Santhosh V. Perumal

Qamco, a 50% joint venture (JV) partner in Qatalum, on Wednesday said its core strategy revolves around revenue growth, supported by optimisation measures as part of efforts to maximise value for shareholders.

This was disclosed by Qamco chairman Abdulrahman Ahmad al-Shaibi at the annual general assembly where shareholders approved the financial results for 2020 and the cash dividend of QR195.3mn, equivalent to a pay-out of QR0.035 per share, with a pay-out ratio 206% to group’s net earnings.

"Qamco's competitive advantages, being one of the lowest-cost aluminium producers globally, together with our flexibility in operations and a lean cost-base, enhanced Qamco’s response to the external challenges," he said, adding its financial position continued to remain robust despite several macroeconomic headwinds.

Despite the challenging macroeconomic situation, Qamco remained focused on optimisation and operational excellence to maximise shareholder value, he said in his message to shareholders in the board of directors’ report 2020.

Highlighting that operational excellence remains key to the company's progress towards maximising value for its shareholders; al-Shaibi said the financing strategy adapted was implemented to ensure an optimal structure for the Qamco JV's debt to support in "weathering the downturn" in the industry.

"This strategy will ensure sufficient free cash flows are generated at the joint venture level to sustain operations and health safety environment-related expenditures, and ultimately lead to accretive value creation for the shareholders," he said.

On the liquidity position, he said Qamco had QR740mn in the form of cash and bank balances at the end of December 31, 2020.

The Qamco joint venture generated "positive" share of operating cash flows of QR684mn with a share of free cash flows of QR226mn, he said.

According to its annual report for 2020, Qamco via its joint venture places a "pronounced" emphasis on the need for efficiency and cost competitiveness in maintaining its position as a leading low cost efficient smelter.

In this regard, a series of cost management measures was taken in the form Qatalum Improvement Programme (QIP) which resulted in cost savings in line with the defined targets.

In addition to QIP, given the current difficult market conditions and macroeconomic outlook, the company's joint venture has further strengthened its optimisation drive to withstand against external pressures, where operating costs were revisited and expenses were identified which are not critical in the current circumstances.

During the first quarter of 2020, Qamco's joint venture concluded refinancing of its outstanding loan amounting to $1.2bn, which will boost its overall cash flows over the new tenure of five years.

"The company's joint venture is also relieved from the compliance of stringent financial covenants previously required as per the old terms. This refinancing deal is not only expected to bring cash flows to the joint venture but also will provide new avenues of growth and flexibility to ensure the market volatilities, which in turn is expected to maximise shareholder value," the report said.