NMDC Ltd’s fourth quarter numbers were pale compared to the perk up in international iron ore prices in the same period. The decline, both in sales and production of iron ore at NMDC, dragged revenue down 6.2% from a year earlier.

A saving grace came in the form of lower operating costs and a write back in royalty payments in the last quarter. That swung the Ebitda margin enough to beat the Street’s estimates, coming in at 57.4% in the March quarter. Ebitda is earnings before interest, tax, depreciation, and amortization.

Overall, NMDC’s cost per tonne was down by 20% year-on-year to 1,513, its lowest since the third quarter of fiscal year (FY) 2018. This was due to the lower employee, selling and other expenses. This buoyed NMDC’s net profit by 30% year-on-year.

In a conference call, the NMDC management guided that iron ore production volume for FY20 could be in the range of 32-33 million tonnes (mt). This is similar to that of FY19.

NMDC Ltd’s fourth quarter numbers were pale compared to the perk up in international iron ore prices in the same period. The decline, both in sales and production of iron ore at NMDC, dragged revenue down 6.2% from a year earlier.

A saving grace came in the form of lower operating costs and a write back in royalty payments in the last quarter. That swung the Ebitda margin enough to beat the Street’s estimates, coming in at 57.4% in the March quarter. Ebitda is earnings before interest, tax, depreciation, and amortization.

Overall, NMDC’s cost per tonne was down by 20% year-on-year to 1,513, its lowest since the third quarter of fiscal year (FY) 2018. This was due to the lower employee, selling and other expenses. This buoyed NMDC’s net profit by 30% year-on-year.

In a conference call, the NMDC management guided that iron ore production volume for FY20 could be in the range of 32-33 million tonnes (mt). This is similar to that of FY19.


What is more important for investors is the price realization expected this year. International iron ore prices are up this year due to supply disruptions. Iron ore prices went up to about $110 per tonne in China.

NMDC sells nearly all of its production in India. But as the landed cost of iron ore is higher by about 25%, it has scope to hike prices. Further, demand in the Indian subcontinent is expected to be robust as new steel capacities are expected to come on stream in the coming years.

But iron ore price hikes may not be easy as Odisha miners are expected to de-stock some inventory.

“Going ahead, we see operating challenges arising from: 1) shipments plateauing at 32mt if the Donimalai mine does not resume operations and; 2) limited price hikes in view of the possible de-stocking by Odisha-based merchant miners ahead of the bidding process," said Edelweiss Securities Ltd in a note to clients.

But more importantly, investors are awaiting the outcome of the uncertainty over the Donimalai mines in Karnataka. The case is pending before the Karnataka high court. Further, investors are also closely watching the progress on its much-delayed 3mt steel plant in Nagarnar, Chhattisgarh. The plant is expected to be commissioned sometime this year. Any positive outcome on both these developments could be triggers investors are looking for.

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