IMFANSEQ4 FY22May 25, 2022

Indian Metals & Ferro Alloys Limited

8,329words
228turns
11analyst exchanges
6executives
Management on call
Prem Khandelwal
CFO & COMPANY SECRETARY, INDIAN METAL & FERRO ALLOYS LIMITED
Bijayananda Mohapatra
COO, INDIAN METAL & FERRO ALLOYS LIMITED
Deepak Mohanty
HEAD, FERRO ALLOYS BUSINESS, INDIAN METAL & FERRO ALLOYS LIMITED
Binoy Agarwalla
HEAD, POWER BUSINESS UNIT, INDIAN METAL & FERRO ALLOYS LIMITED
Sandeep Narade
HEAD, MINES BUSINESS UNIT, INDIAN METAL & FERRO ALLOYS LIMITED
Prem Khandelwal
CFO and Company Secretary, Mr. Bijayananda Mohapatra – COO, Mr. Deepak
Key numbers — 40 extracted
Rs 1,06,000
ion for Q4 is 61,462 tons and sales is 70,395 tons. Average realization for the quarter is around Rs 1,06,000 per ton and average cost is around Rs 82,700 per ton. with that we can start the question-answer s
Rs 82,700
ons. Average realization for the quarter is around Rs 1,06,000 per ton and average cost is around Rs 82,700 per ton. with that we can start the question-answer session. Thank you. Moderator: Thank you v
5%
if we also see the overall production number which was 2,46,000 for the current year, has seen a 5% drop compared to 5,59,000 almost 5,60,000. So, I wanted to know now going forward what kind of vo
61%
here is another reason, we have produced this particular year ferro-chrome with higher grade like 61% as against 59 % in the previous year. So that accounts for also quite a bit of volume. With the s
59 %
reason, we have produced this particular year ferro-chrome with higher grade like 61% as against 59 % in the previous year. So that accounts for also quite a bit of volume. With the same kind of ore
Rs. 4,200
production. Basis the number that is given to us, it seems like we had a cost increase of almost Rs. 4,200 for a ton Q- on-Q. So, I wanted to understand and most likely this cost increase is because of coke
Rs. 8,000
slightly higher than that? Prem Khandelwal: Q3 versus Q4 if you see the cost increase is around Rs. 8,000 a ton. So yes, maybe around that level we could see a cost pressure of around that level only in Q
2.4 million
in, which will affect Durban port operations.. Further, Chinese chrome ore stock has gone down to 2.4 million level from earlier 2.7 million and 3.5 million, industrial activities have come down but once the
2.7 million
rt operations.. Further, Chinese chrome ore stock has gone down to 2.4 million level from earlier 2.7 million and 3.5 million, industrial activities have come down but once the pandemic situation gets soften
3.5 million
Further, Chinese chrome ore stock has gone down to 2.4 million level from earlier 2.7 million and 3.5 million, industrial activities have come down but once the pandemic situation gets softened then things w
20 crore
I had few bookkeeping questions. Firstly, if we see the employee cost which has gone up by almost 20 crores on an average this quarter. If you can explain the reason. Secondly, on the deprecation side it
10 crore
this quarter. If you can explain the reason. Secondly, on the deprecation side it has gone up by 10 crores without any CAPEX getting capitalized. I wanted to know this reason also. Lastly on that tax, wh
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Guidance — 20 items
Shubham Agarwal
qa
“So, I wanted to know now going forward what kind of volume can we expect and is there some debottlenecking possibility from our plants.”
Deepak Mohanty
qa
“As you know we produced around 2,50,000 per annum and every quarter it will be in the range of 60,00 to 62,000.”
Deepak Mohanty
qa
“In that manner it is more or less in line and particularly in this quarter that also will be in that range of 61,000 tonnes”
Shubham Agarwal
qa
“The cost increase will be similar to Q4 versus Q3 or it will be slightly higher than that?”
Deepak Mohanty
qa
“Anyways, we are expecting higher realization in Q1 compared to Q4 of last year and in Q2, it will be more or less in similar lines because again in Durban, South Africa flood is forecasted.in view of continuous rain, which will affect Durban port operations..”
Deepak Mohanty
qa
“Further, Chinese chrome ore stock has gone down to 2.4 million level from earlier 2.7 million and 3.5 million, industrial activities have come down but once the pandemic situation gets softened then things will be different and we are expecting more or less in similar line at least for next quarter going ahead minus slow down to that could happen.”
Shubham Agarwal
qa
“Lastly on that tax, what would be at our average tax going forward, these three bookkeeping questions I asked.”
Prem Khandelwal
qa
“So, tax rate is going to be around 25% going forward.”
Siddharth Mehta
qa
“My question was related to the pricing that you see for ferrichrome going forward.”
Prem Khandelwal
qa
“As far as price is concerned very difficult for us to give any long-term projection for our prices.”
Risks & concerns — 10 flagged
No Shubham I think we'll see some more cost pressure in Q1 on account of coke and coal because the prices have gone up, particularly the coal price has gone up very high so which is going to be consumed in Q1 and Q2.
— Prem Khandelwal
We might see some more cost pressure in Q1 especially.
— Prem Khandelwal
So yes, maybe around that level we could see a cost pressure of around that level only in Q1.
— Prem Khandelwal
As far as price is concerned very difficult for us to give any long-term projection for our prices.
— Prem Khandelwal
Deepak already informed, next two quarters looks to be good, beyond that very difficult to predict any price movement.
— Prem Khandelwal
It is just a number; it may drag along further also.
— Saket Kapoor
How do you explain the decline in ferrochrome production when your chrome-ore production has gone up?
— Abhijit Mitra
As I said in our industry it's very difficult to predict anything beyond two quarters.
— Prem Khandelwal
It's very difficult to predict anything in China.
— Prem Khandelwal
Yet to be seen the impact of export duty on stainless steel.
— Prem Khandelwal
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Q&A — 11 exchanges
Q
Firstly, my question is with regards to volumes. So, if we see the production number this quarter versus last quarter, we have seen significant drop and if we also see the overall production number which was 2,46,000 for the current year, has seen a 5% drop compared to 5,59,000 almost 5,60,000. So, I wanted to know now going forward what kind of volume can we expect and is there some debottlenecking possibility from our plants.
Prem Khandelwal
Shubham you're comparing the Q4 versus Q4 of last year? Yes, Q4 versus Q4 of last year and overall FY22 number versus FY21 number. Shubham actually last quarter of the previous FY21 it was 67,000 versus 61,000. That's primarily because of the pandemic situation we were producing but lot of material remained unprocessed, which have been handed over in the fourth quarter. That is one of the major reasons for which number is 67,500 in that quarter vis-à-vis 61,500. That is one major. Apart from that particularly on annual figure if you talk about it’s a drop of about 13,000-14,000. That also incl
Q
My question was related to the pricing that you see for ferrichrome going forward. Do you see the increase in prices sustaining, do you see a higher price, do you see that it should go past our excess cost that you're foreseeing of about Rs. 8,000 per ton? The second question was, are you comfortable with the supply for the Mahanadi coal and on the linkages are you comfortable or are there problems in getting that?
Prem Khandelwal
As far as price is concerned very difficult for us to give any long-term projection for our prices. At best we can predict for next two quarters. As Mr. Deepak already informed, next two quarters looks to be good, beyond that very difficult to predict any price movement. As far as coal is concerned, I will request Power BU head Mr. Binoy to brief you. Actually, I just wanted to convey we have linkage option through, we have fuel supply agreement with MCL through linkage e-auction and our total capacity through linkage e-auction is 4,58,000 which is we are self-sustained with that tonnage of co
Q
On this court case date parcel, already I think so there's a new winner for the coal block. I think so we have withdrawn PIL earlier because of which the process has gone through. What is currently the merit of the case, is it a compensation part only we are speaking? Just wanted to understand the court and post the allotment happening now what is the merit of this date coming up?
Prem Khandelwal
No this is a different case Saket altogether. Earlier we had withdrawn because the allotment was not being done. Once the allotment has been done, we have redrawn the PIL. Then we have gone to the court for early determination of compensation. It's a different case, that case is over. Now this case is for the compensation part to be released to us? Yes. And that will happen only when the block is awarded and that agreement is signed? Block is already awarded and we are waiting for agreement to be signed. Once that is done then there is a period of 80 days, within 80 days we should be getting b
Q
I would like to know one thing, on the coal side how are our contracts priced whether they are long-term contracts, index linked or do we do spot purchases? Because the power cost was flat even in Q2 but later on it has gone up significantly in Q3 and Q4 as expected due to coal. How are we managing this coal crisis?
Binoy Agarwalla
Actually, we have fuel supply agreement with MCL through linkage e-auction. In tranche file we got around 3,60,000 metric tons and earlier linkage was 1,00,000. Around 4,60,000 we will be getting from MCL through linkage e-auction. Our requirement is around 5 lakhs because we are using washery reject and MCL coal in the ratio of 70-30. Our requirement is almost getting fulfilled through our linkage e-auction. That 50,000 requirement that will be fulfilled through spot e-auction or exclusive auction. This we are talking about thermal coal, right? Yes, thermal coal. I also understand that we pro
Q
I have two small questions actually; first on your ferrochrome sales for the full year what would that number be? Sorry, I don't have that number.
Prem Khandelwal
For FY22 you are talking about? Yes. FY22 total sales is 2,48,000 tons. And this chromeore you have increased quite substantially in terms of production, almost 7% YOY. This growth rate we'll continue see for the next couple of years as well or how is this? Yes. In fact, we are targeting more than 6 lakh tons and once our increased capacity in line maybe by FY25 or ‘26 we are expecting around 8 lakh tons. So gradually it will go up. But because of falling grade is the production of ferrochrome coming up or how is it happening or because of capacity being completely….. Falling grade of chrome-o
Q
Binoy one question for you. Do we get price advantage when we sign long-term coal linkages with Mahanadi or we get it from current price based? We just get the quantity from them but we have to pay the current price paid, coal at current price rate. Please clarify this.
Binoy Agarwalla
Actually, our requirement per annum is 5 lakh metric tons of MCL coal because we are using blending coal of MCL as well as washery rejects. Our requirement is 5 lakhs. Out of 5 lakhs we have long-term fuel supply agreement for 5 years with MCL that is 4,58,000. Another 42,000 requirement is there per annum. That can be bought in the open market like spot e- auction and exclusive e-auction. Actually, our MCL requirement is very less compared to washery reject. But from Mahanadi predetermined price, this we have to pay with current price or…? No, that is fixed price, notified price. It’s a notif
Q
Number one, is that your current operation mine capacity I understand it's close to 6.5 lakh ton. Of course, Sukinda also recently got enhanced but it's yet to become operational. Your whole chrome ore consumption will be roughly 6,20,000-6,25,000 but despite having a 6.5 lakh capacity of mines why is it that your mines production is ‘22 was close to 559,000 t. So, I mean is there some problem to ramp it up again? Why is the reason we need to buy ore from outside given that ore prices outside are quite high? Would it be for blending or something?
Bijayananda M
Basically, this lower production has happened with last year because of the 2-3 things. One is that heavy rains, uncertainty to the rain and as limonite extraction. If you see the Quarter 4 it is higher than the budgeted and this 2,06,000 and also, we used to buy some ore from them to go for our mix requirement in the furnace. The furnace requirement also there some low-grade ore. So, for that we're buying. Anyhow we are going to expand like that Mahagiri mines we have up to our EC. Now we are going to increase our EC. Underground is meeting as per our capacity everything but this opencast we
Q
Just to understand this CAPEX what part of the planning is it in, the contracts already I mean the part have been already tendered out or vendors are being finalized? What state because see if in EBITDA drops the cost normalized and EBITDA drops to the extent it was before. Do we have that option if you could slow it down over ‘24-25 or the pace of the CAPEX would be maintained? If you can help understand what stages is this CAPEX in?
Bijayananda M
We are targeting Kalinganagar plant commissioning in March 2025. For setting up plant, we will take 2 years. We have to start build up this by March 2023. We have been allotted the required land and we have already paid for this in February 2022. Today, incidentally demarcation is going on by Government of Odisha and IDCO. We are not going for total EPCs, rather going on a modular system. The basic engineering is in progress and for DPR we are going to engage some consultant which is yet to be decided. Abhijit to add on that. There is no question of slowing down the project now. Once we take u
Q
When does our mine lease expire?
Prem Khandelwal
One is 2049 and another is 2055. How much is the reserve life like as in until when here can they expect minable? Is it there until that period? I think we'll get enough ore by that time and further it depends on the exploration, further exploration will come to know whether we will get beyond that or not. But as of now whatever we have done the exploration we are going to last till then. The coal linkage that we have with MCL that is till what year, until what year? That is in March ‘23. It will expire in 5 years, so March ’23 but that trench. In between every year one-two trench is to come f
Q
Just one clarification. For this year we are planning to mine around 6 lakh tons of chrome ore this is versus 560 last year. How would be the ferro chrome production lined up? This year we did 246 so what should be the?
Prem Khandelwal
This year also we are planning around 2,50,000 which is the optimum capacity we have. So, this year also around that level we will be producing. This then extra ore which would be mine 10%. What's the thought process? Last year we had to buy around 1 lakh ton of ore. We may not have to buy so much. Only for blending purpose we may have to buy somethings. Just a clarification more here that our cost has gone up by Rs. 8,200 from Quarter 3 to Quarter 4 and that is what is expected number for Quarter 1 also however the realizations have gone up from 1,06,000 to 1,20,000? It is likely to be around
Q
First on the contracts for the long-term sales contracts we have, 90% of the contracts are long term. How often do we revise prices for this? Are they linked to invest, it is on a QT basis over the shipment or nickel or is it on average of the last 15 years or the first 15 years? How do we price this long-term contract?
Deepak Mohanty
Our major long-term contract is on a quarterly negotiation basis. So, after every quarter we negotiate based on the benchmark movement and other factors, and few others are linked to monthly prices of . For few others, although we donot have any long term contracts but we supply to them every month but every month we negotiate. Our major contract that is with POSCO that we negotiate on a quarterly basis. Others on monthly basis somewhere it is negotiated, somewhere partly it is based on certain formula. Supposedly we negotiate at the start of Q1 which is whatever moment we have seen in the ear
Speaking time
Prem Khandelwal
82
Yash Chanda
26
Saket Kapoor
20
Abhijit Mitra
16
Deepak Mohanty
14
Moderator
13
Shubham Agarwal
12
Joe Shah
12
Siddharth Mehta
8
Binoy Agarwalla
8
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Opening remarks
Mamta Samat
Thank you Peter. Good morning, everyone and thank you for joining us on the IMFA’s Q4 FY22 analyst conference call. Today we have with us the senior management represented by Mr. Prem Khandelwal – CFO and Company Secretary, Mr. Bijayananda Mohapatra – COO, Mr. Deepak Mohanty – Head of Ferro Alloys Business Unit, Mr. Binoy Agarwalla – Head of Power Business Units and Mr. Sandeep Narade – Head, Mines Business Unit. Before we begin, I would like to say that some of the statements that would be made in today’s discussion may be forward looking in nature. We will begin the call with the opening remarks from the management, after which we will have the forum open for the interactive Q&A session. I would now request Mr. Prem Khandelwal for the opening remarks. Over to you sir.
Prem Khandelwal
Good morning, everybody. Financial numbers are already with all of you, it’s in the public domain. We are published that. So, I'll start with the production sale numbers; production for Q4 is 61,462 tons and sales is 70,395 tons. Average realization for the quarter is around Rs 1,06,000 per ton and average cost is around Rs 82,700 per ton. with that we can start the question-answer session. Thank you.
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