Qatar Gas Transport Company Limited (Nakilat) (QPSC) (QGTS) Earnings Call Transcript

Hello, everyone, and welcome to the Nakilat 1Q '26 Results Call. My name is Nadia, and I'll be coordinating the call today. Please note, there will be no live Q&A on today's call. I will now hand over to your host, Fahad from EFG Hermes to begin. Please go ahead.

Good morning and good afternoon, everyone. Welcome to Nakilat's First Quarter 2026 Results Call. Today, representing the company, we have the pleasure of having with us: Mr. Hani Abuaker, Chief Financial Officer; Mr. Fotios Zeritis, Head of IR and ESG Reporting; and Mr. Kamaran Jomah, Financial Planning and Reporting Manager. I would now like to hand over the call to Mr. Fotios to take the call forward. Thank you.

Thank you. Good afternoon, everyone, and welcome to Nakilat's First Quarter 2026 Earnings Conference Call. For your convenience, a transcript of this call and accompanying presentation are available in the Investor Relations section of our website. Please note that this call is being recorded and the members of media are not permitted to attend. Before we begin, I would like to remind you that some of our remarks today may contain forward-looking statements. These statements are subject to uncertainties that could raise -- could cause actual results to differ materially. For further details, please refer to the Slide 2 on the Investor Relations presentation. In addition, certain remarks may include non-IFRS financial measures. A reconciliation of these measures is provided in the notes on the presentation. Before we proceed, I would like also to note that Nakilat will not be commenting on geopolitical matters or developments. Our focus today will remain on the company's performance and overview. Furthermore, today's presentation has been prepared to provide a comprehensive update on the company's performance. Given the current environment and its sensitivity, we will not be holding a live question-and-answer session following the call. However, should you have any specific questions or require further clarification, we encourage you to reach out our Investor Relations team as we have consistently engaged with you over the recent months and remain committed to addressing your queries in detail. I will begin today's call with a brief overview of the LNG shipping market. Following this, Kamaran Jomah, Nakilat's Financial Planning and Reporting Manager, who will present the group financial results. And finally, our CFO, Hani Abuaker, will discuss the company's outlook. I am pleased now to begin with the update of LNG shipping market. The global LNG shipping market delivered a good start to 2026, with both spot and term charter rates reaching multiyear highs during the first quarter. This marks a significant improvement compared to the softer conditions observed in 2025 and underscores the sector's temporary supply tightness. Let us now turn to the Slide 10 of the presentation. Over the medium term and long term, 2025 until 2031, Wood Mackenzie forecasts growth in the global LNG trade with liquefaction capacity expected to increase from approximately 434 million tons per year in 2025 to 780 million tons per year by 2031, an increase of around 80%. This supply growth is expected to support sustained demand for LNG shipping globally. Combined with the continued investment in liquefaction and regasification infrastructure, the industry is well positioned for long-term growth, creating attractive opportunities for established operators focused on reliable, large-scale LNG transportation. Turning to the Slide 11. Clarksons reports that average spot charter rates in the first quarter 2026 for modern 2-stroke vessels reached approximately $70,000 per day. DFDE vessels average around $51,000 per day, while steam vessels average approximately $17,000 per day. One-year charter rates remain at attractive levels, providing important benchmark for market discussion. On the Slide 12, Clarksons indicate that the global LNG fleet reached 808 vessels as of the first quarter of 2026, with a further 298 LNG carriers on order book through 2031, reflecting future capacity growth. Newbuild prices for the XDF vessels have moderated slightly to approximately $250 million by the end of the first quarter of 2026. In summary, LNG remains a cornerstone of global energy transportation, supported by long-term demand fundamentals, ongoing fleet renewal and continued infrastructure investment. While 2026 may present challenges, including market volatility, continued vessel deliveries and broader global uncertainties, the long-term outlook for LNG remains firmly positive. With that, I would like now to hand it over to Mr. Kamaran Jomah, Nakilat's Financial Planning and Reporting Manager. Kamaran, the floor is yours.

Thank you, Fotios, and good afternoon, everyone. As we reflect on the first quarter of 2026, Nakilat navigated the geopolitical challenges while preserving operational performance and implementing prompt cost optimization measures across the marine business segment. I'll now take you through Nakilat's financial and operational performance for the 3 months, which ended 31st of March 2026. Please refer to Slide 13 and 14, which will summarize the first quarter results. Starting with the bottom line. Nakilat reported a net profit of QAR 439 million compared to the QAR 433 million in Q1 2025, representing an increase of approximately 1.3% year-on-year. This translates to an earnings per share of QAR 0.08, in line with the prior period. Total income for the quarter amounted to QAR 1.21 billion compared with the QAR 1.11 billion in Q1 2025. This includes revenue from operations accounting to QAR 1.18 billion compared with the QAR 1.08 billion in Q1 2025. This was mainly due to the inclusion of Qatar Shipyard and the LPG vessels, which was not present in the comparative period. Turning to the shipyard segment. Performance in Q1 of 2026 was impacted by the ongoing geopolitical situation. This resulted in a noticeable reduction of activity levels across both shipyard operations and other marine services, which has impacted all similar providers in the region. As a result, the overall segment contribution was lower year-on-year. Looking ahead, we anticipate that as the geopolitical situation improves, we expect to see a gradual ramp-up in activity, initially at modest levels, building over time towards full operational capacity over the upcoming period. Now moving on to costs. Operating expenses for the quarter were higher year-on-year. This was primarily driven by the full consolidation of Qatar Shipyard Technology Solutions and the LPG vessels following their respective transfers, which introduced additional operating costs, which are not present in the prior year comparative. This was partially offset by lower vessel operating expenses within the existing fleet, reflecting reduced vessel activity during the period. General and administrative expenses increased to QAR 34 million. The increase was mainly attributable to the full consolidation of Qatar Shipyard Solutions. This introduced a new overhead cost, which was not present in the prior comparative. This was partially offset by the continued benefit of cost improvement initiatives across the group. Depreciation and amortization amounted to QAR 229 million compared with the QAR 219 million in Q1 2025, representing an increase of approximately 8.1% year-on-year. The increase was mainly driven by the completion of the vessel dry dock cycles during the second half of 2025, which resulted in higher depreciation being recognized in the current period as well as the recognition of the LPG vessels and Qatar Shipyard Technology Solutions following their full consolidation. Interest, dividend and other income decreased year-on-year. This was primarily driven by partial elimination of the interest income from the joint venture shareholder loan following the consolidation of Qatar Shipyard Technology Solutions, which is now reflected through full consolidation rather than equity accounting. The decrease also reflects lower variable interest rates in the short-term deposits during the quarter. Taking revenue and cost movements together, EBITDA for the quarter was lower year-on-year, mainly driven by lower contributions from the shipyard activities. This reflects the impact of the current geopolitical environment on operational activity levels, as mentioned before. Finance costs decreased year-on-year. The reduction was primarily driven by lower variable interest rates during the period. Savings achieved through improved loan margins as part of Nakilat's ongoing refinancing strategy and the benefit of scheduled loan repayments in line with the group's debt amortization profile. These were partially offset by the inclusion of finance costs associated with Qatar Shipyard Technology Solutions following its consolidation. Now turning to Slide 15, which provides an overview of the balance sheet. Property, plant and equipment increased during the quarter, primarily reflecting the continued installment payments associated with Nakilat's newbuild program. This was partly offset by depreciation recognized across the fleet and operating assets during the quarter. Cash and deposits increased compared to the end of Q4 2025. This was mainly driven by cash generated from operations, together with a net increase in borrowings during the period. These inflows were partly offset by installment payments made in line with Nakilat's newbuild construction schedule. Overall, the cash position reflects Nakilat's ability to fund ongoing investment commitments. Borrowings increased compared to the year-end Q4 2025, primarily driven -- primarily due to the drawdowns related to the financing of the newbuild program. This was partially offset by the scheduled loan repayments made during the quarter, which is consistent with the group's debt amortization profile. The movement in borrowing reflects Nakilat's continued and disciplined execution of its long-term investment strategy. As highlighted previously, Nakilat has continued to secure funding well in advance of the upcoming shipyard payment obligations for our newbuild program. The group has financed arrangements in place to fully cover all scheduled shipyard payments for 2026 and continues to make additional arrangements to support future payment requirements. This approach provides funding visibility, enhances liquidity planning and supports the continued execution of the newbuild program in an orderly and effective manner. As we look ahead, Nakilat enters the remainder of 2026 with its shipyard and marine segment facing reduced activities, a direct consequence of the current geopolitical situation that has broadly impacted both shipyard operations and the marine services within the region. We continue to monitor the situation closely and expect a gradual recovery in activity as conditions normalize over time. I thank you for your attention, and I would like to hand over the discussion to Nakilat's CFO, Hani Abuaker, who will provide insight into Nakilat's business outlook and strategic priorities.

Thank you, Fotios and Kamaran. I think you covered it very well. Despite the geopolitical challenges during the first quarter of 2026, we maintained safe operational performance and took immediate and targeted action to rationalize any costs and mitigate any impact across our business segments. This was particularly relevant in areas such as the dry dock facility and the agency services, which, as Kamaran said, experienced a decline in activity level, which has been the case across the region. At the same time, we remain focused on ensuring high fleet reliability, uphold our strong safety standards and constantly delivering services to our customers under all conditions. In the shipyard segment, performance was impacted with the current environment, lower activities. And as a result, the contribution was lower year-over-year. Going forward, we should expect as things stabilize, we anticipate a recovery in that activity. We'll start most probably modestly and then progressively building towards a normal operation in the shipyard repair facility going forward. Overall, our priority remain clear, continuous disciplined cost and cash flow management as we navigate the current environment. With that, I thank you for joining us today on this earnings call. We sincerely appreciate your time and continued engagement, and we trust -- and the trust you place in our company. As Fotios said, we remain committed to transparency and maintaining open and clear communication to support your understanding of our performance and strategy. Our team and the IR team as always and has been available over the last months to answer any questions and to provide you clear clarifications. With that, we look forward to reconnect with you during our next update. Thank you very much, and please have -- stay safe, and have a nice day.

Thank you. This now concludes today's call. Thank you all for joining, and you may now disconnect your lines.