Good day, and welcome to the Milaha Qatar Navigation Q3 2021 Results Conference Call. Today's conference is being recorded. At this time, I'd like to hand the conference over to Bobby Sarkar. Please go ahead.
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 third quarter and nine months, 2021 results conference call. On this call, we have Akram Iswaisi, who's the EVP Finance and Investments at Milaha, and Sami Shtayyeh, who's the VP of Financial Planning and Analysis at Milaha. We will conduct this conference with management first reviewing the company's results, followed by a 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. As usual, I will start with our consolidated financial results and then move on to the individual business segments. Sami will then go over our outlook for the year, remainder of the year, and we'll end with questions and answers. The key highlights of our financial results. Milaha's operating revenues came in at QAR 2 billion for the first nine months of 2021, compared with QAR 1.7 billion for the same period in 2020, for an increase of 18%. Operating profit came in at QAR 192 million for the first nine months of 2021, compared with QAR 286 million for the same period in 2020, for a decrease of 33%.
Net profit for the first nine months of 2021 was QAR 654 million, compared with QAR 384 million for the same period in 2020, for an increase of 71%. Lastly, our earnings per share were at QAR 0.58 for the first nine months of 2021, compared with QAR 0.34 for the same period in 2020. Now, getting into our business segments, starting with maritime and logistics. Operating revenue increased by QAR 143 million or 22%, and operating profit increased by QAR 70 million. Our container shipping unit drove most of the increase as it continues to benefit from a boost in global shipping rates. We also posted an increase in revenue in our logistics unit as volume and job disruption from last year due to COVID eased up.
On the cost side, much of the drivers we discussed last quarter have remained the same. Variable expenses tied to revenue increased. Fleet expenses increased due to two additional vessels in our Offshore unit and additional COVID-related expense costs. Lastly, we had a one-time claim-related provision that was recorded at the half-year. At the non-operating level, we had a drop of QAR 12 million related to various adjustments. Overall, our net profit ended up 85% higher than the same period last year. In Offshore, moving on to offshore, our operating revenue increased by QAR 321 million or 21%. Strong top-line performance was more than offset by a higher increase in operating expenses, which negatively impacted our margins.
The increased revenue came from the addition of both owned and chartered-in vessels and more diving and engineering services income. Expenses are slightly out of alignment with revenue, and most for the same reasons I explained last quarter, and they can be summarized in four main categories. Due to COVID restrictions and outbreaks, our dry dockings are taking longer than usual, meaning assets can't return to employment and earn the same revenue as they did in the past. Although COVID-19 expenses have just recently started decreasing, they continue to have an impact on our operating results. Crew costs in particular have shot up as a result of excessive quarantine, and this has led to an increase in accommodation expenses. In addition, we recorded QAR 60.4 million for tax basis provision that will not recur again, it's a one-time adjustment.
Lastly, our lift boat was employed off the coast of West Africa, but has been laid up since Q1, which negatively impacted the top line. Additionally, we transferred her to [inaudible] recently and incurred close to QAR 11 million in mobilization expenses. In short, she is not earning revenue, but we're still incurring operating expenses for the lift boat. QAR 257 million in lower impairments recorded versus 2020 boosted overall performance for the segment by 92%. Moving on to Gas & Petrochem. Revenue dropped by QAR 40 million and operating profit dropped by QAR 51 million, primarily as a result of lower tanker rates versus 2020. Further, we now only have one tanker remaining.
After selling two tankers in June, the remaining tanker will be converted to an FSO starting later in the year and will be deployed on a long-term contract starting mid-2022, which should eliminate volatility in this segment. On the non-operating level, income increased by QAR 22 million, with higher profit coming from our share of Nakilat more than offsetting QAR 8 million in losses on the sale of two tankers in the second quarter. With respect to our trading segment, increased revenue we recorded in Q1 and Q2 this year continued well into Q3, boosting our year-to-date revenue by QAR 122 million or 97% versus the same period last year. Bunker and heavy equipment sales drove most of the increase and helped improve the bottom line by QAR 2 million versus the same period in 2020.
Lastly, Milaha Capital investment income decreased by QAR 24 million, with QAR 48 million in lower dividend income, partially offset by QAR 14 million in higher bond income and other income, and QAR 10 million in reduced losses reported last year in our health and trading portfolio. Real estate revenue decreased by QAR 18 million, driven primarily by lower rental income. At the half year mark, real estate revenue was down QAR 22 million, but with income from our new villa compound that started in Q3, we've been able to chip away at the year-over-year reduction. At the non-operating level, neither QAR 163 million impairment nor the QAR 82 million gain on sale of properties we reported last year occurred, which contributed heavily to the year-over-year net improvement. That wraps up the segments, and I will now turn over to Sami to discuss our outlook.
Thank you, Akram. Starting with maritime and logistics. On the container shipping side, we expect the strong shipping rates that we have witnessed thus far this year to continue. In logistics, we expect a pickup in volumes in business, barring any unforeseen COVID-19 related closures. In offshore, we'll obviously continue to feel the impact of the first three quarters on full year results, but for Q4, we're cautiously optimistic. In Gas & Petrochem, now that much of the volatility has been removed by virtue of selling of our two tankers, the majority of our business becomes fairly predictable due to the long-term nature of contracts. Trading, sales are sporadic, but based on our pipeline, we believe we can carry forward with the growth from the first half. Lastly, with regards to capital on both the investment and real estate fronts, we don't foresee any major changes.
With that, we'll now open up for the questions.
Thank you. Ladies and gentlemen, to ask a question today, please signal by pressing star one on your telephone. Please ensure that the mute function on your telephone is switched off to allow your signal to reach our equipment. Again, to ask a question, please signal by pressing star one on your telephone keypad. We will pause for just a moment to give everyone an opportunity to signal for questions. Again, that is star one if you do have a question. We now have a question from [uncertain], Bobby from Al Rayan Investment. Please go ahead.
Hi, gents. Good afternoon. Thank you for the call today. Just wondering what are your utilization rates, currently at the warehouse facility, the Milaha Logistics warehouses, and how are you seeing that going forward? That'd be my first question, if you could. I'll ask my second question later.
Thanks for the question. We haven't disclosed the exact utilization in the past, but what we can tell you is utilization thus far this year is higher than last year.
All right. Are you expecting to sort of maintain those levels going forward?
Listen, utilization, I mean, in terms of utilization, what we're focused on is there are different types of utilization. Our business is, you know, supply chain or logistics 3PL. So what we're looking is focusing on clients and, you know, that have high movement inventory, and that's where we make the money. So if you talk about conventional storage, which is more of a real estate play, you know, you don't have a lot of turnover in inventory. So, you know, as a business, this is what we look for is, you know, very much focused on, you know, clients that have high movement inventory, because that's how we make money. The more we touch the inventory, the more we make money.
You know, our inventory mix or I say client mix continues to change and, you know, we're seeking to optimize the bottom line. You know, it will continue to change until we can get that right mix of clientele.
All right. Thank you. Just on the lift boat, I know you mentioned that, you know, the lift boat, you brought it back into Qatar. Now, what are the prospects for that? And what kind of expenses do you keep incurring on that?
Well, listen, this is a vessel, so you still have to you know keep a certain number of crew. I mean, there are certain operating costs that you have to incur. It's not full operating costs, but you still have to because it's a vessel effectively, right? It's an operating unit, so from lubricants, from bunker, from staff. So there's still certain operating expenses that you have to, they have to incur to keep it going. You know, there is still a plan right now, or let's say under preparation of whether to deploy this or to sell it. We have not reached the final conclusion on what we're gonna do with it. Okay. Once we have a final decision. We'll share that.
Thank you so much.
You're welcome.
Sure. Thank you.
Thank you. As a final reminder to ask a question, please signal by pressing star one on your telephone keypad.
Hey, this is Bobby again. I have a question, if I can. About the conversion of the tanker to the FSO. Could you give us a sense of roughly what type of costs, CapEx we are talking about there? What is the timeline for the, you know, the tanker is going to be out of commission, and then when can we expect the FSO to start contributing? And then overall, what's your any color in terms of CapEx, you know, I guess for next year. Thank you so much.
Well, I mean, the vessel is gonna be converted. It starts in December, and it should start generating revenue mid next year, June to July. The CapEx should be minimal because we already own the vessel. You know, we don't expect significant CapEx investments on this. We own the asset, so it's minor conversion that we're gonna have to do, but it's gonna take roughly five to six months.
Okay, great. Thank you.
Thank you. It appears we have no further questions at this time. I'd like to turn the presentation back over. Oh, pardon me. We do have a question now from Bijoy Joy from QIC. Please go ahead.
Hi. Thanks, gentlemen, for the call. I have a question on your offshore segment. How should we think about this operating profit line once these costs related to COVID and these few of one-off costs are more out in the next couple of years? Should we expect the operating profit to go beyond 2020 levels, as your revenue has increased by almost 15%-20% versus 2020?
Listen, I mean, this year we've been impacted by a number, let's say, I would say one-offs. You know, obviously there was additional costs, you know, that we had to spend to maintain or continue operations. On top of that, you know, we had extended dry docking that has delayed the deployment of vessels. You know, in our view, you know, it kinda sets us up for a more, you know, a better performance next year. As we mentioned, we had, you know, VAT, you know, provision that we had to book. We had excessive dry docking compared to last year and prior years in general. We have additional expenses related to COVID.
Obviously, COVID will be with us for a while, and there's still gonna be some you know expenses we have to spend you know related to COVID to continue to you know from a health and safety perspective. Generally speaking, we were optimistic that these are non-recurring expenses, thus operating performance for offshore will look much better in the coming.
Okay. Thanks. That was helpful. I've another question on your Maritime & Logistics segment. So how should we think about this profitability from this particular segment on the operating level? It has been a loss-making segment for you for the last couple of years. Now that the rates have gone up, we have yet to see a major benefit coming through. So how should we think about this segment? Although the market should normalize over a period of time as the supply issues are sort of resolved. What is your sense on this segment over medium term?
Hi, Bijoy, this is Sami. Listen, on maritime and logistics, yeah, definitely, shipping rates increased and benefited us. There's no doubt about that. We were very transparent about that. Another point, though, that I'd like to make is also there's a lot of work being done behind the scenes on optimizing our network. We've taken tonnage out where it didn't make us money. We're getting into more agreements with third parties. We're doing a lot of cost optimization in Maritime & Logistics in particular. So there's a lot of work in maritime and logistics. It's not just about the shipping rates. Now, the shipping rates, undoubtedly, they're gonna start to come down. When that happens, whether it's in two years, whether it's in 18 months, whether it's in 12 months, that's anyone's guess.
What we're trying to do at this point is, you know, do what we're trying to do, continue doing what we're trying to do, and that's optimize the network, looking into expansion into new areas. That's number one. Now, logistics, COVID really disrupted things in logistics last year. To the extent we'll have, hopefully some clean numbers next year, without COVID, then that should also benefit us going forward. The warehouse, we've talked about the warehouse. Focus on the warehouse is, obviously not just utilization, but utilization with the right types of clients that turn inventory over. That's how, you know. The more you touch the cargo, the more money we make. I think going forward, these are the things we're gonna be, you know, continually focused on.
Stuff we control, the network optimization, growing the business, the warehouse utilization. That's stuff we control. Market rates, we're gonna take it while we can, but we know that that's not gonna last forever.
Let me add to that. I think, you know, there are mixed views on where rates are gonna end up the next couple of years. I think there was a sense of optimism for 2021 that the impact of COVID will subside and then markets will open back up again. Yet here we are, we're still, you know, struggling with COVID. There are major supply chain disruptions globally, and you're seeing the major congestions at the major ports globally in China and the U.S. I think, you know, from my view, this is my own view, I think those rates will continue on for the next couple of years.
If you're looking at the remainder of the year and next year, my view that rates will continue to be strong, at least for the next couple of years. After that, it should potentially normalize, and you're already seeing, you know, let's say, new orders for new tonnage being placed, and that has gone up as well for delivery from two years from now. I think for the next couple of years, we should continue to see good momentum and rates. From our perspective, like Sami has mentioned, we are doing our part to optimize our network, looking at slots, slot swap arrangements, you know, upsizing, downsizing tonnage.
I think we've built a fantastic team of capable shipping guys who are capable of reacting to the market. You know, the reaction to the market. You know, you have to be able to react tactically to the market because it's very dynamic and fluid, and it changes daily. I think that's the way we're looking at it. Obviously, you know, we've recently worked long-term strategy for the business. In the coming weeks, you will see more announcements on expansion in that segment.
Again, it's not, you know, our view is not tactical, but it's backed by a long-term strategy in that segment and a good solid understanding of the dynamics of, you know, global trade and flow of goods. We've spent an extensive time on a container shipping strategy. You'll start seeing the fruits of that, you know, over the next few weeks. That said, it is quite, you know, a competitive market right now with, you know, high pricing and significantly high valuations. We will remain vigilant and opportunistic as we continue to execute on our strategy.
Yeah. Perfect. That was helpful. My final question is on the villa compound. So, is it leased out now or do you expect it in Q4?
As we've announced in our last earnings call, it's already leased on a five-year contract. It's already been leased out.
Okay. The contract has started?
Started already in August of this year.
Okay. Perfect. Thanks.
Thank you. As we have no further questions, I would like to turn the conference back to your presenters today for any additional or closing remarks.
Thank you, operator. This is Bobby Sarkar again. If we have no further questions, we can end the call for today. I wanna thank Akram, and I wanna thank Sami for taking the time to speak to investors, and we will pick this up next quarter. Thank you so much.
Thank you very much. I appreciate it. Have a good weekend.
Thank you.
Thank you. This will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.