The Gulf’s second-largest chemical producer by market value made a third quarter net profit of 1.5 billion riyals ($412 million), compared with 1.17 billion riyals a year earlier.

Analysts polled by Reuters had expected a quarterly profit, on average, of 1.27 billion riyals.

The company reported a nine-month net profit of 4.1 billion riyals.

The strong results were mainly due to higher-than-expected steel margins, said Rita Guindy, analyst at EFG-Hermes based in Cairo.

“The surprise came from steel. We were expecting steel margins to go down in line with other global steel producers. But IQ piled up iron ore inventories at lower costs, as they did last quarter, we think,” Guindy said.

“We think that Q4 will also be a strong quarter with global steel producers signing iron ore contracts at lower prices, and expect IQ to sustain these margins or see higher ones. Fertilizer prices will also be stronger in the fourth quarter,” she said.

Industries Qatar is one of the regional petrochemicals companies that have struggled through the global economic downturn, although market fundamentals have shown signs of recovery since late last year.

The company posted a net profit of 2.6 billion riyals in the first half of the year. In 2011 IQ is expected to add some 23 percent of new urea capacity via its Qafco-5 project.

“IQ remains our preferred pick among the large MENA petchems and where we foresee upside risk to consensus estimates on the back of these Q3 numbers,” Deutsche Bank analyst Aleksandar Stojanovski said in a research note issued Thursday after the results were released.

“Given the strong move in urea prices in the last 2 months, assuming the current pricing environment is sustained well into 2011, we could even see further upside risk to estimates provided that some 40 percent of IQ’s operating profits come from the nitrogen-based fertilizer business.”