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Doha
Qatar Aluminum Manufacturing Company (QAMCO), a 50 percent joint venture partner in Qatar Aluminum Company (Qatalum), on Tuesday reported a net profit of QR 86 million for the three-month period ended 31 March 2024, with an earnings per share (EPS) of QR 0.015.
During the first quarter of 2024, the macroeconomic context for the aluminum markets continued to remain volatile. Several factors affected the commodity markets, which cascaded down to the supply-demand dynamics of primary aluminum and led to volatilities in the prices.
The demand for primary aluminum in key global markets has been significantly constrained by challenging macro-economic environment with consistent inflationary pressure inflation and heightened interest rates. These challenging macro-economic factors have led to a marked reduction in demand, especially within crucial industries such as building and construction. The investment climate in these sectors has notably weakened as financial conditions remained tighten. Despite these setbacks, some positive development is the gradual recovery in the automotive sector. This resurgence is aiding to mitigate the negative impacts on overall aluminum demand.
On an overall basis, aluminum prices for 1Q-24 demonstrated declining trends versus 1Q-23, and 4Q-23, amid macroeconomic headwinds.
Share of JV’s revenue declined by 13 percent to reach QR 640 million for the current period, as compared to QR 736 million for 1Q-23. EBITDA declined by 2 percent and reached QR 220 million in comparison to QR 223 million for the same period of last year. However, EBITDA margin for 1Q-24 improved to 34 percent compared to 30 percent for 1Q-23.
QAMCO’s financial results for the current period versus same period of last year, were largely attributed to an overall decline in average realized selling prices and sales volumes, partially offset by improved operating costs.
Average realized selling price witnessed a decline of 10 percent during 1Q-24 versus 1Q-23 to reach USD 2,423/MT amid macroeconomic headwinds and impacted QR 74 million to the net profit for three-month period ended 31 March 2024 versus the same period of last year. Additionally, financial results were impacted by lower sales volumes amid on-going geo-political uncertainty. Sales volumes declined by 3 percent versus 1Q-23, due to relatively lower sales of extrusion ingots versus last year due to lower demand and lag time due to Red Sea crisis. This was partially offset by higher sales of foundry alloys supported by the recovery in automotive sector. Decline in sales volumes impacted QR 18 million to the net profit for three-month period ended 31 March 2024 versus 1Q-23.
Production levels slightly inched higher with an increase of 1 percent was noted in the production volumes for the current period versus 1Q-23 driven by stable current efficiency, and improved amperage.
Cost of goods sold for the current period declined versus the same period of last year, mainly on account of lower raw material costs and favorable inventory changes amid lower sales volumes.On overall basis, the decline in cost of goods sold contributed QR 88 million positively to the net profits for the three-month period ended 31 March 2024 versus same period of last year.
Compared to 4Q-23, QAMCO’s net profits for 1Q-24 declined by 7 percent. A key contributor towards this negative movement in profitability was due to lower sales volumes reported during 1Q-24 versus 4Q-23, which declined by 10 percent on quarter-on-quarter basis amid on-going geo-political uncertainty together timing of shipments, and subdued demand. This decline in sales volumes contributed QR 69 million negatively to the bottom-line profitability for three-month period ended 31 March 2024 versus 4Q-23. Selling prices on the other hand also witnessed a marginal reduction versus 4Q-23, on account of subdued global demand and tough market condition.
On the contrary, net earnings were positively impacted due to lower cost of goods sold reported during 1Q-24 versus 4Q-23, mainly linked to favorable inventory movements on account of lower sales volumes reported during 1Q-24. This decline in cost of goods sold contributed QR 79 million positively to the bottom-line profitability on a quarter-on-quarter basis.
QAMCO’s financial position continued to remain robust with the liquidity position at the end of 31 March 2024 reaching QR 1.8 billion in form of cash and bank balances (including proportionate share of cash and bank balances of the joint venture) after paying 2023 dividend of QR 391 million. During the period, QAMCO’s JV generated share of operating cash flows of QR 140 million, with a share of free cash flows of QR 54 million.
Operational
performance
QAMCO’s JV has continuously demonstrated ongoing commitment to maintaining high efficiency and cost competitiveness in its production and operations. The prioritization of health and safety measures underscores its dedication to ensuring both the well-being of its workforce and the reliability, and integrity of its assets. Moreover, executing CAPEX projects as planned and in alignment with operational requirements showcases strategic foresight and resource management. Through its focus on operational excellence, health and safety, and strategic investments, QAMCO’s JV is well-positioned for sustained success in its industry.
Earnings call
QAMCO will host an IR earnings call with investors to discuss its results for 1Q-24, business outlook and other matters, on Thursday, 2nd May 2024 at 1:30 p.m. Doha time. The IR presentation that accompanies the conference call will be posted on the ‘financial information’ page within the Investor Relations section at QAMCO’s website.
