Q1 24/25

Aug 1, 2024

Quarterly report

Summary

Q1 turnover declined 5% QoQ, but PAT rose 42% on better realization and lower costs. Higher Q2 volumes are expected to lift profitability, while FY ferrochrome output is guided at 250,000–260,000 tonnes.

Ladies and gentlemen, good day and welcome to earnings conference call of Indian Metals and Ferro Alloys Limited, arranged by Veritas Reputation. At this moment, all participant lines are in the listen only mode. Later, we will conduct a question and answer session. At that time, if you have a question, please press star and one on your touchtone keypad. Please note that this conference is recorded. I now hand the conference over to Mr. Aryan Rana from Veritas Reputation. Thank you, and over to you, sir. Thank you, Shima. Good evening, and thank you all for joining this conference call with Indian Metals and Ferro Alloys Limited to discuss our financial results for the first quarter of this fiscal year ended June 30, 2024. We are delighted to share that IMFA, whose market valuation has jumped 100% the past year, has been awarded several honors by the Directorate General of Mine Safety during the All India Mine Safety Awards 2024. These awards testify to the company's diligent safety measures at Sukinda Mine and Mahagiri Mine, which were ranked second and third in the minor mine category respectively. Recently, the company's market valuation crossed INR 4,000 crore mark, reflecting an impressive growth of nearly 900% over the past five years. Operating in the metals and mining industry, IMFA is India's leading fully integrated manufacturer of quality ferrochrome. Our business portfolio includes chrome ore mining, electricity production, and ferroalloy smelting with 190 MVA of installed furnace capacity, 204.55 MVA of captive power generating capacity, including 4.55 megawatts solar capacity, and extensive chrome ore mining track. Despite external challenges, the company is strongly focusing on maximizing operating efficiency and maintaining IMFA's position as India's foremost fully integrated manufacturer of superior ferrochrome. The financial results are available on our website and the stock exchanges. Before we begin the discussion, I must remind you that our conversation may contain forward-looking statements that involve risks, uncertainties and other factors. These statements should be viewed in conjunction with our business risks that could affect future results, performance, or achievements. To discuss results and address investor queries, we have our management team with us, including Mr. Prem Khandelwal, CFO and Company Secretary, Mr. Bijayananda Mohapatra, Chief Operating Officer, Mr. Saunak Gupta, Deputy CFO, Mr. Binoy Agarwalla, Head Power Business Unit, Mr. Sandeep B Narade, Head Mine Business Unit, and Mr. M. Venkatesh, Head Sales and Marketing, Ferro Alloys Business Unit. We'll begin with a brief overview of the Q1 FY 2025 results, followed by a Q&A session. Now, I will hand over the call to Mr. Prem Khandelwal, our CFO. Over to you, sir. Thank you. Thank you, Aryan. Good evening, everybody. As indicated in the last con call, the results for this quarter is much better compared to Q4 of last year. Although turnover has gone down by 5%, mainly on account of lower production and sales volume, the PAT has gone up by 42%, mainly on account of improved realization by INR 2,000 and a lower cost by approximately INR 2,000. The ferrochrome prices are holding firm above INR 1 lakh at present also. With more volumes expected in this quarter, the Q2 results are likely to be much better than Q1. With this, we can start the Q&A session now. Thank you. Sure, sir. I will begin with the Q&A session. Yes. Yes, please. Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the questions queue assembles. We take the first question from the line of Aditya Veerkare from Axis Securities. Please go ahead. Yeah, thanks for the opportunity. Sir, I wanted to understand the impact of the recent Supreme Court judgment that the states can levy tax on mineral rights. From that perspective, what will be the impact on our operations as we have some captive mines? Will it have any cost bearing going ahead? That is my first question. Aditya, very difficult to answer that at the moment. Very difficult to quantify anything at the moment because judgment itself is not fully pronounced. Whether it will be retrospective or prospective and what action state government or central government is going to take is still unknown. Very difficult to estimate anything on that front at the moment. Okay. My next question is on the pricing and demand environment, especially we are seeing the steel prices. They are quite subdued because of these Chinese imports and declining Chinese HRC prices. From that perspective, where do you see ferroalloy prices in the coming quarters? Even if you can touch base upon the current supply demand situation. Venkatesh, would you answer that? Yes, sir. Yeah. When we look at the next quarter, normally it's a weak quarter because of climatic reasons, the monsoon season in India and China, where construction activity and normally the demand slows down a bit. In Europe, this is a time where they have the summer vacation and many of the steel mills go on a maintenance, so the demand is lower. But in our case, we have a lot of long-term contracts. In fact, most of our sales are on long-term basis, so we do not see any impact on that. When we look at something like the pricing, again, one-fourth of our tonnages are already fixed for the next quarter at the same price as last quarter. So I would see very, if at all there is any impact that will be very marginal. I don't see any impact basically on us. Okay, thanks a lot, sir. That's it from my side. Thank you. Thank you. Thank you very much. We take the next question from the line of Shubham Jain from Kotak. Please go ahead, sir. Hello, sir. Good evening. First of all, many congratulations on posting a superb result. My first question is on the operational performance where our costs have come down by around $70, $80 from Q4 in Q1. What are the main levers for that? Maybe you can put it in terms of price benefit or change in specific. No. If you compare it from Q4, the cost reduction is mainly on account of power. The variable power cost has come down from INR 3.37 paisa in Q4 to INR 3.76 paisa. Other costs are more or less remaining same. Okay. Is it mainly on account of purchase of lower priced coal? Yeah. Binoy, would you answer that? The power cost has gone down. Yeah. The power cost has gone down mainly due to coal price because earlier we were getting less rates for transportation of coal. Now we are getting more than 85% coal are coming by rail. That is the reason why the coal cost has come down. Okay. Sir, my next question is, can you brief us on the specific ore and specific coal? I didn't get you. You mean consumption? Yeah. Consumption per ton? Yes, sir. You are talking about specific coal consumption per unit of generation in power plant? No, sir. Specific ton of chrome production. Shubham, you are not audible properly. Can you repeat it again? Sir, am I audible now? Yeah, a little better. Yeah. Sir, I wanted to understand how is the specific consumption of ore, power, and fuel vis-a-vis Q4 the production side. I am sorry to interrupt you, Mr. Jain. Your voice is breaking up, sir. Are you connected on your earphones, Mr. Jain? Ma'am I audible now? You are audible, sir. Only one request, if you are connected on your earphones, I would request you to switch to your handset, sir. Yeah, I have done it. Sir, I wanted to understand how is the specific consumption moving in terms of power, fuel, and ore vis-a-vis Q4? In terms of per ton of ferrochrome, if you ask, then it is almost same. Like, chrome ore- Can you tell us the absolute numbers? You want quantity? Specific, let's say 2.1 or 2.2. What is the exact number? Chrome ore is 2.34, coke is 0.48, and power is 4,009 units. 4,009 units. Okay. That's all from my side. Yeah. Okay, right. Thank you. Before we take the next question, a reminder to all the participants, anyone who wishes to join the question queue may press star and one on their touchtone telephone. The next question is from the line of Saket Kapoor from Kapoor and Company. Please go ahead. Namaskar, Khandelwal Ji. Namaskar, Suvrit. Namaskar, Saket. Yeah. Sir, as you commented in your opening remarks that Q2 profitability is on a better trajectory than Q1, the one which we are discussing, and this I think would be the monsoon quarter also. If you could just explain, sir, what factors will lead to better profitability for this quarter? As I said, mainly on account of volumes. Because this quarter we have sold around 63,000 tonnes of ferrochrome. We expect around 67,000 in the next quarter. And price remaining more or less same or maybe a little lower than this. So the profitability expected is better in Q2. That is the absolute number will go up because of the higher ton? Yes. Okay. And sir, what are our contracted prices, the benchmark, how are the benchmarks moving? Venkatesh. Yes, sir. So as many of you would be aware, Merafe discontinued announcement of the EUBM, from quarter three or quarter two in our case of financial year. But Samancor, the other big player from South Africa, they announced the quarter three prices or in our case, quarter two prices, which is a rollover of the previous quarter. So July, August, September, the benchmark remains unchanged or it is the same. Sir, I missed your first comment. You mentioned some region discarding it. Earlier there was a South African company called Merafe who used to declare the benchmark. They discontinued declaring the benchmark, but another South African company by the name of Samancor has declared the benchmark for July to September, and it is a rollover from April to June. Basically, it is a rollover of the benchmark prices. Okay. One comment on the Supreme Court's judgment part, although the judgment has been reserved, but only point is that on the basis of which the matter has been fought, any demand has been raised towards the company from the government authorities earlier that is still lying pending as contingent liability, any amount? No, nothing is pending as of now. Okay. Then, it has to be learned what parameters will set Yeah for seeking the tax. If there is no demand pending on their side, on what way will they complete? This will be a totally different thing altogether. That understanding. No, as I said, I think, that the judgment itself is not complete now. Right. I think very nothing is clear. Estimating anything is very difficult at the moment. Sir, only to harp on it because Tata Steel yesterday came up with their results. In that they mentioned about some demand being raised by the state and on some formula, they also provided for a large sum of money closer to INR 17,000 crore as contingent liability on account of this order itself. That was the reason why I put forward whether any demand on the basis of which the case has been fought, any demand is pending from the state towards the company. That was my question. No. If there would have been any demand that would have been reflected in the contingent liability in our balance sheet. Correct. Sir, lastly on the ferrochrome market in particular, I think you said this electricity outages in South Africa has been a persistent condition for a very long time. Taking into account what Mr. Panda commented on the higher global stainless steel production, 6% higher for this year, is there a very strong likelihood that these realizations are more likely to be in a range bound manner? Also, sir, please provide the realization for this quarter. Venkatesh. Yes. Sir, I will answer the question about South Africa. The power situation in South Africa in fact has drastically improved. From 26th March 2024, that is almost more than four months now, there is no blackouts in South Africa. The bigger challenge in terms of what South Africa is facing is the unpaid municipality bills. These bills have to be paid by the municipality to Eskom, which is the electricity provider. The unpaid bill stands at ZAR 78 billion. This is kind of throttling the recovery efforts of Eskom to end those decades of blackouts. At the current stage, it is in a better situation as far as the electricity goes. Okay. Therefore the likelihood of production will also be streamlined and will be adequate depending upon the demand from the steel industry here. That would be a good understanding. Yes. What happens, what we have seen in the past, if there is a slight reduction in production in South Africa, then there is an equivalent increase in production in China because China, as we know, have no ore on their own. They import most of the ore from South Africa. A reduction here is somewhere made up there. I do not see if you are looking in terms of a shortage of ferrochrome going ahead, I do not see that. Then how should- I'm sorry to interrupt you, Mr. Kapoor. May we request another question cue, sir? Thank you. We'll take the next question from the line of Rajesh Aggarwal from Moneyord. Please go ahead, sir. Hello Sir, do we get a better realization in export market or local market? First question. Second, sir, what do we mean by chrome ore raising in the quarterly press release? Vengalil? Yeah. I'll answer the question regarding realization. Different markets give different realization. So in some markets, we definitely get a higher realization than the domestic. In certain markets, it would be on similar levels. Okay. Sir, suppose, for example, do we supply Jindal Steel? When I saw their quarterly raw material cost, they said the ferrochrome purchase prices were INR 108,000. Are these lower to them in terms of INR 105,000 or something like that? No. The prices keep changing. You know what Jindal Steel has reported. Jindal Steel use a lot of their own ferrochrome, what they produce. Okay. Understood. And sir, the second question, in quarterly we saw chrome ore raising. How do we calculate that? What does it mean by it? Hello? Hello. Yes. Here I is. In quarterly press release, we have written below that chrome production, chrome raising. What does it mean? No, I did not get you. Chrome raising means what? In quarterly press release. Quarterly press release, you have mentioned chrome raising below the productions and exports. Operational highlights where you mentioned chrome production, chrome tons, power used, and chrome ore raising. That is chrome ore, whatever we have produced during the year. During the year. Yeah. It is trailing, because we sell 63,000. No, we are mining chrome ore. Okay. We have our own mines, so we are mining chrome ore. No, understood. Is there any ratio on that? Suppose we mine 2,000 tons. How much do we get the final ferrochrome? No. For 1 ton of ferrochrome, we use around 2.3 tons of chrome ore. Understood. I got that. Yeah. Sir, any guidance on the volume current year? For chrome ore or ferrochrome? Ferrochrome. Ferrochrome is likely to be around the same 250,000, 260,000 tons. 250,000. Yeah. Okay. Thank you. Thank you. Thank you, sir. We take the next question from the line of Aashav Patel from Molecule Ventures PMS. Please go ahead. Thank you for the opportunity. Congratulations to the whole team for excellent set of numbers. Sir, my question is Yes, yes. My question is, sir, in terms of our EBITDA cost for this quarter for Q1, what was our EBITDA cost comparison to last quarter or year-over-year? It was INR 77,000 for Q1 compared to INR 82,000, INR 83,000 in Q4. Okay. For Q2, what would be this figure? Roughly what we are internally working with? I think it will remain more or less at this level only. Around 77,000. Around 77,000-78,000, yeah. This will be the EBITDA cost, which covers everything? Yes. This is EBITDA cost. Sure, sir. Okay, sir. That's all from my side. Thank you and all the best. Thank you. Thank you, sir. The next question is from the line of Shubham Jain from Kotak. Please go ahead. Sir, my first question is on the NSR side. Our NSR for the quarter 1 was around $1,260 per ton, which has increased by roughly $20 last quarter. Sir, just this $20 increase is only on account of the better realization? And what is the actual grade? Sorry to interrupt, Mr. Jain. We are unable to hear you, sir. Your voice is breaking up. Hello? Ma'am I audible now? Yes, sir. Better. Please go ahead. Sir, our NSR has gone up by $20 from the last quarter. Is it only because of the better realization, or are we selling better grades in the market? What is the average grade which we are selling right now? Vengalil, would you answer that? I do not have the grades, what we have it in ton. But definitely, like Mr. Khandelwal said, the realization improved by INR 2,000. It could be a combination of better realization, of course, maybe grades and maybe factors like exchange rate. Okay. Sir, my next question is on the by-product side. When we are producing ferrochrome, a lot of by-products. For example, when we are producing lumps, a lot of fines and chips are getting generated. Are we selling those also in the market, or are we consuming it in the process itself? Vengalil? Yes. I won't use the word by-product. It is a product itself, by ferrochrome, in different size range. Yes. There are different size ranges which are sold in the market. Okay. Sir, my next question is on the future outlook, basically on the CapEx plans. So, what are our CapEx plans for quarter 2 and quarter 3? VIyan, would you answer that? Otherwise, you cannot say. But CapEx, we have mainly planned for our running maintenance plants and other ways of CapEx is at mines development. Okay. Sir, my last question is on the chrome sales. Our sales for Q1. Sir, what is the percentage of 63kt? Basically, I would like the bifurcation of 63kt into domestic and export. Your voice is breaking, Shubham. I couldn't understand. Can you repeat it again? Sir, our sales for the quarter was 63kt. What is the percentage of this 63kt into domestic and international? Ganesan, do you have the number? Domestic and export? I don't have the exact number, but it could be maybe close to 90/10. But I don't have the exact number, sir. Okay. Sir, you mean to say 90% is export or domestic? Yes. Normally it is 90% and 10%, Shubham. We don't have the exact number, but it could be in that range only. Sir, I couldn't understand. 90%, you mean to say export? Yes. Okay. That's all from my side, sir. Okay. Thank you. Thank you. We'll take the next question from the line of Akhilesh, an individual investor. Please go ahead. Hi, sir. Good afternoon. Good afternoon, Akhilesh. Sir, can you give us an update on the start date for phase 1, phase 2 of the expansion next year? You mean Kalinganagar? Yeah, 450,000 tons expansion. Bijan, would you answer that? Yes. Actually, there is a slight delay in our original plan. This is basically because of the acquiring of the land and removal of the people staying there by government. So, between that, election has come. So now we have forecasted this one, mid of 2026 will be the first unit. And within another three months, the second unit will come. So around June 2026, you are saying it will start? 2026. June 2026. Okay. The first unit. The second unit will be within 3 months from the first unit. Okay. Okay, sir. That's all. Right. Thank you. Thank you, sir. The next question is from the line of Joe Shaw from Seven Seas. Please go ahead. Deepak, please answer my question. By the way, Deepak is not there. Okay. We will have somebody to answer your question. What is the question? Okay, question is this. Yesterday it was mentioned at the AGM that from Single Window Clearance Authority of Odisha, we have received permission for the second phase of expansion, which I believe is about 200,000 tons. Will you please elaborate on the second phase of expansion for which Single Window Authority has given the approval? Bijan? Yes. Actually, that basically for our other land requirement for our projected another 2 or 3 similar size of units there itself, Kalinganagar. We have asked for a land in the patch of around 200 acres for 2 units. This is only initial phase of Single Window Clearance, then the team will come, then they will alert. That will take time. That will be our next phase after stabilization of this phase 1. Okay. This 300 acres of land which we have received for Kalinganagar is not sufficient for the second phase of expansion? We need more land again? Yes. That will help. Okay. Thank you. Right. Thank you. Thank you. We take the next question from the line of Saket Kapoor from Kapur & Company. Please go ahead, sir. Yes, sir. On the realization front, sir, what was our net sales realization for Q1 and the comparative number for the preceding quarter? Q1, it was INR 103,755, and Q4 last year, it was INR 101,771. Okay. This is the blended one between the long term- Yes. -and the spot market. Yes. Okay, sir. For Q2 also, this will hover because spot market will fluctuate until we are one month into the quarter. Yeah. We will come to know about the number at the end of the quarter only. Difficult to give any numbers now. But the spot is trading in the similar, what exit of June was? Yes, it is more or less similar. Okay. Yeah. And, sir, about the Utkal Coal compensation amount, sir, how much is pending, sir? And I think so yesterday MD sir did commented on that to be also we are on the anvil of receiving the same. How much is it? Yeah. INR 221 crore is pending and already the order has been passed and the money expected any time now. Okay. Thanks. Great, sir. I am done with my questions. Okay. Thank you. Thank you, sir, and all the best to the team. Thank you. Thank you, sir. The next question is from the line of Joe Shaw from Seven Seas. Please go ahead. Regarding your review to shareholders, as per the new budget, we provision for the buyback. The 23.3% tax on the distribution of this on account of buyback is gone now from 1st October 2024. There is one more provision under section 46A, whereby we can claim capital loss for the buyback. I have given the same, all the details to you by mail. As our shareholders are concerned, buyback is more beneficial to small shareholders because they can claim income or this tax and benefit as per the rules which are available to them. For large shareholders, they can always go for selling in the market and get the LTCG benefit of 12.5%. As for the shareholders, instead of paying up to 33% income tax on dividends, buyback is more preferable. I request, I understand that is a decision to be taken by the board. Yeah. Kindly convey our shareholders' opinion that they consider buyback as more beneficial to the company as well as to them. Please consider buyback after 1st of October 2024, as per the new budget provision. Sure, I'll convey your message to board of directors whenever they take up this matter. Yes, okay. Thank you. Right. Thank you. Thank you. A reminder to all the participants, anyone who wishes to ask a question may press star and one on their touchtone phone. As there are no further questions, I would now like to hand the conference over to Mr. Abhishek Savant for closing comments. Yeah. Thank you. The results for the first quarter reflect our strong focus on maximizing operational efficiency despite lower output on account of maintenance activity. While softening input costs have also provided a relevant boost. While ferrochrome prices are range bound at the moment, an uptick in demand driven by global stainless steel production, which is expected to be around 6% higher this year, could result in improved realization during the second half of the current fiscal. We will of course continue to benefit from our fully integrated business model and long-term debt-free balance sheet. On behalf of the board of directors and management, we thank you all for your participation in this call, and a good evening ahead. Thank you. Thank you. Thank you. On behalf of Indian Metals and Ferro Alloys Limited and Veritas Reputation, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.