Release Date: May 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NMDC Ltd (BOM:526371, Financial) achieved record-breaking production and sales in the last financial year.
- Profits for the quarter were up by 19% compared to the previous quarter.
- CapEx was the highest ever at INR2,100 crores, with significant future investments planned.
- The company targets to reach 50 million tonnes of production in FY25 and 54 million tonnes in FY26.
- NMDC Ltd (BOM:526371) has a strong cash position with net cash of INR9,200 crores as of the latest date.
Negative Points
- There was a 1 million tonne production loss in May due to workforce issues.
- Employee wage negotiations are ongoing, potentially increasing costs by approximately INR100 crores.
- Other expenses were substantially higher due to a one-time payment of INR282 crores for land regularization.
- Royalty and additional royalty together account for around 40-43% of sales revenue, impacting profitability.
- The company faces logistical challenges and higher transportation costs due to its remote location.
Q & A Highlights
Highlights of NMDC Ltd (BOM:526371) Q4 FY24 Earnings Call
Q: What kind of volumes are you looking at for FY25 and '26 with the new sanctions?
A: For FY25, we aim to touch 50 million tonnes despite some production loss in May. For FY26, we target 54 million tonnes. (Amitava Mukherjee, Chairman-cum-Managing Director)
Q: Can you provide an update on the employee wage negotiations and its impact on costs for FY25 and '26?
A: Provisions have been made in the accounts, and the negotiation is in the final stages. The impact will be around INR100 crores, but it has already been accounted for. (Amitava Mukherjee, Chairman-cum-Managing Director)
Q: Why were other expenses substantially higher this quarter?
A: We had to pay INR282 crores for regularizing land in Donimalai, which was previously forest land. This was a one-time expense. (Amitava Mukherjee, Chairman-cum-Managing Director)
Q: What is the status of advances to NMDC Steel Company, and when do you expect recovery?
A: Repayments are expected to start from Q2 of this year as the company is on track to break even. (Amitava Mukherjee, Chairman-cum-Managing Director)
Q: What is the expected EBITDA margin for NMDC Steel as capacity ramps up?
A: Beyond 2 million tonnes, the EBITDA margin should be around 10%. At 2.5 to 2.6 million tonnes, it should reach around 25% at current price levels. (Amitava Mukherjee, Chairman-cum-Managing Director)
Q: What is the status of the CapEx plan to double capacity over the next five to six years?
A: We have about INR50,000 crores of investment in the pipeline, with various stages of approval and tendering. Major projects include new crushers, slurry pipelines, and pellet plants. (Amitava Mukherjee, Chairman-cum-Managing Director)
Q: How will the increased production be distributed among the mines?
A: Karnataka will contribute around 17 million tonnes, and Bailadila will contribute around 80 million tonnes. Additional production will come from new mines and increased capacity at existing ones. (Amitava Mukherjee, Chairman-cum-Managing Director)
Q: What is the dividend payout ratio, and will it increase with higher profits?
A: This year, the payout was 38% of net profit. Given the substantial CapEx plans, it is prudent to maintain this level. However, absolute dividend amounts are expected to increase with higher profits. (Amitava Mukherjee, Chairman-cum-Managing Director)
Q: What is the status of the slurry pipeline and railway line projects?
A: Phase 1 of the slurry pipeline is progressing well, with significant portions already laid. The railway line doubling is also on track, with completion expected by the end of the year. (Amitava Mukherjee, Chairman-cum-Managing Director)
Q: What are the plans for the land in Karnataka initially intended for a steel plant?
A: We are exploring alternative uses for the land, such as a blending yard, as we have decided not to build more steel plants. Consultants are advising us on the best utilization. (Amitava Mukherjee, Chairman-cum-Managing Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
