Lloyds Metals and Energy Limited (512455) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Lloyd's Metals and Energy Limited Q1 FY '27 Earnings Conference Call hosted by Nomura. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Jashandeep Chadha from Nomura. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone and thank you for joining us today. We at Nomura are pleased to host Lloyd Metals & Energy 1Q FY '21 Earnings Call from the management. We have with us today Mr. Rajesh Gupta, Managing Director; Mr. Riyaz Shaikh, CFO; Mr. S.K. Naredi, Director of Finance from Thriveni, Mr. Hemankur Upadhyaya, Director of International Strategy and Operations; and Mr. Chintan Mehta, IRO. Without much ado, I would like to invite Mr. Rajesh Gupta for his opening remarks. Over to you, sir.

Good evening, Jashandeep,and everyone else on the conference call. A very warm welcome to all of you joining us on our Q1 call. And thank you to Jashandeep and the entire Nomura team for hosting this call today. We deeply value the engagement and the platform we have given us to share the loyal metal story with the investor community. Before I speak about the quarter, I want to pause on a milestone that is very measure to all of us at Lloyd's as well as I hope for all the people on the call. This quarter, we achieved and crossed a market capitalization of INR 1 lakh crores, a level that would have seen a distant agree not very long ago. This might one do not belong to the management or the team he belongs first and foremost to every investor and the company that stood with us through the early years of 1 certainty through the ramp-up and through every project that we have executed since -- it is a reflection of the trust and the way we are placed in our ability to execute. We are neat, and I want to assure you that we carry the responsibility with all the series that deserves. Q1 has been the outstanding quarter for Lloyd Middle on a stand-alone as well as consolidated basis. revenue of INR 7,364 crores, more than tripling year-on-year is, of course, not sure for the improve. -- while Riyaz taken you through the numbers and details. I would like to talk about some of the interesting events that have happened. Our second plant on pellet was commissioned in May 2026 and again, a very short period and as schedule and within budget. I'm proud to say our parent operations reach 10% capacity utilization within just 4 months. Pet production stood on this quarter at 1.65 million tonnes at a very, very healthy realization. A large part of relation comes from the geographical mix of our sales. We have expanded our export into Kenya, South Korea, Indonesia and of course, China. And while deepening our results across interest and Southern India, most of the markets in Southern India or Central India are more or less catered to entirely buyers. This better markets, roughly 3/4 of domestic and month-worth of export is helping us to place volumes where it protect the rights. Why I've been focusing on pellet because that's a big factor of the margin that we are reporting on, including the slurry pipes that tract lowered our progestin and freight cost for iron very effective fuel mix, including chip partly from LCs to LNG, which is, of course, a greener mix has given better cost control across the value chain. Capital logistics and a growing share of value-added products together means that we structure margins and not cyclical ones. We are confident that these margins are sustainable in the cyclical commodity because we continue to actively pursue better and higher value market for every product we make, changing realization and not test volume. And this is exactly the discipline that we want to intend to replicate as we commission as we commission our first 1.2 million tonne long product seed plant very shortly. The same integration and the same cost focus and the same market first approach will carry into our seeming journey and of course, into comp. Even as we deliver these reserves, the next leg of our project pipeline is already taking shape, BHP beneficiation, the third pellet plant and the next line of our total slurry handling and on handling system without trucks. Together, these projects deepen our integration, expand our value-added capacity and further lower our delivered cost. We are confident that this pipeline will continue to drive meaningful value for the company over a period of time. Riyaz will now walk you through the standalone financial problems. Thank you.

Thank you, Rajivji, and good evening, everyone. Let me take you through our standalone financial performance for the first quarter of FY '27, which has been our strongest quarter yet across every metric. Revenue from operations for the quarter stood at INR 5,413 crores, a sharp 127% growth year-on-year and 10% sequentially over quarter 4. EBITDA came in at INR 2,120 crores, growing 172% year-on-year and 31% quarter-on-quarter. This growth was driven by higher iron ore EC limits a faster-than-planned ramp-up of the pellet plant and improve on Jan volumes. PAT for the quarter was INR 1.27 crores, up 141% year-on-year and 43% sequentially. Profit before tax stood at INR 2,008 crores. I want to dwell on margins because this is the real story of the quarter. Our EBITDA margin came in at 39.2%, the best margins the company has ever reported. Importantly, this has case on both fronts, up 639 basis points year-on-year and up 631 basis points quarter-on-quarter. Very few quarters, the margin expansion of this order on both a year-on-year and a quarter-on-quarter basis at the same time. Three factors drove this: First, the commissioning of the slurry pipeline lower logistics and credit cost on iron ore and pellets. Second, higher realization across products strengthened the overall mix. And third, and more structurally a better product mix with a higher contribution from value-added products like pellets led to meaningful margin expansion. The shift is disciplined in our mix. Value-added products now contribute 41% of stand-alone revenue and 40% of EBIT versus just 13% and 2%, respectively, a year ago. This is a structural rerating of the earnings base, not a cyclical pipe. Product-wise performance added ore production for the quarter was 6.05 million tonnes, up 53% year-on-year and sales was 5.46 million tonnes, up 58% year-on-year. realization stood at INR 6,068 per tonne with an EBITDA of INR 2,230 per tonne. Our monthly run rate is now upwards of 2 million tonnes, and Power. DRI sales volume stood at 183,000 up 133% year-on-year at a realization of 7,376 an EBITDA of INR 627 per ton. Power volumes were up 87% year-on-year. Pellet production was 1.69 million tonnes reaching 100% capacity utilization within 4 months of the second plant coming on stream in May. Realization stood at INR 11,783 and EBITDA at 580 per ton. The 359 captive cost, coupled with strong realization got these robust pellet margins. Our sales mix was 75.3% domestic and 24.7% export. Coming to CapEx and the net debt. The company incurred CapEx of INR 13,530 crore -- INR 30 crores during FY '20 to FY '26 and a further of INR 305 crores in quarter 1 FY '27 alone as we continue to build out our downstream and beneficiation projects. Stand-alone net debt as of 30th June stood at INR 5,616 crores very comfortable related to the EBITDA and business is now EBITDA the business is now generating. Let me add one point at a consolidated level. Our consolidated debt net debt remains around INR 18,000 crores. A significant part of this pertains to the China acquisition, which is -- which we are actually working to renegotiate on more favorable tons. We will keep the investors informed as and when the material acts. To summarize, record revenue, record EBITDA, record tax and our best ever margin expanding on both a year-on-year and a quarter-on-quarter basis. With that I'll hand over to Naredi for the Thriveni performance. Thank you very much.

Good evening, everyone, and thank you, Rajeshji and Riyazji. For us, at Thriveni, the growth has always been about disciplined execution and getting the fundamentals right quarter after quarter. Let me take you through reining performance for Q1 FY '20. For Q1 FY '27, the revenue from operations for the quarter stood at INR 2,672 crores, which is up 63% year-on-year. EBITDA came at INR 658 crores, which is up 145% year-on-year, with margins at 24.63% an expansion of 87 basis points over the same quarter last year. Cash spend stood at INR 447 crores, up 145% year-on-year with cash margins -- cash paid margins improving 522 basis points to 16.2%. Our margins this quarter were marginally impacted by higher fuel costs due to the salt prices. We are actively pursuing pass-through of these costs to our clients, and those negotiations are currently underway. Having said that, I want to be very clear that our guidance of 28% to 30% EBITDA margins on a full year basis remains intact. We are confident of getting there as pass-throughs conclude and as volume scale throughout the year -- through the year. Operational performance, iron ore volumes, including BH stood at 19.09 million tonnes for the quarter, that's nearly doubling from 9.8 million tonnes in Q1 last year. Core volumes from Indian operations, including overburden, were 26.02 million cubic meters with overseas operations at 5.9 million cubic meters and by right at 2.14 million cubic meters. Gadchiroli operations. Now following the environmental clearance is obtained in 2 our ROM handling capacity at Gadchiroli has been enhanced from 10 million tonnes per annum to 55 million tonnes per annum. There is a 5.5-fold increase -- the mine achieved a total production of 12.8 million tonnes, including BHQ during the quarter. full-scale operations have commentate central ill and the FY '27 equipment mobilition plan is on schedule. On greenfield, 88 electric equipment units are now official at the mine with a further 20 and the railway siding. We have also mobilized 14 mobile pressures and 268 AM units for BSQ crushing and are deploying higher capacity to port panel dumpers to support the enhanced production and other operations in Orissa, the Lazada Pacer Mining operations commenced in Q1 FY '27 with a target of 1.5 million tonnes per annum, and the Dalbar is expected to commence in Q2 FY '27 with a target of 3 million tonnes. Several existing mines have been scaled up, and we expect Orissa volumes to grow 39% year-on-year to 34 million to 35 million tonnes in FY '27. On the pole side, our prevailing operations retained a 5-star rating from the Ministry of Coal and the #1 position among open cast mines in India for the second consecutive year. In our Logistics business segment, at present, we have around 150 electric and LNG vehicles, and we propose to add another 200 vehicles of which 50 will be LNG and 150 will be EV to our fleet aiming to make the fleet of green vehicles. Already 20 charging stations are installed and in the process -- we are in the process of installing another 30 charging stations. It will give us 30% to 40% cost savings an increase in EBITDA of this particular operation from 32% to 40%. On gold, [indiscernible], which is India's first private integrated gold mining and processing operations, this was formally inamorate in July and it delivered ROM production of 0.17 million tonnes and drilling of over 14,000 meters in its first quarter. Thriveni's focus remains clear, scale responsibly execute efficiently and protect margins through productivity and cost optimization. The pipeline into FY '27 across Gadchiroli, Orissa and coal is strong, and we are confident of sustaining both growth and profitability. With that, I'll hand it back to open the floor for Q&A.

[Operator Instructions].. The first question is on the line of Vikash Singh from ICICI Securities.

Congratulation on very good set of numbers. Sir, my first question pertains to our copper division. We have given in a slide like Apex growth in the next couple of years in the copper production, basically almost INR 8,000 to INR 96,000, including the Cadmium. So if you could give us the road map and the CapEx, how much you have already invested the equipment order for this? It would be really helpful.

Can you just repeat the question? Ass there was some disturbance?

Yes. In the Paper division, we have given a road map to almost over a lakh ton of production of copper as well as the Karim. So what kind of CapEx you have already done? What is the CapEx would go in FY '27, '28? Because if you want same to be happen in the capacity to be completed by '28, I believe. So CapEx

So basically, we have 2 assets. Actually, one of them, the CapEx is already completed. -- which was part of the acquisition. So that CapEx is already done a large part of it was already done last year. So that number is a total of around $10 million. which has been invested into the asset. So that is for the current operating asset, which is operating at the rate of around 800 tonnes per month, so roughly 2,400 tonnes per quarter is average production from there. The larger asset, which is the JV company, which we have acquired together with the U.S. partners, -- so that CapEx actually has already been ongoing because this was an asset which was under construction. So when we acquired it on the books, along with the liabilities, there is a total asset book size of near about $800-plus million. And it would take a total CapEx of around $300-plus million to get it to completion. So as of now, we have done part of it, and we intend to complete that CapEx over the period of next 9 months, and we intend to have the assets operational somewhere in Q1 FY '28. SP1 So for both the projects combined $300 million in the next 9 months, we would be expanding Yes. But as it SP-4 Correct. So -- and the CapEx that we are talking about, that is together as a JV company. So effectively, our CapEx will be part of it. And the balance -- basically, I think we'll have to do the contribution as per our share.

So out of that 50% contribution, how much you're planning to invest from the India business and how much you're taking on here?

So we are looking at all options. So we are in discussion with multiple financing parties which includes U.S.-based financial institutions as well as Africa-based institutions and the India institution. So we'll be looking at partly equity infusion. -- and also partly lead infusion. I think we'll get the clarity on it in the next 3 months when we intend to achieve the financial closures for that.

Okay. And sir, my second question is for the 2 parts. Firstly, any update on the projects with Tata Steel, if any progress has been made there? And secondly, can in our existing capacity, we have a lagging to further expand the EC limit in case if we want to.

Yes. So Tata Steel, we have made a reasonably good progress, right, from starting operating the plant, which was already there part of the JV company. So we reported an EBITDA of around INR 99 crores, which is as per the long-term conversion contract that the company has. So that will continue as it is. Over and above that, we have started a few long-term projects with them, which are primarily on 2 fronts. One is the MDO contract. So we have started a very small mining operations, which is in the Coast mines. And second, we are also evaluating in some of their mines if we can ramp up the production faster. And while we can also increase the easy capacity for some of those mines. So there, the value addition of this JV company will be much higher. And the current MP contract is a small step towards that direction, but our teams are evaluating and making a plan. on how we can increase the production capacity in these mines over the next 2, 5 years. So that's the longer-term plan. And also, we are evaluating slurry pipelines, which will be developed as a service model, which is on the BOT model. So the JV will develop the pipeline. -- and they'll be providing it as a survey to DSL and it will be connecting the Tata Steel mines with the steel plants. So that evaluation and technical studies is also currently going on, and we'll get to know more on it in the coming year.

Sir, just a clarification is these are the NIL or Bhushan mines for which you have been jointly developing or as an MDO -- or how is the status.

No, currently, so we are looking at mines, some of the, which will be scaling up. So the final set of mines where all we will be taking up the MDO is not clear. we are still evaluating that. But whichever mines are ramping up. So some of the mines which you mentioned will be ramping up. So it is a decision which will be made by Tata Steel, but we are evaluating all the mines wherever scaling up is required and if we can help in the faster scaling up, it may be taken up by the JV.

And second part of the question, in --

Sorry to interrupt with Vikash sir that you return to the question for follow up. [Operator Instructions]. The next question is from the line of Jay from Phillip Capital.

Congratulations on the good set of numbers. So my question is actually on the pellet segment. So we've seen pellet profitability go up this quarter. I just wanted to understand how much of that is your export mix and pellet premiums versus how much of it is capital and Sari pipeline? And -- as we scale up in the next few quarters, is this a margin that we can build in? Or is there something one-off about this?

So 25% of our production is being sold as export right now. the slurry pipeline saving is around INR 900 to INR 700 a tonne, and that will remain -- sorry, in time, that will remain -- and we assume that the export quantity will be more or less remain the same. Right now, the -- I mean, given the the [indiscernible] of the market, sometimes export is better, sometimes local is better, but we hope to maintain our product mix, which will serve all our customers regularly in doing the international and the Indian ones.

The next question is from the line of Kunal Kothari from Nuvama Wealth.

Congratulations for the set of numbers. So my first question is in regard to our iron ore business, where volume has increased sharply by 58% year-on-year. but EBITDA per tonne has remained flat year-on-year and have not seen any operating leverage benefit. Can you provide some light on it sir.

The sales price basically remained the same over the last year on year, if you see. It's been on INR 6,000 -- and therefore, there's a contribution, which is -- the EBITDA has always also remained at the same -- we've got more and more usage of material, which is gone up internally. So of the sales quantity has reduced. That's the reason why it is.

But sir, volume has increased sharply. So most is there any operating investment benefit that has not been seen in terms of higher margins?

That's what I said to internal consumption has increased -- so when we talk of the margins, that is all based on the outward sales, so that has remained the same. So the margin is then getting transferred to the value-added products.

Okay. Secondly, on MDO business. So over here, again, the numbers are fantastic, but can you help us to understand the EBITDA 1 growth breakdown in terms of what led to how much of EBITDA growth and margin on a EBITDA.

EBITDA we have improved from last year. And current year also, we are going to maintain the same rate since the volumes are now picking up. And for the Orissa operations also, we are going to ramp up the production. And for the Garcia also the production is being ramped up. And as I stated in my remarks, that for this logistic operation, we are converting our conventional diesel vehicle to green vehicles. So there also, we are going to improve on the EBITDA. So we are pretty sure that we'll be able to maintain the EBITDA level of around 27% to 30%.

Sir, can you give more clarity because EBITDA is up around 15% year-on-year. So -- and the volume is up in or around 80%. So just want to current the bridge of what led to such high? Is there any -- the contracts, which is giving us the higher margins now compared to the last year? Can you just detail out something overall same here.

In Orissa, this year, we are going to -- we have already started 2 new mining projects, 1 in Lazada Pacer and another we are going to start a -- so in both the mining contracts, we have a better EBITDA margins as compared to our other Orissa mines. So in these 2, our EBITDA margins will be much, much better as compared to other mines. And also, -- on the fuel cost and all this in fuel efficiency, we are going to improve upon and our EBITDA would be stable as compared to the last year. And fuel savings, we are going to go -- get more due to the EV vehicles. And these 2 mining contracts where our margins would be around more than 40% -- so we'll be able to maintain the higher EBITDA margins.

Okay. Lastly on the console.

Sorry Kunal sir, we request to return to a question for follow-up. The next question is from the line of Amit Dixit from GS.

A couple of questions from my side. First of all, congratulations for a very good set of numbers. Sir, if you could let us know the progress of BHQ plant. You have mentioned in the PPT that yield is like 38%. So just wanted to understand what kind of grades we are getting now. And when is this project expected to be complete, is there any delay or something like that, if you can comment on that? That is the first question.

In BHQ, we hope to commission it by March 28. -- as per our initial view. The recovery of 38% earlier, 35% is more or less comfort with all the tests that we've been doing on the test bench. -- through the parent blood. And so the cautious also more or less within that range that we had ordinally assumed.

Sir, what is the grade in terms of iron ore and alumina content, if you can highlight?

The total GAN will be less than 3% alumina and silica and the -- all the [indiscernible] order will be in the range of 66%, 67% and the barium.

Wonderful, sir. The second question is essentially on CapEx. Now if I look at the CapEx, I mean, this quarter, it has, of course, increased quite a bit. Just wanted to understand the peak CapEx for the company, which year, I mean, we will be having the peak CapEx. And what is your plan for CapEx in international geographies, particularly if you want to further increase the operations in Congo let us say and also if there are -- if there is any CapEx apart from that $300 million that you mentioned in your opening questions to make up here.

Okay. CapEx currently as Hemankur mentioned, we be having for foreign operations. We are around $300 million is what is planned. This should be in this financial year is what it should -- what would be expected. -- that as the for the ongoing projects, we should be having -- apart from the the ISP console, we would be having around INR 8,500 crores of CapEx in this year. So we're going to done around INR 3,000 crores is already in the first quarter. And then we so it should be at around 11,000, INR 1,500 over the next 3 next 2 years, that should be the CapEx. And going forward with these steel plant coming in, it should be on a higher range, plus we does not include anything for the copper project in PNG, the Panguna mines. So we're just exploring that once that is clear, and we have a clear picture on it, then we should be coming back to you.

The next question is from the line of Siddharth Gadekar from Equirus.

Congrats on strong set of numbers. The first question is on the India business. If I look at the production and sales volume this quarter, it seems that we had some carryforward inventory of iron ore. Can you quantify that? -- one? And secondly, the INR 325 crores of cost savings on the study pipeline, can we annualize that annually on a per tonne basis?

I didn't get your second question. Can you repeat it.

So the saithe cost saving on the savvy pipeline was around INR 325 crores you mentioned in the presentation. Can we annualize that savings on a per time basis for the full year?

Yes. [indiscernible] mentioned it around around INR 500 crores to INR 550 per tonne on -- because of the slurry line display project. That is the saving what we are getting on the lectin -- and to the first part of your question, we had around 1.5 million tonnes of stock -- opening stock of iron ore, which we would be selling out in this year. So this year, the sales would be more than 26 million, but this 1.5 million tonnes.

Okay. Sir, second, on the P&G any time lines and any initial thoughts on how much would be the investment on that project?

Both Siddharth and Hemankur has mentioned, sir, the PNG ABG project is still under study. It's very, very pipelines. -- and it will be very difficult to have earnings at the moment. It's a very positive movement for the company. We are studying it. We have our team for the exploration for the studies for everything for the CA to start with also. But -- and we hope to replicate what we have done in Gadchiroli both in MS and Panguna but to give figures for Panguna at the stage is impossible.

Sir, just last question on the steel plant, sir. Any changes on the steel plant CapEx and time lines of when are we expecting to start the steel plant CapEx?

Which steel plant, sir?

The Maharashtra steel plant, we had announced.

The first steel plant is already under commissioning is under execution, we hope to commission the plant by the end of this year, March 27. And for the second one, the Orica 1 which was estimated at around 3 million tonnes in Concur. We have, like I mentioned last time, we have put that on the study block starring how we can get maximum retag of the land that has already been allotted to us already in our position. And whether we can increase our capacity in that area given that we already have the iron ore availability and assume that the operations are going very smoothly. We might be increasing the capacity. No decision has yet been made on that.

The next question is from the line of Vinit Thakur from Plus 91 Asset Management.

Congratulations on a great set of numbers. Sir, I just had a question regarding the guidance for CapEx for next 3 years.

Yes. As I just mentioned, we should be at around 11,000 close to INR 11,000 crores for the next 2 years. and the tire around INR 20,000 crores in the year after that, through the third year. So that is what true.

And sir, coming to the EBITDA, the previous part isn't the same question was EBITDA per tonne. -- what do you think would be the next -- for this coming quarter, how market has been subdued, as said by other players in the market as well, the prices have fallen off tenets down and so as iron over prices are walling down. So do you think the results in coming few months will be depressed for pricing?

I don't count any pricing ever as depressed or bullish. It's a commodity changes with every season and every year. I believe that the average for this year quarter-on-quarter has been the same like last year, which is very exactly the same. I believe this year will behave the same like last year. How we can improve is by placing our material better geographically, which we have forcing our sales seems to do to ensure that we get better realizations with the same market, whatever it is. It has helped us that some of our -- I don't know that we are selling in longer distances can be serviced to customers need not be service to those customers because we are adding value by making pellets. So that will probably add to our long-term margins, which we have seen with a 6% growth this year. we hope to continue similar results, but pricing is impossible to predict.

And sir, what's the sustainable margin going forward?

Sorry,

What will be a sustainable margin going forward post corporate?

It is a commodity, which all of you guys call cyclical, how can I credit any margin.

The next question is from the line of Meet Boao, Integrity ventures and partnerships.

On our corporate vision, you mentioned you are renegotiating among project by -- so 1 on to do your views on that. So to interrupt me, sir, your voice is not that audible. Please can you speak a little about there? Yes. Sir, I wanted to ask on corporate -- also the management had mentioned that you are reciting the down loan came up. So what's the status of the project? And what is the number term view of the manage on this project?

So the terms are already in actually, we are looking at total financial closure. The project is under active development. So I think we'll reach financial closure in the next 3 to 4 months, and we will have the firm time line on closure out of all the agreements which have been signed.

Okay. And what is the lower term view on this project? Like is the project expected to generate the EBITDA margins for a company.

So basically, we do have feasibility reports from the past, but I think it would be more prudent. And as we said, it's a commodity business. So it depends. I mean if we consider current copper prices, of course, the margins are very high. But it would be a pretty early comment on what margins we'll be making. We do have a plan we do have production, but I think we'll be able to disclose more on that when we are confident and final commissioning time line, which I think should happen in the next 3 to 4 months.

Okay. And then this project must be contributing to the depreciation, et cetera, other expenses current quarters, right?

Yes, yes. So yes, the assets will work incomplete. So all the depreciation benefits will remain and will be claimed by the company, which is the company, which has been acquired. So will help in the tax benefits that will come along with the assets being there.