Release Date: February 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NMDC Ltd (BOM:526371, Financial) reported a 19% increase in production and a 24% increase in sales over the nine-month period.
- The company achieved a 25% turnover growth, which was entirely volume-driven.
- January was the best month ever for NMDC Ltd (BOM:526371), with strong performance continuing into February.
- The company has significant expansion plans, targeting 50-51 million tonnes of production next year, with potential to reach 53 million tonnes.
- NMDC Ltd (BOM:526371) has a strong cash position with INR 11,500 crore, sufficient to fund its CapEx plans for the next two to three years without raising additional capital.
Negative Points
- The Kumaraswamy enhancements have not yet come through, potentially impacting the ability to reach the 47 million tonnes target.
- There are constraints in terms of Environmental Clearance (EC) limits, which could delay production increases.
- The NMDC Steel plant is still in the process of stabilizing operations and has not yet reached profitability.
- The company faces logistical challenges and higher costs compared to peers, impacting price realization.
- NMDC Ltd (BOM:526371) had to pay a significant penalty of INR 252 crore for historical forest clearance issues, impacting Q3 financials.
Q & A Highlights
Q: Our volumes have grown well in terms of dispatches. We had earlier guided for around 47 million tonnes of volumes for the full year. Any change in that number or would we largely be meeting that number? And also, the volumes for next year?
A: We will be very close to that volume. Whether we'll touch 46 million tonnes, 47 million tonnes or not is a question, but we'll be very, very close to that. Next year, we are targeting 50-51 million tonnes, potentially reaching 53 million tonnes if additional projects come through.
Q: We have taken price hikes this quarter. How do you see the pricing ahead now for iron ore?
A: In terms of pricing, we are fairly comfortable. There could be minor adjustments on the upside or downside, but largely, prices look stable and optimistic right now.
Q: Previously, you mentioned a constraint in terms of the EC limit around 52 million tonnes. Do we have some flexibility in the EC limit?
A: We have applied for a 10% increase without public hearing for several deposits. If these come through, we should be able to produce more. For larger enhancements, public hearings are required, which take about a year.
Q: Could you elaborate on the project progress on the slurry pipeline, coal block, and new international mines venture?
A: The slurry pipeline is progressing well, with most approvals in place. The pellet plant redesign is almost done, and we expect significant progress next year. For the coal block, we are hopeful for approvals under the CBA Act, which would expedite execution. Our Australia operations have started, and we plan to invest more in exploration.
Q: Could you highlight the current progress and time it will take to stabilize operations at the NMDC steel plant?
A: We are in the process of stabilizing. January production was around 1 lakh tonnes of HR coil. We aim to reach 1.5-1.6 lakh tonnes per month to turn profitable. We need to solve constraints like rake movement to achieve this.
Q: Beyond 53 million tonnes, it would take us three to four years for incremental volumes to come in. Is it fair to assume minimal volume growth until FY28?
A: Yes, most major projects will take around three years to execute. We expect a significant volume jump around FY28-29.
Q: What is the Capex number for the next two years, and what is the net debt level as of December?
A: The net debt level is nil. Current year Capex is around INR 1,750-1,800 crore, and next year will be around INR 2,000 crore. The current CWIP is around INR 2,900 crore.
Q: What is the current capacity at which we are functioning in the Bacheli mines deposit five?
A: The EC is 10 million tonnes, and we are producing 10 million tonnes. We have applied for an increase to 12 million tonnes. Kirandul and Bacheli are expected to produce around 16.5-17 million tonnes each this year.
Q: Any plans to start exporting from Karnataka mines?
A: Exporting would attract a 30% duty, making domestic realization generally higher. We are exploring strategic tie-ups for future expansion but not considering immediate exports.
Q: What is the progress of our Legacy Iron Ore project in Australia, and when do we expect profits?
A: The gold project is expected to give around 10 million tonnes. We need to invest more in exploration. The PFS for the magnetite project is almost over, and the lithium deposits PFS will commence soon.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
