Qatar's single-minded focus on industrial expansion at Ras Laffan has raised the profile of companies such as Industries Qatar (IQ), the steel and chemicals producer. But the company may have attracted more investor attention than it deserves. Nomura Securities yesterday cut its rating of the company's stock to "reduce" because of perceptions that investors have overbought the shares.
The brokerage has also cut its forecast for IQ's earnings per share between 2010 and 2014 by an average of 12 per cent a year. That includes reductions of 8 per cent this year and 18 per cent next year. "The company's unclear growth outlook, bias to an increasingly oversupplied urea market and a low-margin chemicals business does not justify its valuation premium," the Nomura analysts Scott Darling and Vishal Gupta wrote yesterday in a report.
"We expect IQ to deliver one of the lowest margin and growth outlooks within the Middle East petrochemicals sector." With a moratorium in place until at least 2014 on further development of Qatar's biggest gasfield - the source of inexpensive fuel and feedstock for the emirate's petrochemicals and industrial plants - the rapid development of Ras Laffan may be drawing to a close. Qatar's huge North Field is part of the world's biggest gas deposit, which the Gulf state shares with Iran. Nomura suggests that the national oil and gas company Qatar Petroleum has given higher priority to the expansion of its US$6 billion (Dh22bn) petrochemicals joint venture with ExxonMobil than investing in IQ, its 75 per cent-owned basic industries unit.
IQ "is devoid of large expansion projects", the analysts noted. "IQ's capacity growth seems delayed into mid-decade." Of the fertiliser components urea and ammonia, which account for 40 per cent of the company's output, Nomura expects "poor demand and faster than expected capacity growth" to lead to global oversupply in the period between 2012 and 2014. The firm has cut its medium-term price forecast for urea to $260 from $328 a tonne.
Even IQ's steel business may not help the Qatari enterprise outcompete its arch-rival Saudi Basic Industries, which also has a steel unit set to benefit from the global recovery. firstname.lastname@example.org