India: NMDC reports best-ever Q2 performance, FY22 guidance unchanged

India's largest iron ore producer, NMDC, registered a record second-quarter performance in Q2FY'22 (Jul-Sept'21). The company reported its best-ever iron ore production and sales in this quarter. Key highlights of the investors' conference call are listed below:

• Iron ore production up 56%: The miner recorded iron ore output at 8.77 million tonnes (mn t) in Q2FY'22 as against 5.64 mn t in Q2FY'21. However, on a quarterly basis, output inched down by 2% as compared to 8.91 mn t in Q1FY'22.
  
  
• Iron ore sales up 36%: NMDC's total iron ore sales volumes increased 36% y-o-y to 8.98 mnt in Q2FY'22 as compared to 6.6 mn t in Q2FY'21. The entire material of 8.98 mn t was sold in the domestic market.

  NMDC iron ore production and sales

  
  qty in mn t
  Source: Company reports
  
  

• EBIDTA up y-o-y: The company's EBITDA was recorded at INR 3,203 crores in Q2 FY'22, up significantly as against INR 1,118 crores in CPLY.
  
  
• Average domestic realisation nearly doubles: The average domestic realisation stood at INR 7,444/tonne (t) for Q2FY'22 as against INR 3,114/t in Q2FY'21.
  
  
• Nagarnar plant demerger and commissioning: Commissioning and demerger of the 3-mn t integrated Nagarnar steel plant is expected in Q4FY'22. The steel plant is being set up by NMDC, in Bastar district, Chhattisgarh. Total capex till date is expected at around INR18,600 cr.
  
  
• Donimalai pellet plant resumes operations: The Donimalai pellet plant, after removal of technical issues, has resumed operations and is expected to resume at its full capacity of 1.2 mn t by about Q4FY'22
  
  
• Domestic iron ore prices to stay range-bound: Though the global prices have dropped significantly domestic demand remains unaffected by the price change. Hence, domestic prices may remain range-bound with no major impact being witnessed.
  
  
• Production guidance unchanged: Expected production in FY'22 will be around 44-45 mn tin , where 14 mn t will be from Karnataka and the remaining from the Bailadila sector.
  
  
• Coal mining: The company owns two mines in Jharkhand. However, amid awaited clearances,mining has not started.
  
  
• Slurry pipeline first phase to be commissioned towards FY'24: Currently, most of the company's material moves on KK line on rails. It plans to double the line. The 15-mntpa slurry pipeline is being built from Kirandul to Vishakapatnam. The first phase is upto Nagarnar and then down to Vizagand is expected to be commissioned towards FY'24. The line will reduce logistic costs for NMDC. For instance, the rail freight through Bailadila to Vizag is about INR 1,200/t but only INR 200/t via the pipeline.