IMFANSEQ1 FY'23July 27, 2022

Indian Metals & Ferro Alloys Limited

7,650words
186turns
12analyst exchanges
5executives
Management on call
Prem Khandelwal
CHIEF FINANCIAL OFFICER & COMPANY SECRETARY, INDIAN METALS & FERRO ALLOYS LIMITED
Bijayananda Mohapatra
CHIEF OPERATING OFFICER, INDIAN METALS & FERRO ALLOYS LIMITED
Deepak Mohanty
HEAD, FERRO ALLOYS BUSINESS UNIT, INDIAN METALS & FERRO ALLOYS LIMITED
Binoy Agarwalla
HEAD, POWER BUSINESS UNIT, INDIAN METALS & FERRO ALLOYS LIMITED
Sandeep B Narade
HEAD, MINES BUSINESS UNIT, INDIAN METALS & FERRO ALLOYS LIMITED
Key numbers — 40 extracted
38%
the financials and then we can start question- answer session. Sales for Q1 FY'23 has gone up by 38% to Rs.732 crores compared to Rs.530 crores in the corresponding previous quarter. Similarly, net p
Rs.732 crore
nancials and then we can start question- answer session. Sales for Q1 FY'23 has gone up by 38% to Rs.732 crores compared to Rs.530 crores in the corresponding previous quarter. Similarly, net profit has gone u
Rs.530 crore
tart question- answer session. Sales for Q1 FY'23 has gone up by 38% to Rs.732 crores compared to Rs.530 crores in the corresponding previous quarter. Similarly, net profit has gone up by 36% to Rs.134 crores
36%
pared to Rs.530 crores in the corresponding previous quarter. Similarly, net profit has gone up by 36% to Rs.134 crores compared to Rs.99 crores and EBITDA has gone up by 27% to Rs.225 crores compared
Rs.134 crore
o Rs.530 crores in the corresponding previous quarter. Similarly, net profit has gone up by 36% to Rs.134 crores compared to Rs.99 crores and EBITDA has gone up by 27% to Rs.225 crores compared to Rs.177 crore
Rs.99 crore
responding previous quarter. Similarly, net profit has gone up by 36% to Rs.134 crores compared to Rs.99 crores and EBITDA has gone up by 27% to Rs.225 crores compared to Rs.177 crores. Production of ferro ch
27%
net profit has gone up by 36% to Rs.134 crores compared to Rs.99 crores and EBITDA has gone up by 27% to Rs.225 crores compared to Rs.177 crores. Production of ferro chrome for the quarter is 63,760
Rs.225 crore
ofit has gone up by 36% to Rs.134 crores compared to Rs.99 crores and EBITDA has gone up by 27% to Rs.225 crores compared to Rs.177 crores. Production of ferro chrome for the quarter is 63,760 tons compared to
Rs.177 crore
Rs.134 crores compared to Rs.99 crores and EBITDA has gone up by 27% to Rs.225 crores compared to Rs.177 crores. Production of ferro chrome for the quarter is 63,760 tons compared to 58,640 tons. Power is alm
260 million
hrome for the quarter is 63,760 tons compared to 58,640 tons. Power is almost at the same level of 260 million units and chrome ore almost at the same level of 1,58,000 tons compared to 1,58,142 tons in the pr
15 million
world amongst the exporting countries? Deepak Mohanty: Ferro chrome worldwide is produced around 15 million. And we produce only 250,000. So, it's not a very big quantity, but our total production is more t
90%
d we produce only 250,000. So, it's not a very big quantity, but our total production is more than 90%. We do mostly exports more than 2 lakh. That's why it's not a very significant, but it is signific
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Guidance — 20 items
Sanjeev K Damani
qa
“Chrome ore reserve how many years will last with our project deposit?”
Sanjeev K Damani
qa
“It is very long pending claim, so, we will be claiming some interest also on it?”
Deepak Mohanty
qa
“So, in line with that it will be, but costs are more or less in the same line as in the Q1.”
Saket Kapoor
qa
“So, what should we anticipate for FY'24, '25 now?”
Prem Khandelwal
qa
“No, as we have told earlier also, the new furnace is going to come into commercial production maybe by end of FY'25 or early '26.”
Sandeep B. Narade
qa
“So, we are working on that and already we have given the study to one party and they will submit us the report and we'll start opening that underground mine maybe in the next year.”
Saket Kapoor
qa
“Rs.1,000 crores will be spent on underground mine?”
Saket Kapoor
qa
“There will be no advantage of payback in this?”
Saket Kapoor
qa
“So, it gets commensurate more so if we not sustain higher prices then there will be more pressure on martins going forward because we have to go underground.”
Saket Kapoor
qa
“Sir, as I am a layman, discount is in benchmark, what does this translate to the prices currently, if this discount is going to prevail for a considerable period of time, what would be the fixed contract price going forward?”
Risks & concerns — 7 flagged
And sir, secondly, in general, I wanted to understand the demand trend because everywhere we are seeing globally there is a strong headwind as far as demand is concerned.
— Shubham Agarwal
if the same price is sustained, then Q3 we are seeing a decline in our revenue and profitability since the cost of production is going to remain static?
— Saket Kapoor
No, Saket, that is very difficult to predict anything at the moment, you see, we cannot predict anything, because the market is so volatile and so many factors are impacting, so many things are happening in the world today, so very difficult to estimate or give any prediction for Q3.
— Prem Khandelwal
Because we have tied up some tonnage, for Q2, we can give some prediction but Q3 is very difficult.
— Prem Khandelwal
So, it gets commensurate more so if we not sustain higher prices then there will be more pressure on martins going forward because we have to go underground.
— Saket Kapoor
May not be much impact on the profitability, but very difficult to give any estimate at the moment.
— Prem Khandelwal
Sarda, that's why Deepak is saying that the price may not go too much beyond $1 because the cost pressure is there.
— Prem Khandelwal
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Q&A — 12 exchanges
Q
Sir, my first question was regarding coking coal. So, in last quarter, you mentioned that total average cost of mine was around $480 and we had enough inventory which will suffice till September, October. So, recently in the last one month, we have observed that the prices have fallen down significantly. So, I was wondering if for Q2, we will have to take inventory write down if any and what would be the amount that we would have to hit on our P&L?
Prem Khandelwal
Thank you, Shubham. See, inventory write-down is not going to be there because we are following the average method of accounting. So, whatever cost we are buying coke, all are getting average down. So, there is no question of writing down inventory here. What is our buying rate right now? Last, we bought at 525. Going rate is in this range even though the coking coal prices have come down and particularly for us we buy from Columbia, which is a limited source, there is no ultra-low first coke. Secondly, on the realization bit. So, again, we have observed that last one month our realization has
Q
Actually, one thing I wanted to know was that how much ferro alloy whole business we have got to continue with the same capacity when I get some number of years how much we can use these deposit for how many years?
Prem Khandelwal
Sorry, Sanjeev. I am not able to understand your query. You are talking about chrome ore reserve or what? We use chrome ore. Chrome ore reserve how many years will last with our project deposit? I think it will last till we have our mines. Our mines is valid up to 2049 and 2055. So, it should last till then. Do you know cost of our production is at par with the world cost of production of these items or we are slightly higher or lower than the world? You mean ferro chrome cost? Final product cost that we sell. Yes, as far as ferro chrome is concerned, we are one of the top five least cost prod
Q
Sir, if you could explain to us this line item of finance costs wherein there is loss on foreign currency transaction appeared twice. Once it is Rs.15.81 crores and again item #F also it is Rs.10.57 crores. So, if you could explain the nature over there?
Prem Khandelwal
There are two components, Saket, here. One is the pure finance cost and other is the exchange fluctuation. So, exchange fluctuation is your normal amount because we are availing working capital in foreign currency. So, we need to restate the working capital outstanding at the end of the quarter in dollar terms. So, that's why we are showing that the actual finance cost is the interest cost and the fluctuation part is almost notional. So, if I take the absolute number, the actual cost is then only Rs.5 crores? Yes. And other foreign currency transactions of Rs.26 crores or Rs.27 crores is only
Q
Now, you mentioned that the realization during Q2 is expected to come down to Rs.1,15,000. Yesterday, M.D. mentioned that there will not be impact on the profit because the cost has also gone down. So, earlier in Q1 you mentioned cost was at Rs.81,000. So, in Q2 can we expect cost at Rs.75,000 something like that?
Prem Khandelwal
Difficult to predict at the moment, Mr. Shah. We will come to know after end of the quarter only. What kind of mix we are going to use; of coke and what mix of coal we are going to use depends on that. The M.D. mentioned that profitability will remain more or less similar. That's why I am wondering in Q1 or Q2 there is a change in profitability. May not be much impact on the profitability, but very difficult to give any estimate at the moment. But what we expect that there may not be much impact on the profit or at all there will be a little impact on the profit. Regarding Utkal, we are discus
Q
What will be our average cost for thermal coal in Q1 and what is the possible cost in the Q2, any rough estimate?
Binoy Agarwalla
In Q1 actually coal cost was Rs.62. It was just because of we got hold by road only and we participated in spot e-auction and spot e-auction cost was very high because we didn't get our monthly settle quantity from MCL and we didn't get rake also from MCL because rakes are getting diverted to IPP. And in Q2 also will be in the same range around 470 or 475. So, far how much coking coal is required per ton production of ferro chrome in volume terms? We don't need cooking coal. We need coke around 0.5 tons of coke for 1 ton of ferro chrome. Sir, this Rs.1,000 crores CAPEX you are going over the n
Q
Just two questions. One, how is the demand/supply scenario currently in the ferro chrome market? And as you said earlier, we are among the lowest producer in the ferro chrome. So, if our costs are 80,000 being a own mine, the people who are 90% and they don't have mine as you rightly said in China most of the chrome ore is getting imported, so how is the selling price so low in the ferro chrome market? I don't understand that. Since we have an advantage and we are not the neighbors-related, currently this quarter was good but going forward as you said the current price is one lakh. So, how the
Deepak Mohanty
Let me go in a little different way to explain. You know the stainless-steel production for the Q1 of this calendar year has gone down by 3.8%, 14.5 million and similarly in China it has gone down by 8%. That's mainly because of the pandemic situation and zero COVID restrictions and all for that it has gone down okay. So, that is one factor. And in this quarter also, it will be lower and although initially there was a prediction of 4% growth for the stainless steel, now it is in doubt because of this pandemic not only in China, in all parts of the world, it is again resurgence has happened som
Q
Accounting-related question. One, I had on power cost but that you have explained very beautifully. Second is I can see a lot of inventory buildup. So, can you please send a picture of how much inventory like what was our FG inventory in Q1 and how do we plan to liquidate it in Q2 given that most of our sales are in long-term contract?
Prem Khandelwal
Built up you mean of ferro chrome or – I'm assuming it is ferro chrome, sir. There is a change in this line and delta between production and sales both are on ferro chrome only. Actually, the inventory is going little higher compared to the previous quarter. That's because we have 2,500 tons shipment which was supposed to be done on the end of June. That vessel got delayed. So, it was done in this quarter, that is why. Otherwise, it is at the 1Q level considering our level of export. I hope that is clear, Yash. Yes. So, closing inventory you are saying we have next to zero or less than 1,000-
Q
The question is basically what kind of ratios we have in terms of raw material inventory, work- in process and finished products? Second question is how much of our total sales is long-term and how much is export and within that long term it is three months, six months or one year?
Deepak Mohanty
Actually, almost 90% is our export and most of them are on annual or long-term contract. Very limited tonnages on spot, this is for domestic, although this domestic are also on month-to- month basis but as we don't have annual contract or long-term contract, we say that is spot. Similarly, for exports, there is really very little quantity, it maybe 5% at times and sometimes it is still low. So, mostly it is annual or long-term. In that case, do we have a price increase close or no? Many of them are on negotiation. It's not just formalized yet. So, at times the price revision might take place,
Q
Sir, my question is now we are a cash rich company. So, have we any formed any dividend payout policy?
Prem Khandelwal
Our dividend pair policy is already there, Anand. You can go through our website; the policy is there.
Q
Sir just one minor question regarding the coke inventory. So, you said it is still November but in tonnage, can you give me how much is the tons that we have right now?
Deepak Mohanty
It will be around 30,000 to 40,000. Not having the exact figure. But out of that also, something is in shipment which will arrive. We have stock at plant, we have stock at port which would flow in and in transit also. When you say till November, it is including transit, am I right? Yes, absolutely, whatever we have already procured and on voyage already with the arrival in due course and can be consumed within November.
Q
Do we export on free on-board basis or CIF basis?
Deepak Mohanty
We do CIF basis, we do on DAP basis, both. If we can shift our trade to pre-owned board, then shipping costs, etc., is not on our headache you know, can we not do that? But we are working on basically long-term contract and in fact we can arrange a better freight than others. I appreciate sir but this has happened in past that suddenly the shipping prices have gone up. We had one very bad experience last year I think or in the beginning of this year that lot of prices of shipping and container price, etc., have gone up. So, that would affect our profitability sir in future if suppose anything
Q
Q1 FY23 Analyst Conference Call - Indian Metals & Ferro Alloys Limited.
Time
July 27, 2022 11:00 Hrs India Time Main Speaker(s): Miss .Sneha Joshi -(cid:9)Associate Director,Perfect Relations Pvt. Ltd. Management Of Indian Metals & Ferro Alloys Limited. Mr.Prem Khandelwal-CFO & Company Secretary Mr.Bijayananda Mohapatra-COO Mr.Deepak Mohanty-Head - Ferro Alloys Business Unit Mr.Binoy Agarwalla-(cid:9)Head - Power Business Unit Mr.Sandeep B Narade-Head – Mines Business Unit Mr.Ashok Kumar Nayak-Sr.GM (Finance) Mr.Bijaya Kumar Jena-DGM (Accounts)(cid:9) Total 62 Participants including the Speakers. Participants List Phone Name Sr. No. 6742611053 HOST: Ashok Kumar Nayak 1
Speaking time
Prem Khandelwal
50
Deepak Mohanty
31
Sanjeev K Damani
26
Saket Kapoor
23
Moderator
13
Shubham Agarwal
10
Joe Shah
6
Yash
6
Ashish Koti
5
Anurag Patil
4
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Opening remarks
Sneha Joshi
Good morning, everyone and thank you for joining us on Indian Metals & Ferro Alloys Limited Q1 FY'23 Earnings Conference Call. Today, we have with us senior management, represented by Mr. Prem Khandelwal -- CFO & Company Secretary; Mr. Bijayananda Mohapatra – COO; Mr. Deepak Mohanty -- Head of Ferro Alloys Business Unit;, Mr. Binoy Agarwalla -- Head of Power Business Unit; Mr. Sandeep B Narade -- Head of Mines Business Unit. Before we begin, I would like everyone present to note that some of the statements made in today's discussion will be forward-looking in nature. We will begin the concall with opening remarks from the management, after which we will have the forum open for interactive Q&A session. I would now request Mr. Prem Khandelwal for the opening remarks. Over to you, sir.
Prem Khandelwal
Thank you, Sneha. Good morning to everybody. The financial results are already in the public domain. So, I'll just give a brief snapshot of the financials and then we can start question- answer session. Sales for Q1 FY'23 has gone up by 38% to Rs.732 crores compared to Rs.530 crores in the corresponding previous quarter. Similarly, net profit has gone up by 36% to Rs.134 crores compared to Rs.99 crores and EBITDA has gone up by 27% to Rs.225 crores compared to Rs.177 crores. Production of ferro chrome for the quarter is 63,760 tons compared to 58,640 tons. Power is almost at the same level of 260 million units and chrome ore almost at the same level of 1,58,000 tons compared to 1,58,142 tons in the previous quarter. Sales of ferro chrome is around 60,335 tons compared to 59,506 tons. Average realization is 1,21,000 compared to 89,000 in the previous quarter and ferro chrome cost has gone up to 80,000 compared to 61,000 in the previous quarter, mainly on account of power, variable cost
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