MOIL FY20 results: Key takeaways
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MOIL conducted an investor conference yesterday for Q4 FY20. Key highlights from the same are listed below:
Production in FY20 decreased during the lockdown months
MOIL's production decreased by a marginal 2% in FY 20, if not for the pandemic, the company would have witnessed a growth in production. Output in Q4FY20 majorly suffered due to loss of production during March, as there was a significant reduction of 42% in Mar 20 y-o-y production with a decrease of 57kt to 76kt. The loss was mainly attributed to the lockdown imposed due to the pandemic and the subsequent mining restrictions that followed. Furthermore, MOIL still expects a loss of 77kt in FY21 due to COVID related issues.
Manganese Ore sales dropped by a whopping 32% y-o-y in Q4FY20
Ore sales witnessed a major drop in the quarter due to the lockdown imposed, as the sales in Mar'20 alone had a fall by 54.5% y-o-y. Disruption in logistics along with labour constraints were at the highest during the lockdown. Also, demand for manganese alloys suffered in the export market as the countries which got affected by COVID reduced their inquiries, resulting in meagre export volumes, which in turn forced many producers to shut down their production partially to counter the rising inventory.
Moreover, sales realization reduced by 16% from INR 9,044/t in Q4FY19 to INR 7,584/t in Q4FY20. Whereas, the turnover from 395Cr in Q4FY19 fell by 43% in Q4FY20 to 225Cr. Despite a sudden drop in the Mar'20 sales figure the sales drop in the FY20 was by a marginal 7% and the average sales realization dropped by 21% y-o-y.
Expansion Projects delayed due to COVID
Company's previous announcement of achieving 2mnt production by FY21 suffered severely by a significant delay in the EC clearances due to which the company couldn't ramp up the production. However, now with the clearances received, the company is working on the expansion of the mining activity. Meanwhile, the project of expansion of ferro alloy from 10kt to 75kt in FY22 has been delayed to FY23 due to various blockages post the pandemic.
Chinese Port stocks the key driving force for Manganese ore prices
China, being the largest consumer of manganese ore around the globe, has a major role in the fixing of manganese ore prices. Higher Chinese inventory levels translate to a reduction in the prices. However, the hike in the prices in .... was abnormal and it was bound to come down. With the current inventory level at 4mnt in China, the prices are expected to go further down.
Outlook
The company plans to achieve the target of 2.55mnt by FY25 and 3mnt by FY30, in addition to setting up two ferro alloys plants. Meanwhile, with the onset of monsoon, the domestic demand and production might get curtailed, as 65% of the production is from the underground mines. Although, there is a significant increase in the production volume in June when compared to the previous month, yet it may take some time to attain the normal pre-COVID levels of production.
