Credit crunch

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Arabian Buisness turns the spotlight on Industries Qatar.

That's a bit of a vague title, isn't it?

True, but it does hint at the scale of Industries Qatar's (IQ) interests. IQ is one of the largest integrated industrial holding companies in Qatar and the GCC markets. Recent reports by the Doha Securities Market (DSM) highlight that IQ is one of the most traded stocks on the DSM (by trading value), and that the performance of IQ has a direct impact on the Qatar economy and the wealth of its people.

So how much is it worth, and who's raking in the cash?

As of 31st December 2006, IQ had a share capitalisation of US$1.4bn distributed between its 500,000,000 shareholders. The company posted a 33.7% rise in Q2 2007 profit to a record US$318.8m against US$238m in Q2 2006, and IQ reported earnings of US$564m, or US$1.13 per share, in the first six months of the year. Its shares are up almost 31% this year to the delight of state-owned Qatar Petroleum, IQ's main shareholder, which holds a 70% stake in the business. Other shareholders include a host of private companies, charities and the general public.

I see. And how is the company structured?

The IQ group consists of four major companies: Qatar Petrochemical Company (QAPCO), Qatar Steel, Qatar Fuel Additives Company (QAFAC), and Qatar Fertiliser Company (QAFCO). When first established in 2003, the group did not have any ownership interests in any other subsidiaries and joint ventures. Now, many of these companies have themselves invested in subsidiaries and joint ventures, thereby significantly expanding the size of the group.

I've heard of that last one. Has it been in the news recently?

You're spot on. Last week, it was revealed that QAFCO had dropped plans to sell US$1.2bn of bonds after the global credit crunch made borrowing more expensive. The company may look to resurrect the deal in January or February, according to its General Manager, HH Sheikh Nasser bin Hamad Al Thani. However, the bond sale is on hold and the company is looking instead for project finance to pay for a new urea and ammonia plant.

It's part of an expansion drive, then?

Yes - the bond would have financed a plant with a capacity of 3500 tonnes per year of urea and the same of ammonia, to be completed in 2010. QAFCO is not alone, however. The credit crisis, which has made banks around the world more reluctant to lend, may delay as much as US$90bn worth of petrochemical projects in the world's biggest oil exporting region, according to the Gulf Petrochemicals and Chemicals Association.

And does this represent a serious setback?

Not really, although it does come hot on the heels of Qatar Steel's decision to postpone plans to raise a US$1.34bn loan, because of the turmoil in global credit markets. IQ will still push ahead with its Vision 2010 plan, a capital investment programme that involves all of the group's companies.

The total anticipated cost of all the projects now stands at US$8bn, and the initiatives are designed to meet the increasing demand for IQ's world products, as well as instill production efficiencies by increasing economies of scale.

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