Mesaieed Petrochemical Holding Company ‘MPHC’ a subsidiary of Qatar Petroleum partially floated on the Qatar Exchange, and one of the region’s premier diversified petrochemical conglomerates with interests in the production, distribution and sale of olefins, polyolefins, alpha olefins and chlor-alkali products, announced its financial results for the four-month period ended December 31, 2013 with a net profit of QR0.6bn.
In comments issued to the Qatar Exchange after the group’s first Board of Directors meeting for 2014, H.E. Dr. Mohammed Bin Saleh Al-Sada, Minister of Energy and Industry, Chairman of Mesaieed Petrochemical Holding Company, stated, “At the outset, and on behalf of the Board of Directors, I would like to thank His Highness the Emir, Sheikh Tamim Bin Hamad Al-Thani, for his generosity and support both before and throughout the IPO of Mesaieed Petrochemical Holding Company. It is due to His Highness’ support that we are able to announce these first published results of Mesaieed Petrochemical Holding Company, and declare a dividend.
“MPHC registered a net profit of QR0.6bn for the four-month period ended December 31, 2013, and the Board of Directors proposed a cash dividend of QR0.4bn, or QR0.35 per share. This proposed dividend is equivalent to 72.1% of net profit. And, in line with the continuous support and directions from His Highness the Emir, Sheikh Tamim Bin Hamad Al-Thani, it was recommended that the shareholders as of the close of trading on the last trading day before the group’s first post-IPO annual general assembly meeting will be entitled to receive a dividend relating to the four-month period ended December 31, 2013 despite the fact that MPHC was only listed on February 26, 2014,” he said.
Consolidated Financial Results
Commenting on the financial results, Mr. Khalid Al-Subaey, Chief Coordinator, Mesaieed Petrochemical Holding Company, stated, “Net profit for the four-month period to December 31, 2013 was QR0.6bn. This period was marked by relatively stable market conditions and operations – utilisation rates remained strong and no major shut-downs were noted. Profits were also aided by the supply of competitively-priced ethane feedstock and fuel gas under long-term supply agreements with Qatar Petroleum. And, cash across all group companies increased by QR0.2bn during the four-month period to a total of QR1.5bn.”
Segmental Financial Results
The main activity of MPHC is to act as a holding company. The group consists of six companies, with three of them directly held: MPHC holds 49.0% of the issued share capital of each of Qatar Chemical Company Limited Q.S.C (“Q-Chem”) and Qatar Chemical Company II Limited Q.S.C
(Q-Chem II), and 55.2% of the issued share capital of Qatar Vinyl Company Limited Q.S.C. (QVC). Both Q-Chem and Q-Chem II each have a single, wholly-owned subsidiary, while Q-Chem II also has an effective ownership of 53.85% of Ras Laffan Olefins Cracker Company Limited. The group’s facilities are all based within the State of Qatar, and are primarily engaged in the production of olefins, polyolefins, alpha olefins, and chlor-alkali products.
Q-Chem / Q-Chem II
Elaborating on the combined revenue performance of Q-Chem / Q-Chem II, Mr. Al-Subaey said, “The business unit recorded revenue of QR1.2bn for the four-month period ended December 31, 2013, with polyolefins constituting 62% of revenue, alpha olefins almost 26% and the remainder attributable to ethylene and other minor products. During the period, circa 148,000 MT of polyolefins and 65,000 MT of alpha olefins were produced at utilisation rates of 112% and 99% respectively, broadly in line with historical averages.” No shut-down days were noted during the period.
Combined EBITDA for the period was QR0.7bn with an EBITDA margin of 61.2%. The creditable margin can be largely attributed to a low operating cost base due to the supply of competitively-priced ethane feedstock by Qatar Petroleum. Net profit for the period was QR0.6bn and net profit margin was 46.7%, with the difference between net profit and EBITDA primarily due to current and deferred taxes (QR0.09bn) and depreciation (QR0.07bn). Total assets of the combined Q-Chem / Q-Chem II business unit as at December 31, 2013 were QR7.1bn, and cash and cash equivalents before dividends to MPHC was QR1.2bn. Total debt was QR1.9bn, with the entire balance due by Q-Chem II, while the combined companies’ cash realisation ratio was well-over 100%.
Revenue from the sale of chlor-alkali products for the four-month period was QR0.3bn. Commenting on the supply to QVC of ethylene, the joint venture’s primary feedstock, Mr. Al-Subaey stated, “Production of the company’s chlor-alkali products – caustic soda, ethylene dichloride, vinyl chloride monomer and hydrochloric acid, was supported by the supply of competitively-priced ethylene from Qatar Petrochemical Company (“Qapco”) and market-priced imported ethylene, in line with the joint venture’s production requirements. The average production utilisation for the period was 95%, 93% and 99% for the EDC, VCM and caustic soda facilities respectively, within the historical 90% to 100% range.”
Net profit recorded during the period was QR0.04bn, with a net profit margin of 12.3%, while EBITDA was QR0.07bn and EBITDA margin 21.6%. During the period, QVC wrote off a total of QR0.02bn attributable to certain capitalised costs, and continued to benefit from competitively-priced fuel gas for electricity generation supplied by Qatar Petroleum.
QVC’s total assets as at December 31, 2013 was QR1.4bn, with cash and cash equivalents before dividends to MPHC accounting for QR0.3bn. The company’s cash position was aided by a creditable cash realisation ratio of over 100%, minimal CAPEX of only QR0.01bn, and having no outstanding debt during the period. “QVC, like Q-Chem and Q-Chem II, is a business with the ability and track record of generating strong operating cash flows,” remarked Mr. Al-Subaey. “Each of the group companies has generated operating cash flows of at least 200% of net profits during this period. In conjunction with the low planned capital expenditure program and low debt levels, this is key to the group’s generous and progressive dividend distribution policy that seeks to maximise the dividend payout ratio,” he added.
Group Taxation Status
Further to Qatari Tax Law Number 21 of 2009 and Law Number 20 of 2008 and the listing of MPHC on the Qatar Exchange with effect from February 26, 2014, the share of profits from the group’s joint ventures attributable to Qatari public shareholders shall be exempt from income tax.
Group Dividend Policy
The Board of Directors approved a group dividend policy confirming that MPHC aims to maximise the percentage of net profit paid as a cash dividend while maintaining adequate liquidity for the group’s capital investments, working capital and financing needs, and the principles of financial prudence. Dividends proposed by the Board of Directors are subject to general assembly approval.
Proposed Dividend Distribution
With respect to the proposed dividend, H.E. Dr. Al-Sada commented, “In line with the continuous support and directions from His Highness the Emir, Sheikh Tamim bin Hamad Al-Thani, shareholders of Mesaieed Petrochemical Holding Company at the close of trading on the last day of trading before the group’s first post-IPO annual general assembly meeting will be entitled to receive a cash dividend from MPHC’s profits for the four months ended December 31, 2013 despite the fact that MPHC was only listed on February 26, 2014. In consideration of the group dividend policy, the Board of Directors is pleased to propose a cash dividend for the four months ended December 31, 2013 of QR0.4bn, equivalent to a payout of QR0.35 per share and representing 3.5% of the nominal value. This proposed dividend distribution represents 72.1% of the group’s profits, clearly indicating the Board of Director’s intention for the group to pursue a progressive and generous dividend distribution policy.”
In concluding remarks, H.E. Dr. Al-Sada, said, “The close of this first financial period marks the beginning of a new era for MPHC and the State of Qatar. The Board of Directors and senior management look forward to the future with confidence in the sound competitive advantages of the group and strong government support. On behalf of the Board of Directors, I would like to once again thank His Highness the Emir, Sheikh Tamim Bin Hamad Al-Thani, and His Highness the Father Emir, Sheikh Hamad Bin Khalifa Al-Thani. A word of appreciation is also extended to the senior management and staff of the group companies for their hard work and dedication.”
For more information please contact:
Mr. Khalid Al-Subaey
Mesaieed Petrochemical Holding Company QSC
Monday, March 17- 2014 @ 12:02 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.