Yes.
Listen, you know, the board has made a decision on the dividends. If you look at, you know, again, as I mentioned, we have growth plans. I mentioned earlier the initiatives that we've got in place, you know, our freight forwarding arrangements, the new one. If you look at the bonded warehouse, you know, all the investments we're making in offshore. We are looking to make more investments to grow the business. Otherwise, you know, the business will remain stagnant. There's a big focus right now on growing the top line and optimizing operations through the leverage of technology and improving the way we deliver services. In light of, you know, that aspect, the board has decided on, you know, paying the same as last year. To be honest with you, that's all I could comment on.
Sure. Just a couple of further questions. One on the lift boat. Obviously lift boat, you know, it got taken off, and then there were the costs that you had to bring it back to Qatar. Any plans on that? You know, will it be still hampering the bottom line going forward? Secondly, on the rental income, you know, your Villaggio compound has now gone on lease from Q3. How material will that impact be going forward?
Okay, first of all, on the lift boat, we've had challenges with this lift boat, and where it was operating off the coast of West Africa. We brought it back to the region. As I mentioned earlier, you know, I am personally quite optimistic about the oil and gas activities in the region. We're already talking to various clients about potentially chartering this vessel along with other services that will go along with that. Our plan is, you know, there are opportunities we're working on, and we set the timeline for ourselves. If we can't deploy it, we'll just get rid of it. Okay?
There are opportunities in region, and like I said, I'm quite bullish on oil and gas in the region, and we're seeing a lot of momentum and a lot of activity. Then the last question was on the compound.
The rental income.
Again? Yeah. Yeah. On that. The rental income, I mean, listen, if you look at, yeah, I think you can do quick back of the napkin, look at the average rent per villa times 178 villas. You know, and you can quickly, you know, arrive at a number that'll give you a sense of how much of an impact that will have on our bottom line. There's a confidentiality clause in the contract, because it's one client that rented the whole compound.
Unfortunately, we cannot disclose the impact. I think you can back into it by looking at market rates times 178 Villaggio. That will give you a view of, you know, ballpark of what kind of an impact that will have on the bottom line.
Sure. Thank you, Akram. Thank you.
Thank you.
Thank you. We can take a follow-up question from Ashish Prajapati from United Securities. Please go ahead. Your line is open.
I had a query on dividend, but then that has been answered. Thank you.
Thank you very much, sir. There appears to be no further questions in the queue at this time. I'd like to hand the call back to our hosts for any additional or closing remarks.
Okay. Thank you. This is Bobby Sarkar again from QNBFS. If this is all in terms of questions, we can end the call for today. I wanted to thank Akram and Sami for taking the time to answer our questions, and we will pick this up next quarter. Thank you so much, guys.
Thank you, everyone. Thank you. Appreciate it. Thank you.
Thank you.
Thank you. This concludes the call, today's call. Ladies and gentlemen, you may now disconnect.