Given the government's drive to push Qatar's economy away from energy sector dependency, the news this week that Industries Qatar (IQ) had made profits of QR2.5bn ($687.3m) in its first full year of operations was broadly welcomed in Doha.
"Our company has made significant progress in its first full year since inception," Abdullah bin Hamad al-Attiyah, minister of energy and industry and IQ chairman and managing director, told IQ's AGM on March 13. "The group companies of IQ have performed beyond expectations."
Since its inception in April 2003, IQ has shown expansion and growth across all four of the companies under its umbrella.
"The companies benefited from higher sales volumes and prices during the year," al-Attiyah continued. "Inevitably, this had a positive impact on our 'bottom line'."
The IQ portfolio encompasses the Qatar Fertilizer Company (QAFCO), the Qatar Petrochemical Company (QAPCO), the Qatar Steel Company (QASCO) and the Qatar Fuel Additives Company (QAFAC).
IQ also posted sales of QR5.3bn ($1.46bn) for the first full year represented a 90% increase on the prior nine month period's profits of QR2.8bn ($769.8m). Earnings per share grew from QR2.26 to QR4.99 and an increase in total assets helped plump up the balance sheet as they rose 18% to QR10.2bn ($2.8bn). This asset growth came as little surprise, as each company expanded their activities and boosted sales.
"We have already commenced a number of significant activities, which we believe will positively affect our future operation and financial performance," continued al-Attiyah, highlighting that more expansion is on the way.
QAFCO IV, an additional ammonia and urea train, went online in 2004 - boosting the production capacity of the former by 50% and the latter 65%. During the year, QAFCO also signed a letter of intent with Yara International and Qatar Petroleum for QAFCO V, creating the platform for constructing a plant to deliver 1m tonnes of ammonia and 1.2m tonnes of urea annually and adding to what is currently one of the world's largest fertiliser plants.
QAFAC signed a heads of agreement for the QAFAC II project with its foreign shareholders; the agreement paves the way for commissioning of an additional plant to produce methanol and ammonia. IQ will hold a 50% stake in the project.
QAPCO were also part of the drive to be bigger. Their Ethylene Expansion (EP2 project) is set to increase ethylene production by 37% to 720,000 metric tonnes per annum (mtpa). The $220m project is expected to come online in early 2007.
French petrochemical giant Total Petrochemicals (formerly Atofina) is also part of the action as they are partners with QAPCO in the development of a polyethylene plant expected to produce 450,000 mtpa of LLDPE when it opens in 2008.
Also scheduled for a 2008 start is the Ras Laffan cracker project, which is a joint venture between Qatofin, QP and Q-chem 2 and will produce 1.3m mtpa of Ethylene.
Last but by no means least, QASCO is currently engaged in a large expansion project to boost production with new plants in the Mesaieed industrial city. With total costs forecast around the QR2bn ($550m) mark, this will add significantly to the size and capacity of QASCO's activities.
The idea behind creating IQ seems to be creating the desired effect. The holding company came about because QP was holding a number of industrial companies - and the need to allow the stock market to participate in their success was seen as desirable. The company was thus created with QP holding 100% of the equity, of which 30% was divested in 2003 when the shares were floated at QR16.
With IQ shares being amongst the most traded on the Doha Securities Market, the interest in participating in industrial growth has been obvious.
"With the intensified popularity of our shares, we have witnessed the further rise of our share price, emphasising the confidence the market holds in our combined group strategy," added al-Attiyah at the AGM.
As well as the increased value of the stock, shareholders are set to be made even happier with total annual dividend distribution for the year of QR1.75bn ($481.1m) - representing QR3.5 per share.
IQ is not the only government-driven project aimed at developing industry in Qatar though. Qatar Industrial Development Bank (QIDB) was set up in late 1997 with the specific purpose of developing the industrial sector. With the realisation that much investment was going into trading and real estate development, QIDB aimed at creating a solid platform to find support for industrial ventures.
"Whilst there are investors, they are probably investing in real estate or as partners or mutual funds, but not as 100% Qatari companies," explained Mohammed bin Khalid al-Mana, chairman of the Qatar Chamber of Commerce and Industry, when speaking to OBG recently. "We need to see more and more small and medium manufacturing industries come here. We have a very good vehicle for that, namely the Qatar Industrial Development Bank [QIDB]. They link the know-how with the Qatari investors."
By undertaking feasibility studies the bank has striven to address informational gaps that inhibit the formation of joint ventures. Through this and the granting of soft loans, QIDB has driven industrial development and created jobs. Leaving the energy-intensive and large upstream industries to more direct government participation, success is apparent by the recent announcement that QIDB's capital will be increased to QR5bn ($1.37bn) and it will be allowed to address other sectors - including education, tourism, health and agriculture.
However, much of the investment coming into Qatar is still going into large upstream projects and infrastructure. This is only natural as the foundations for a successful industrial base need to have quality feedstock produced in large quantities to create cost advantages, and infrastructural development to allow efficient operation and distribution.
The externalities of the massive hydrocarbon developments being undertaken will surely be felt as the large-scale downstream projects come online. As the investment pours into the top, more opportunities in the small- and medium-sized industrial sector are expected to become available over the next few years. Crucially, the mechanisms for ensuring they are taken advantage of are now in place.