Industries Qatar posts fourth straight record profit

RECORD PROFIT: Industries Qatar's net income for the first quarter more than doubled by $522.4 million.

Industries Qatar, the Gulf's second-largest chemical company by market value, posted its fourth consecutive record profit in the first quarter on higher output and steel prices.

Shares of the state-controlled company, which also produces steel and fertiliser, surged almost 7% to 154.20 riyals on Monday in their biggest one-day gain since February 3.

"These are wonderful times for Middle East chemical producers, for as long as oil prices remain high and gas prices remain disconnected," said Patrick Rooney, managing director for Houston-based Chemical Market Associates (CMAI), an industry consultant.

Oil prices, to which chemical prices are linked, have surged to above $110 per barrel this year, compared with less than $65 per barrel a year ago.

Whereas many global chemical producers rely for feedstock on naphtha - whose price is also linked to oil - Gulf rivals such as state-controlled Saudi Basic Industries Corporation (Sabic) benefit from fixed and relatively low prices for ethane gas. Qatar is the world's third-largest holder of natural gas reserves.

Qatar Industries' net income in the three months to March 31 more than doubled to 1.9 billion riyals ($522.4 million), or 3.5 riyals per share, compared with 893 million riyals, or 1.62 riyals per share in the year-earlier period, it said on the Qatari bourse website. It did not give details.

Output of ethylene at unit Qatar Petrochemicals Company (Qapco) rose almost 40% to 720,000 tonnes per year after completion in August of a $230 million expansion of an ethane cracker, Qapco General Manager Mohammed Al-Mulla said in February. Ethylene is a base chemical used to make plastics.

In Europe, the price of rebar - produced with steel billets - jumped to 570 euros ($901.70) in February from 440 euros in December after supplier China raised its export tax on billets.

Industries Qatar's steel affiliate, which aims to almost double production by 2012, contributed to more than a third of sales in 2007, according to financial statements. Qatar Steel Company produced about 1.1 million tonnes of steel billets last year.

Demand for iron and steel in the world's biggest oil-exporting region - where more than $2 trillion of infrastructure projects have been announced or are under construction - could climb more than 30% to 19.7 million tonnes this year, according to the Gulf Organisation for Industrial Consulting.

Ethylene prices in southeast Asia averaged $1,240 per tonne in the first quarter, compared with $1,230 per tonne a year earlier while methanol prices in China rose to $415 from $400 per tonne, according to CMAI data.

The Qatari government owns 70.12% of Industries Qatar, whose shares almost doubled in 2007.

HSBC Holdings started research on Industries Qatar in February with an "overweight" rating and a share price target of 210 riyals, saying its profitability profile was unmatched in most industries.

It said the company was undervalued and approaching a period of sustainable peak earnings across its business lines.

HSBC on Monday cut its price target on Sabic, the world's largest chemical company by market value, to 210 riyals ($56) from 260 though maintained its "overweight" rating. Sabic shares closed at 159.25 riyals on Sunday in Saudi Arabia. (Reuters)

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