Release Date: August 16, 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 19-20% increase in PBT and PAT despite a 14% drop in production.
- The company successfully reduced its losses by half and expects to break even on a monthly basis by the end of Q2 FY25.
- NMDC Steel Limited (NSL) achieved a milestone by producing over 1.5 million tonnes of hot metal within a year.
- The company is optimistic about recovering retrospective tax liabilities from customers, minimizing financial impact.
- NMDC Ltd (BOM:526371) is on track to achieve its annual production target of 50 million tonnes despite initial shortfalls due to heavy monsoons.
Negative Points
- Production decreased by 14%, impacting overall output.
- The company faces potential liabilities of INR 2,500 crores in Karnataka and INR 144 crores in Chhattisgarh due to retrospective tax judgments.
- NMDC Ltd (BOM:526371) experienced operational challenges, including scheduled maintenance and equipment damage, affecting production rates.
- The company has not yet made provisions for potential liabilities arising from the Supreme Court judgment.
- There are concerns about the impact of additional levies and taxes imposed by state governments on future profitability.
Q & A Highlights
Highlights from NMDC Ltd (BOM:526371) Q1 FY25 Earnings Call
Q: Can you provide details on the Supreme Court's ruling on retrospective tax and its impact on NMDC?
A: Amitava Mukherjee, Whole-Time Director: Out of the 81 cases, one case pertains to NMDC, with a liability of around INR21 crores. Recovery from customers is challenging. For Karnataka and Chhattisgarh, potential liabilities could be around INR2,400-2,500 crores, but recovery from customers is likely as most are long-term clients.
Q: What was the production run rate for NMDC Steel Limited in the last quarter?
A: Amitava Mukherjee, Whole-Time Director: Production in April was 106,000 tonnes, May 130,000 tonnes, and June 120,000 tonnes. We aim to reach 150,000 tonnes by the end of this quarter, contingent on resolving evacuation issues.
Q: What is the status of the INR2,200 crores outstanding from NMDC Steel?
A: Amitava Mukherjee, Whole-Time Director: INR100 crores was paid last month. With improved performance, we aim to liquidate the remaining amount within 12 months.
Q: Will the sale of NMDC Steel impact NMDC's financials?
A: Amitava Mukherjee, Whole-Time Director: The raw material sourcing from Bailadila will remain unaffected by the ownership change. NMDC Steel's peak production will require around 5 million tonnes of iron ore, about 10% of NMDC's total sales.
Q: What is the status of the slurry pipeline and pellet plant projects?
A: Amitava Mukherjee, Whole-Time Director: 73 km of the 131 km pipeline has been laid. The pellet plant and beneficiation plant have been redesigned for dual fuel and common sizing equipment. The entire system is expected to be operational by mid-2026.
Q: How does NMDC plan to handle potential additional levies from state governments?
A: Amitava Mukherjee, Whole-Time Director: Any new taxes will be recovered from customers. The pricing structure is inclusive of royalty, DMF, and annuity, with additional levies charged separately.
Q: What is the expected production capacity for FY26?
A: Amitava Mukherjee, Whole-Time Director: Current capacity is 53.6 million tonnes. We aim to achieve full capacity utilization by FY26, pending necessary environmental clearances.
Q: How does NMDC plan to address the losses in the Pellet and Other Minerals category?
A: Amitava Mukherjee, Whole-Time Director: Losses in the pellet plant, Panna, and non-operational sponge iron unit are being addressed. Steps are being taken to run these units full-fledged to avoid negative figures.
Q: What is the impact of the recent price cuts on NMDC's financials?
A: Amitava Mukherjee, Whole-Time Director: Two price cuts totaling INR1,000 have been implemented. This will reduce average sales realization from INR5,304 to around INR4,304, in line with market trends.
Q: How is the royalty calculated, and why does it vary quarter-on-quarter?
A: Amitava Mukherjee, Whole-Time Director: Royalty is paid based on sales but accounted for based on production. The decrease in production by 14% led to a 13% reduction in royalty.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
