Interview: Khalid Al Subaey
How do you rate the overall success of MPHC’s initial public offering (IPO), and what was the rationale for listing these three companies together?
KHALID AL SUBAEY: The IPO was a great success as it was over-subscribed by five times with around 199,000 individual nationals subscribing. The state has set itself firmly on the path to developing a long-term savings culture within its population. The IPO was in many ways a landmark for the state of Qatar. It marked the first of a strong series of offers to be consecutively floated by the state through Qatar Petroleum, targeting the fair distribution of wealth and the participation of citizens in economically successful projects. Second, it is the first IPO of its kind in the GCC, with innovative terms specifically designed to encourage long-term share ownership, such as non-dilutive incentive shares. And third, subscribers and shareholders were further incentivised by the announcement that shareholders would be entitled to dividends declared for the four-month period ending December 31, 2013, even though the IPO process only began on that date.
MPHC’s primary strategy is to maximise shareholder value by capitalising on its three group companies’ competitive strengths and positions in the petrochemical industry. It also gains strength from being the umbrella for three of the most successful companies established by Qatar Petroleum in the petrochemical industry, which have achieved above-average returns in the region’s petrochemical industry, namely Q-Chem, Q-Chem II and Qatar Vinyl Company (QVC).
Given current market conditions within the plastics industry, what is your outlook for the demand of the products being produced under MPHC?
AL SUBAEY: Conditions continue to improve. New capacity additions are likely to be limited prior to the wave of capacity additions in North America, expected in the 2016-20 period. Globally, growth in demand for high-density polyethylene (HDPE) has been consistently above growth in GDP, and this trend is expected to continue. The strongest demand growth is coming from Asia – particularly China, where growth in demand for HDPE is expected to slow somewhat over the next five years yet still be above 6%. China’s continued growth, coupled with relatively few new capacity additions, is expected to drive increasing exports, especially from the Middle East. China continues to be the fastestgrowing country and main target market – demand growth there for 2014 is expected to have been about 7%, nearly double the global growth rate.
With Muntajat handling sales and distribution for over a year now, how would you assess the impact of this change on MPHC’s operational efficiency?
AL SUBAEY: Muntajat commenced the purchasing, marketing, distributing and selling of QVC’s chlor-alkali products before MPHC was incorporated, and the start date of such activities for Q-Chem’s and Q-Chem II’s newly regulated products was between the end of 2014 and the early 2015 period.
QVC’s interactions with Muntajat run at many levels, from exchange of data on daily production, inventory, berth availability, etc, to periodical reviews of performance at the CEO level. In between the two, information is exchanged through fixture notes on product placement and is followed up right until the product has been shipped with the logistics department. On the finance side, standard reports stating the likely price and quantity to be delivered are produced each month, which is actualised around the first week of the next month. The information flow is reviewed on a quarterly basis at the level of the supply chain committee consisting of departmental managers, followed by an annual review.
In these ways, the handling of sales and distribution by Muntajat has had a positive impact on the efficiency of QVC’s operations. The sale of QVC’s products is expected to remain at the same level as prior to Muntajat’s takeover of marketing activities, since the sales are constrained by the level of production and QVC’s production capacity has not changed since that time.
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