National Aluminium Company Limited (NATIONALUM) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '27 Earnings Call of National Aluminum Company's [indiscernible] Conference Call hosted by Systematics Group. [Operator Instructions]. I now hand the conference over to Mr. [indiscernible] Systematic Group. Thank you, And over to you.

Thank you, Sharish. Good morning, everyone. On behalf of Systematic, [indiscernible]. I would like to thank the management for giving the opportunity [indiscernible] this call. And I now hand over to Mr. Bharat Sahu, Company Secretary [indiscernible]. Over to you, sir.

Good morning. Warm greetings from NALCO, [indiscernible] Ministry of Mines. Let me at [indiscernible] to introduce our personnel directors sitting in this earnings call. [indiscernible] our CMD, [indiscernible]; sitting next to him, Director Finance [indiscernible]; and sitting next to him, is Dr. [indiscernible], our Director; sitting next to me is our Director of Production, [indiscernible] and I'm Bharat sahu, the company [indiscernible]. On July evening NALCO Board considered and approved the financial reset for the fourth quarter of FY '27. NALCO already registered a robust performance in the Q1. And the one presentation is already uploaded in [indiscernible] stock exchange also on our site of the company. In the robust performance, and I will request our CMD, just to highlight some of the key financial of this one, and then we'll start taking the call the questions from our [indiscernible].

Good morning. At the outset, our performance for the Q1 already the presentation is loaded, but I would like to give a few highlights of the Q1 performance. Q1, our overall total income, which grew if you compare to previous year funds to from INR 3,930 crore to INR 5,400 crores, around 39% growth Q1 to Q1 and if you see CY earnings, if you see PBT grew by around 88%, EBITDA grew by around 78%. So there has been a substantial growth both in revenue collection, both in profitability of the company. If you see the highlights of the performance, physical performance also has been very good, whatever targets we have set in the beginning of the year, almost all targets we have achieved -- we have achieved best-ever production in bauxite in hydrate production and power in power generation. As far as quarter 1 progress is concerned, best quarter 1 in all these areas. Financially, if you see this quarter performance, we have done as far as our revenue generation is concerned, is the ever best quarter we have done. As far as profitability is concerned, best Q1 profitability we have achieved. And the major contributors have been, of course, our internal if fee improvement in the volumes of production, whatever targets we have taken almost we have reached to the peak of the volume in all the areas if we see refinery, if you see our metal production all the years. And we have targeted at least 5% to 10% more than the capacity utilize whatever we are going to do more than the rated capacity we have targeted this year. As far as other areas are concerned, we are also targeting to reduce our costs, increase our efficiency which is in our hand, that is increasing volumes and reducing the cost. We are also going for some value-added products for our future expansions. As far as the cantons concerned, hand is going to come this year. And also, we are targeted to spend of mental capacity for which we are going for CPR mix being it with the various milestones which we'll be discussing in the presentation. So once again, thank you, Systematic Group for organizing this conference call.

[indiscernible] over to you, we can now request all our call participants to come forward with their questions.

[Operator Instructions]. The first question is from the line of Mr. Amit Lahoti from [indiscernible]. Please go ahead.

[indiscernible], how is the commissioning process moving there? And can we still produce 300,000 tonnes in the current system?

Our system refinery the current, we have -- June onwards, we have started the commissioning of view of that decommissioning activities we have started of the packages, almost around 50, more than 50 packages are there. [indiscernible] of the packages, mechanical completion already has been done, and the trial of those packages are under process. A few of the package are left out. Our target is by September end. We have to complete canal completion of all these packages. Do the integrated trial first. That is the [indiscernible] needs to be done within the packages. And after that, we start the actual production process. It will take maybe 3 to 4 months to stabilize and reach to the level of 70%. This year, our target was that we'll be producing around 2 lakh tons of alumina from this refinery. So even if we start the actual production from November, December onwards, after that also, we'll be able to achieve those kinds of figures from the system and that is around like tonnes of alumina production.

Right. So why has there been a delay? Because earlier, we were planning to start to basin from June onwards. So as you have seen around 6 months of a delay. Any reason around that?

We were planning to start the commissioning activity from June onwards. And after that completes it in next 3 to 4 months, of course, the mechanical completion, which was supposed to be done by June, July, maybe getting delayed by 2, 3 months. So this is a big project, big project. It is very difficult to exactly pinpoint the date of commissioning and all that, and it's a chemical process. So now our -- maybe by September end, we are targeting the mechanical compression will be there and will start. There is almost 2, 3 months delays there, not very huge delays there.

Sure. Okay. My second question is on employee cost, which has gone down below INR 1,600 crores if we annualize Q1 number of INR 395 crores. So is it part of the superannuation plan that you guided in Q3 FY '20 that you were going to affect senior people of around 20 to 50 with a cost saving of INR 70 crores to INR 80 crores. So is it same which is coming now?

Myself [indiscernible] Director of Finance is the right question, why our complete cost is going down. If you see the CTC of our last year to this year. Our [indiscernible] and in this quarter, it is around INR 50. There is a reduction of 3 less almost. That is because rightly, you have said that is because of [indiscernible] employees and investment of the employee at the entry level. That is the one reason. Second reason is we have made some provisions last year towards retirement benefit that is provisioned to [indiscernible] and which was on the high side, we see quarterly to provide that. And another area is we are [indiscernible] provision last year, which is at resin that ratio that can reduce our cost. And we expect that we will continue in the next 3 quarters.

Okay. So for the full year, we can still see this number around INR 1,600 crores?

That's right. Right. Right. In the last part of the year, in the last quarter, quarter 4, there may be some impact of very vision because [indiscernible] January 2027, [indiscernible]. So the last quarter, there may be some increase 15% additional. Otherwise, 2 quarters, second [indiscernible] the cost will be in the slide.

Thank you, sir. This question is from the line of Mr. Ajit [indiscernible]. Please go ahead.

My question is with respect to our alumina sales volume. So for FY '27, you have guided 25 lakh tonnes of alumina production, but anything in terms of sales volume because that number fluctuates a lot, if you can guide on the full year volumes for FY '27.

This financial year, last year, we sold around 4 lakh tonnes of alumina. This year, we are targeting INR 16 lakhs. Whatever 2 lakhs of Astra Alumina, we are trying to produce from this team, it will be added to our sales value. The 2 lakhs will be selling this year.

Yes, understood. And the second part is, I mean, we have seen now that the aluminum prices have come down. So going forward in Q2, do you foresee any raw material cost pressure, which will persist, because we have seen that in the earlier quarter, you have added that there is some cost inflation on [indiscernible] and other raw materials. So will it impact our margins going forward as the aluminum prices have cooled down?

Aluminum prices you see in the first quarter average, we got around 3,500, 3,600 700 of [indiscernible] come down to around 3,200 [indiscernible] material prices, of course, has increased. You see caustic soda prices last year average was around 43,000. In Q1, our expenditure was around 45,000 per tonne. In Q2, it will become around 49,000. Of course, plastic soda prices are going to go up by around INR 3,000 to 4,000 as compared to Q1. [indiscernible] also has gone up 53,000 watts to 44,000 watts last year, gone to 66,000 to 70,000. These are the two major areas and also price, which was 46,000 last year, it has gone up to 75,000. So this has increased our overall cost of production by around INR 15,000 to INR 16,000 per tonne of metal. So these 3 areas, [indiscernible] and HFO. These are the three areas where cost also aluminum chloride by some. So of course, around 10% to 15% increase in the topics are there. which is increasing our cost by around 15,000 to 16,000 metal prices.

So anything which can offset that means we have seen this recently [indiscernible] prices have increased [indiscernible] and then is there any scope to offset that with lower power cost or you think that the margins could take slight rate?

Alumina prices, what we expected in the beginning of the month, year was around $3.10 to $3.20. But of late we are getting around 370 alumina prices. That is because in Russia also Rusal and China, two of the refineries due to red mud issues, they have reduced the production. The bauxite prices in new game has increased slightly. So that's why the alumina prices, which we were expecting that it will be somewhere around $3.20. We are getting around $70. So that will offset somewhat raw material, what is increase in the raw material cost because [indiscernible] has given us an expenditure burden in Q1 of around INR 120 crores INR -- INR 230 crores and extra increase in the raw material prices. So alumina prices are the prices which we are expecting equally if we remain at the level then that will offset the input raw material costs.

Thank you. The next question is from the line of Pinakin from HSBC.

Thank you for this opportunity. I have a few questions. The first is you highlighted $370 per tonne as your Alumina realization per CapEx currently. And what was the Alumina realization cost in Q1, sir?

Just -- can you repeat the question? Just last line.

The alumina realized ratio in Q1?

Q1, our average realized was around [indiscernible] Alumina.

And one cost of Alumina quarter of [indiscernible].

Little louder we are not able to [indiscernible] not clear.

One second. Alumina cost of production, so will it be higher in quarter 2 versus quarter 1?

Quarter 1, our cost position if you see, you are talking about alumina or metal?

Alumina. Alumina

Alumina costs normally it is between INR 21,000 to INR 42,000. Last quarter, it will be around within that well only. And the second quarter, since we have observed all the input cost increase in the first quarter and similar pattern cost, pricing be remain in the next quarter. And we don't think our cost will be increased. Whether our cost will be within that range only around 1,000 to 2,000 or term of alumina. And the weather will be getting [indiscernible] price because he has already explained that the next quarter, we are going to get incremental price of around 50 from alumina.

Got it. My second question is, sir, you highlighted metal cost of production increase of INR 15,000 to INR 16,000 a tonne. Once that cost of production increase already fee in quarter 1? Or will that increase come in quarter 2 versus quarter 1.

No, it is already. It was already expected because we are knowing that raw material prices are going to go up. [indiscernible], HFO and CPC. So that was almost expected. And the similar kind of cost will continue in Q2 also.

Okay. Similar kind of costs will continue. Got it, sir. Sir, my third question is the -- you highlighted name prices which have moved. Now how are the domestic aluminum premiums because you highlighted previously that may change with the lag. So have they increased in recent times? Or do you see the premiums increasing in the domestic sales?

Premium has increased. Our earlier premium was around $60. Now it has gone up to around [indiscernible] around $ 110 [indiscernible] has increased by about $50.

Got it. And do you expect this to increase further, sir?

No, no. That income increase was due to that was situation in the Middle East since the situation is easing out we are expecting that it may remain a or maybe it may go [indiscernible].

Got it. And sir, my last question is because of the war situation in the Middle East, where any of your export shipments impacted which will now normalize, either in alumina or aluminum?

Yes, a few of the shipments, like one shipment was earlier orders. Of course, that was before the war, it was ordered at $390 also. That has got [indiscernible] relation in that. As far as other shipments are concerned, other shipments, whatever is getting ordered, they are going no other pending shipments are there.

Got it. The next question is from the line of Mr. Vikash Singh from ICIC Securities.

Good morning, sir, and thank you for the opportunity. Usually being a monsoon season has traditionally been weaker, especially on the coal input side. So just wanted to understand, have we have sufficient coal inventory, including the captive this time and any one-off cost escalation or any disruption we have at PDN so far?

As far as our core plant is confirmed in [indiscernible] that is for our smelter. There, we are having sufficient coal because that coal we are getting from our CapEx stores around 60%, 70% of coal we are getting from the captive. So their issues are not there. Of course, in our refineries, the full stock is on the lower side. All stock, we have to maintain at the level of maybe 10 to 15 days. Now it is around 2 to 3 days. That is because of the restriction given by the government, the priority of the rates there, we are heavily dependent on the rates from the railways and the priority is given to the power plant. So there are some issues out there. We are taking it very aggressively with the Indian railways and our ministry and some improvement is there. And since now the restrictions summaries will come down. So we are expecting that these stocks will also improve in the coming days. As long as the rate availability for the shipment is concerned, there is no problem so far. No, that for that shipment, our own breaks are there for the dispatching kiln alumina. For that, no issues out there. We have got our own BTAP rates. So that's no issue there.

[indiscernible].

Mr. Singh, your voice is breaking.

Is it better?

Yes.

Yes. So sir, second question pertains to we take about our 0.5 million tonne aluminum plant. Could you give us some highlights at what stage of board approval these plans are when we will start on this and the CapEx any for this 0.5 million tonne?

Metal plant product development as far as of date [indiscernible] we have already got technology supplier finalized that we are going to sign technology license with them this. Maybe this month by 10 or 15. So DPR making is under process. The consultant is making that a -- our target is next 3 to 4 months, we'll be ready with the delayer and get the board approval maybe October, November for the DPR for setting up this 0.5 million tonne smelter and also 1,000 megawatt power plant. After that, maybe we'll take 8 to 9 months to order the packages. By next year, August, September, we should order all the packages and start the groundwork maybe next year, October, November, and from there, it will take 3 to 3.5 years to set up this plant. So the time lines which we have given to the ministry and our internal time line is by December 2030, we have to complete this plant along with the power plant. As far as the power plant is concerned, power plant, we have done one JV agreement with [indiscernible] for setting up this power plant has to reduce and to have the raw material security, that is the goal. NLC having the coal mines here itself in Salta districts. So the coal supply will be from there. So that will be good for this power plant. So this power plant VTR is also under process. So at the same time, both will get ordered and get commissioned by 2030 and [indiscernible] half. [indiscernible] concerned. The overall CapEx expenditure will be somewhere around INR 25,000 crores. And this will start from financial year '27 '28 and the peak will be '28, '29 and '29,'30 and '30, '31. This will be the 2, 3 years where this CapEx flow distribution will be there. This year, for that to give no major CapEx will be there. Of course, technology licenses, we have to give something maybe INR 300 crores, INR 400 crores. But the major CapEx will be coming next financial year onwards.

No, that Sir, just one clarification. The shipment of the exports which we do to Russia, is it on a dollar-denominated or this will the Russian currency and whatever the dollar denominator [indiscernible] do in the export market? We booked the one at the time of shipment, right?

No, whatever shipment our exports are going, that is at the time of ordering when our tender is floated, we do the spot tenders and that is the dollar rate as of that is.

Okay. But then the booking happens or the sales got booked at the time of shipment, right? Looking -- actually, we do the spot tender and the date of opening the core tender at that date, whatever the dollar prices are there, that is finalized.

The next question is from Samana Govia from [indiscernible] Securities Limited.

Sir, my first question comes on the captive coal mines. So we were targeting a 4.8 million tonne production for FY '27. So can you just elaborate on where we are in the EC process for our mine expansion?

Already, the mining plan approval we have done for many plan approval is to be done from the Board. This board we have done the money plan approval. And now we are applying for the ICICI. The next maybe 2, 3 months, we'll be getting the -- so already we have started the production and 400 million tonnes, we are sure we are going at the rate of 4.8 million tonnes or monthly breakup whatever we have done. The next 2, 3 months, we'll be getting easy from [indiscernible] so there are no major issues in that.

Okay. That's good to hear. And could you just give me what was our total coal production in Q1 from our captive mines?

Q1 was -- because initially, what happened initially 4, 5 days, in the beginning of Q1, 5 days, the production from the mines were not there, there were some technical issues. Now we have ramped the production and the subsequent quarters will be managing those whatever shortfalls were there.

Okay. Can you just repeat the number [indiscernible]?

11.04 lakh tonnes.

11.04. Okay. Sure. sir, my second question is the [indiscernible] mines, we have already appointed an MDO. When do we see the production to take place? Or has it already started?

[indiscernible] mines, actually, one, we have already ordered the MDOs. And for going to the mines and starting the production, one road is to be made 8-kilometer road for making the road recutting this to [indiscernible]. We have, along with [indiscernible] residences coming there, some activists and some residents are coming there. District authorities 2, 3 times, we have tried along with the state government, police works and all that. We are trying to mobilize the locals there along with the MDO. And I think in this month, this month itself, that is in the month of August, along with the authorities, we will be again going there or making the road once that road making will take around maybe 15, 20 days, that met we are targeting maybe September, October onwards, October onwards, we'll start the production.

Okay. Sure. That is quite helpful, sir. So one last question I had. As of the March 2026, our total employee count was roughly INR 4,880. What would the employee count be as of right now or as of Q1 end?

[indiscernible] for it.

Okay. So there could be another 150 to 150 to 170 employee reduction more by the year end, right?

[indiscernible], we'll be looking around 170 to 200 every year reduction yields in coming 3, 4 years.

The next question is from the line of Amit Murarka from Axis Capital. Please go ahead.

You mentioned the mechanical completion of the Lumina plant in September and roughly additional 200 kt production, right? So -- but next year, then can we assume the full run rate of cost capacity?

Yes, next year on what we have to do. We will be going to 1 million tonne production from there and already, we are 2.2, 2.3. We are going from the existing. Maybe we'll be going to 3.1, 3.2 next year onward.

Sure. Also on this local market premium for aluminum, how does [indiscernible] you enter into some contracts once the premium is fixed? Or is it goes with the spot market itself?

Actually, we do export tenders from export tender that is loaded on the domestic [indiscernible] in what we do that [indiscernible] on the domestic pricing, LME. Domestic pricing is based on the LME.

No, no, I know I'm talking on the premium. So when you sell in the local market, the premium that you book charge customers in the local market is also based on some benchmark, let's say, MJP benchmark, something like that? Or you fix [indiscernible]

What we process follow is, we do on export tender. In export tender, whatever premium we do, yes, that premium is fixed for next 3 to 4 months. unless and until we do the net export tender. So suppose we did export tender last month, we got a premium of $110. So that premium will be loaded on the domestic pricing for next 3 to 4 months until we do the net [indiscernible] tender, and we discovered the premium. You were talking about the metal price or alumina.

Aluminum. [indiscernible] we make local.

[indiscernible] is our policy, what [indiscernible] explained that these are -- we have a structured policy for facing the aluminum price. And there are other factors are also there, one factory is premium, whatever premium is discovered for tendering, export and marine, that is added to our aluminum price domestic supply.

Sure, sure. Got it. And is it revised based on every tender that you every country the frequency of 10 depend 34 months, so we normally Right. Also, what is the CapEx outlook now for FY 2017 '20, if you could provide the numbers?

Our target INR 1,500 crores. Maybe we'll be crossing that will be somewhere ending up with around INR 26, INR 27 [indiscernible].

So this year as well as next year.

This year, it will be -- our target is around INR 1,500 because most of the payments for [indiscernible] is done. So major capital expenditure is not there, but still we'll be doing somewhere around INR 1,500 crores to INR 1,700 crores or INR 1,800 crores. Next year onwards, it will increase because our expansion of the smelter will be there. So next year, how much we are planning? Next year, we have plan to INR 2,500 crore INR 2,500, maybe in '27, '28. After that, it will go to maybe INR 4,000 crores after net INR 6,000, INR 10,000 crores. We have done the pricing and the major expenditure will come from the smelter expansion and power plant expansion.

Sure. Got it. And also captive coal, I think earlier you had mentioned about 4.6-odd million tonnes of production this year. So [indiscernible] you seem to be on track on that?

Yes, captive coal. Last year, we did 4 million tonnes. This year, we are targeting 4.8 million tonnes. The 20% increase is allowed for that all permissions and all that under process. And on a monthly basis, we are producing at the rate of 4.8 million tonnes and we'll be achieving that at the end of the year.

The next question is from Sumangal Nevatia from Kotak Securities. Please go ahead.

Sir, just continuing on the previous question. So one, on the CapEx, can you share 1Q, how much we spend. And then for the expansion, I just want to know, the power CapEx will happen in other JVs. So will we be contributing only to the amount of equity, which could be maybe around 20%, 30%? So just if you can explain how the power expansion CapEx will happen?

Our CapEx plan, what [indiscernible] explained, smelter, we are going to do EPC more. And for power plant, we have [indiscernible] with NLC and will be doing good. Okay. So contribution to total expenditure towards our CapEx up to teal be around INR 24,000 crores, INR 700 re, INR 4,000 crores on smelter and INR 6,000 crores towards contribution for this power plant megawatt per ton to get. The cost will be total cost will be around INR 12,000 crores and INR 6,000 crores from our side and INR 6,000 crores from NRC because [indiscernible]. in Power Plant, we have a detection. So if you follow that, our equity contribution will be lower. It is around INR 3,500 hours share will be balance will be financed through back through our NALCO and NLC is because [indiscernible] because this is a new JV, we will be the [indiscernible] the money will be taken from the bank. So if you see otherwise if you see our firm base, if you see our balance sheet as a bit, we have formed a of around INR 3,500 crore [indiscernible]. So every year, we are adding 2,500 after paying our dividends and all our CapEx regular. So if you see that area, we need not to get any money from the outside because we have sufficient balance. Since we have -- and to the agreement of disagreement for power plant. So the power plant will be financed by that company with any company equity participation will be 30%, 70% will be taken on that. So balanced menu, which we have will be pledging for our expensive project of smelter and other projects we are also considering that will be entirely to put it because we have suitable. So the power plant will be 70-30-ish. So that is to present proposal and we are going to go by this file.

Understood. Sir, for the power plant, INR 12,000 crores or 1,000 megawatt, I mean, generally, the thumb INR crore, crores per megawatt. So why is the cost so higher?

It is not -- sorry, one, without, I think, INR 10 crores, 1 megawatt. So it will be INR 10,000 crores to INR 11,000 crores. It is not higher because we're going to set up at 1,000 to 80 megawatts per plan.