Industries Qatar disappointed analysts with its fourth quarter earnings release yesterday.
Industries Qatar may have to work harder
The Gulf's second-largest chemical producer by market value disappointed analysts with its fourth-quarter results.
Industries Qatar (IQ) reported a net profit of 1.5 billion rials for the final quarter of last year, an improvement on the 1.07bn rials for the same period in 2009 but well below the 1.65bn rials analysts forecast.
Profit for the year was 5.6bn rials, the company said.
"Industries Qatar's results were slightly disappointing, especially considering the increase in fertiliser and steel prices in the quarter," said Scott Darling, an analyst at Nomura in Dubai.
Mr Darling maintains a "reduce" rating on the stock with a price target of 126 rials. Shares traded down 7.4 per cent to 119 rials yesterday.
On the upside, the company has announced a dividend of 5.5 rials a share, above expectations and a higher yield than that offered by its main energy competitor, Saudi Basic Industries Corporation.
Mr Darling said IQ should be among the "safer" investments in the Gulf but would be affected to some degree by political events.
"With the current investor sentiment for the region, we suspect the stock's performance is likely to be dictated by geopolitical rather than macroeconomic factors," he said.
The company said it was seeking a credit rating in October to access the debt markets, but might have to put those plans on hold as regional unrest would probably make it more costly for companies to borrow.
The money would be used to fund the expansion of its regional steel operations, Mr Darling predicted. The steel business will need to support US$60bn of infrastructure projects after Qatar won its bid to host the 2022 Fifa World Cup.
At the moment, only 7.5 per cent of the stock is open to foreign ownership. Qatar is a candidate to receive the classification of "emerging market" from MSCI Barra. It is currently considered a "frontier market".
Among the requirements for an upgrade is for Qatari companies to relax foreign ownership limits.