India: Godawari's profit drops 24% q-o-q on lower realisations

Central India's leading steelmaker, Godawari Power and Ispat Limited (GPIL), recently announced its Q3FY'23 results. GPIL's consolidated profit after tax (PAT) fell by 24% q-o-q to INR 1,280 million in Q3FY'23 from INR 1,686 million in Q2FY'23, mainly on account of a fall in sponge and billets realisation.

Performance highlights:

• Iron ore production in Q3 was at 0.64 million tonnes (mnt), a marginal increase of 4% q-o-q as compared to 0.62 mnt in Q2FY'23.
  
  
• The company's (GPIL's) pellet production stood at 0.64 mnt in the quarter under review, stable as compared to production volume in Q2FY'23.
  
  
• Total pellet sales in Q3 stood at 0.46 mnt, a fall of 13% q-o-q as compared to 0.53 mnt in the previous quarter.
  
  
• Total steel billets output for the quarter stood at 102,395 t, a q-o-q increase of 26% compared to 81,570 t in the previous quarter.
  
  

Highlights:

• Average pellet sales realisation inch up: GPIL's average sales realisation stood at INR 8,284/t in Q3FY'23, a slight increase of 1% q-o-q from INR 8,186/t in Q2FY'23.
  
  
• EBIDTA down q-o-q: The company's EBITDA was recorded at INR 1,731 million in Q3FY'23, a significant q-o-q fall of 25% as against INR 2,308 million in the previous quarter, majorly because of lower realisations q-o-q.
  
  
• FY'23 pellet output guidance up: The company increased its iron ore pellets production guidance to 2.7 mnt in FY'23 against 2.6 mnt announced in November, 2022.
  
  
• Ari Dongri mines' iron ore production capacity to increase: The company announced that the existing iron ore mining capacity of Ari Dongri mines will increase to 6 mnt from 2.35 mnt and iron ore beneficiation plant with the capacity of 6 mnt will be set up with an estimated time of 18 months. However, the company is having no intention of selling the raw material in the market as the enhancement has been aimed at captive purposes only.
  
  
• High-grade pellets capacity to enhance: GPIL has proposed to enhance its high-grade pellets capacity to 5.7 mnt from the current 2.7 mnt by setting up an additional pellets plant with an estimated time of 36 months.
  
  
• Modification of rolling mill: The existing rolling mill for the production of wire rods is proposed to be modified for the manufacture of steel strips for the RM requirement of EPR pipes. The company is already manufacturing ERW pipes in the fabrication division and the project is expected to be completed by December, 2023.
  
  
• Solar plants to replace grid power: The first solar power plant with a capacity of 70 MW in Rajnandgaon has been commissioned on 6 August, 2022 and started generating power for captive consumption. A 38 MW plant will be installed in Khairagarh (earlier Bemetara). The land acquisition and procurement of solar modules have been completed. The construction activities started and the project commissioning is expected by the end-June, 2023. The third plant with a capacity of 60 MW will be set up at the Hira Ferro Alloys Limited facility in Bemetara for which the construction activities started and commissioning is expected by 31 March, 2023.
  
  
• Shut down of sponge iron plant: Godawari has announced shut down of its sponge iron plant at Siltara, Raipur w.e.f 13 February, 2023 as it has reached its capacity utilisation level of 98.5%. On the other hand, steel billets rolling mill and wire rod drawing plants were also required to be shut down, as the facilities are dependent for input on sponge iron division.
  
  
• Setting up of 1 mnt pig iron/hot metal through BF: GPIL intends to set up a 1 mnt pig iron or hot metal through a blast furnace in Raipur for which there will be an additional requirement of iron ore and pellets which will be taken care of by the above-mentioned capacity enhancement plans. The completion of land acquisition for the same is delayed and the project will take off once the acquisition and other regulatory approvals are completed.