National Aluminium Company Limited (NATIONALUM) Earnings Call Transcript

Good morning, everyone. On behalf of Systematix Group, we welcome you to the 1Q FY '26 Earnings Conference Call of NALCO Limited. We are joined today by Shri Bijay Pratap Singh, CMD and Director, Commercial; and other functional directors of the company, along with Mr. Bharat Sahu, Company Secretary to discuss the company's financial and operational performance for the first quarter FY '26. I would like to thank the management for giving us an opportunity to host this call. At the end of the presentation, we will open the floor for questions and participants can raise their hands if they wish to ask a question. Now, I request Mr. Bharat Sahu for his opening remarks and introduction of the management team. Over to you, sir.

Thank you, ma'am. Greetings from National Aluminum Company Limited to all our esteemed investors. We had a Board meeting yesterday to consider and approve the Q1 '25-'26 results. The result is already out. And thank you, Systematix Group for arranging and hosting this post-earnings conference call. Before we start, let me have the privilege of introducing our management team, the functional directors. Anti-clockwise, sitting extreme is Shri Srimanta Panda, our ED Finance. Sitting next to him is Shri Abhay Kumar Behuria, Director, Finance. Next to him is Shri Jagdish Arora, Director, Projects and Technicals. Sitting in the middle is our CMD and Director, Commercial, Additional Charge, Brijendra Pratap Singh, sir. Sitting next to him is Sri Pankaj Kumar Sharma, Director of Product, sir. And sitting just next to me is our Director, HR, Dr. Tapas Kumar Pattanayak. And before taking any further time, first, we'll have a brief presentation about the Q1 results, and then we'll invite our esteemed participants to come forward with their questions. Now I'll request my colleague, Mr. Subh Purohit to have the presentation, please.

Thank you, sir. Good morning to all. Welcome to you all to this earnings conference call for quarter 1. The results of Q1 has been published yesterday and it's another quarter of strong results shown by the company. Now, we will go through the presentation. The agenda of presentation is similar to the earlier presentation, look at the company [indiscernible], then we will go to the physical performance, the financial highlights, then we touch little bit on industry outlook to [indiscernible] see results, finance of the company and SC components of the company as well. In NALCO, Navratna CPSE, Government of India Holding is 51.28%. Integrated 7 bauxite-alumina-aluminium-power-coal- complex in the country and it is global leader in producing bauxite and alumina at the lowest cost. We are the lowest cost production since around 7 to 8 years. We have been continuously rated as the lost cost production in bauxite and aluminium. Our assets, bauxite assets, bauxite and refining assets are at Damanjodi, it is 7.5 million tonnes a year producing right now of bauxite as per the requirement of our refinery. Our refinery capacity is currently 2.1 million tonnes and our metal and [indiscernible] assets are at Angul, again in the state of Odisha. We are also recently started operating our Utkal D and E coal mines in January of 2025, for combined capacity of 4 million tonnes started. Then we have a dedicated facility at Vizag port for export of alumina and also imported -- and metal, and import the products. We are operating 4 wind power plants of total 198 megawatt capacity at Rajasthan, Maharashtra and Andhra Pradesh. Now coming to our physical performance in quarter 1. We have been operating at almost 100% capacity, but still we are improving our productivity and still registering higher production quarter -by-quarter. So if you see in case of bauxite, we have achieved 6.6% growth against corresponding quarter last year. In case of alumina hydrate, there has been a significant jump of 35% against quarter 1 due to a base effect. Then in case of metal, we have achieved 3% growth and power also 6% growth. [indiscernible] in sales also in case of alumina, we have achieved significant jump. This is partly due to base effect as Q1 sales were a bit less. And in case of metal also, we have achieved growth of 9%. Here, I would like to mention also that. In case of domestic sales of metal and alumina, in both case, we have achieved highest ever sales for quarter 1 of any particular year. And if you see the run rate also, we are exceeding our past year production. So in case of alumina, we are running at a run rate of around 23 lakh tonnes. Aluminum, we are running at 4.6 to 4.7 and bauxite around 76 lakh tonnes. Now coming to the financial performance. In the last quarter, the Q4 of '24, 25 recorded record breaking performance of the company, the last quarter and the last financial year as well. For Q1 also, the company has shown very strong performance in its results. We can see there is growth of 33% in the revenue and also the PAT has registered growth of 77% against the corresponding quarter of last year. The company has also declared INR 2.5 per share in its latest [indiscernible]. Now, coming to the industry outlook. There LME price equity, there was a downfall in April '25 where LME price fall down to [indiscernible], because of the tariff announcement by U.S. President. Since then, the LEM price recovered and it has reached to $2,560 [indiscernible]. The LME price going at and likely to be impacted by the tariff announcements are still [indiscernible], but steel, there are a lot of negotiation to go and the tariff rates are far [indiscernible]. The developments, the price also will depend on the latest developments and the type of U.S. announcements. Then there are new starts in alumina refining and smelting capacities, primarily in Indonesia and India. Then, of course, there is rising oil prices and increase in U.S. dollar index recently, the LME price normally moves inversely with the rising oil prices and with the rising dollar index actually, the LME price moves intensely. So the LME prices will be impacted. And there is disruptions in the bauxite supply also. [indiscernible] has canceled some licenses recently for bauxite mining. In Hana also, there is one lease where the license was canceled. So upon development in these sectors, the LME price will also be impacted. Now, coming to the global GDP growth. In earlier outlook, in April 2025. IMF has projected 2.8% growth. But this time in July 2025, the tariff related developments has [indiscernible] as per IMF and they have projected a growth of 3% which others for the aluminium sector as well. Because aluminium consumption is almost proportional to the growth of the country as well as globe. We can see in July 2025, the IMF has projected that there will be 3% growth of the year 2025 and 3.1% growth of the year 26. Coming to the aluminium growth, the alumina [indiscernible] was a bit of downside on the last [indiscernible] and within [indiscernible] the difference between production and consumption, it is coming a little bit on the surplus side. The aluminium prices are also moving accordingly. Coming to the aluminium sector, in aluminium sector, there is growth, there is little bit of deficit if you see the quarter-on-quarter basis and on the year estimation for the [indiscernible] also. They are a little bit of deficit side, so the aluminium sector is also dependent on the latest capacity additions. We all know that the capacity at China is capped at 45 million tonnes currently. So currently, China is almost reaching about 43 million tonne, 44 million tonne. So supply side will be limited to that. In the H2 of this year and future years, the LME prices are likely to stay strong. If you look at scenario, the domestic, currently, still the process going [indiscernible]. Recently, Ajay said that for this year, we are projecting at 6.5% growth, for the next year 7% growth. [indiscernible] for the year 2047, so to reach 33 [indiscernible] by 2047, the growth rate needs be more than 7%, which again are just well for the aluminum industry in the country, if we see the aluminium consumption better. Currently, the electrical sector is having the largest chunk in the aluminium consumption. It is at around 48% share and transportation and [indiscernible] comes next. So as the country s GDP growth rises, there will be definitely growth in this sector. And recently, our Ministry of Mines published vision document of aluminium [indiscernible] aluminium consumption will reach to about 3.5 million tonnes by 2030. There is lot of scope for improvement of demand in the country. And if you see the Indian aluminium scenario also, their growth rate is about 9%. The aluminium consumption growth is around 9% and also there is growth in the production also. The sector is a booming sector in the country and the primary production channels also adding capacities to their [indiscernible], so this is it, growing well in the business. If we come back to NALCO, NALCO s strategy is [indiscernible], we are integrated with our bauxite mines, our aluminium refining capacity, our power plant, then also we are running our own [indiscernible]. The company is a these 0 debt company, it gives [indiscernible] our smelter and power projects, it requires huge investments, so [indiscernible]. We are exploring raw material security in case of [indiscernible] with GACL which supplies caustic soda to the company. Then our refinery capacity is going at it. The smelter capacity is also on the pre-project status at the moment. If you see at our [indiscernible] plants, currently going at bauxite mines, [indiscernible] 7.5 million tonne and we are projecting to find the lease deal for our bauxite mines which will be operated by this year end or by quarter 1 of next year. So our capacity will increase by 3.5 million tonne, then we are going with our extreme refinery extension which will increase the capacity by 1 million tonne. The metal completion is started by this financial year end. And [indiscernible] we have achieved around 74% to 75% progress, physical progress in this [indiscernible] itself. Our aluminium [indiscernible] power plant, these are at the pre-position stages, and the plants are likely to become by financial year 30. Now coming to the environment part. The company is [indiscernible] what is in the environment benefit. Our bauxite mines are rated as [indiscernible] mines recently, we are operating 2 bauxite mines, Central and North block and South block at Panchpatmali mines, both these bauxite mines and the recently accredited with 5 star rating. We are putting equal emphasis on plantation, [indiscernible] biodiversity protection. We are also certified in all the international certifications like ISO14001, ISO15001, ISO9001 and likes. We have already -- I have told that we are operating 190 megawatt wind power plant. We are also utilizing our solar places, currently the capacity is 1020 kilowatts power, and we have planned to add 7 megawatts rooftop solar in the future. [indiscernible] we are also equally responsible to the society. We have identified important sectors where we are working. The company is working at Damanjodi and Angul. Damanjodi is one of the most tribal resided population, so we are [indiscernible] we are sponsoring students, tribal students mostly to reputed residential schools. We have also [indiscernible] NALCO Ki Ladli, which is in line with Government of India's Bheti Bachao Bheti Padav moment. While we are providing financial assistance to the [indiscernible] families. In terms of health care, we are providing mobile health care units, 8 numbers of mobile health units are in operation currently and continued in Damajodi and also Panchpatmali while they are serving to people of 250 peripheal villages. We are something more than 1 lakh [indiscernible]. Also, we are operating 1 OPD facility at Angul, where we are serving 18,000 patients annually. Our women empowerment, we are helping through [indiscernible] SAFA Foundation for their likelihood support. Then there are lots of words on peripheral development, and we have adopted the Puri Jagannath temple and surrounding areas for development work. So these are all the areas where we are working as per our social [indiscernible]. Our corporate governance, the company is a government of India company -- so we are maintaining all our statutory requirements. There are 10 Board level committees, we are in 17 core policies and guidelines. We have [indiscernible]. Also, we have been [indiscernible] treatment to investors, our dividend policies and transparency in our reporting. So thank you all. My presentation is over now.

Thank you. Yes. Ma'am, we have already made a brief presentation on the Q1 as well as the different activities of the company. Now we may allow our esteemed participants to come forward with their questions to the management, please.

We now open the floor for questions. [Operator Instructions] Till then, I'll proceed with a couple of questions from my side. So first question would be the status of the alumina refinery. And what is the status? What is the progress? And when are we now expecting the commissioning to happen? And post that, what is likely the ramp-up plan? And what can be the expected volumes post commissioning in FY '27 and 28?

As far as refinery is concerned, first of all, a very good morning to all to you and everyone -- everyone connected here. Very good morning to all, and congratulations to all for the wonderful performance of NALCO in Q1. As far as your question is concerned, for [indiscernible] refinery expansion, whatever commitment we have given earlier that we'll be starting the commissioning -- all mechanical jobs will be completed maybe by March, and we will try to start all commissioning thing after that and try to start the production by June '26. That is the commitment we have given earlier also, and we stand by it. The progress in the site is good. All the packages are working well. So when this refinery comes, maybe we start the commissioning in production in June '26. Next financial year, we are hoping we will be producing at least 50% of the total capacity because initially, the production will be less, maybe around 5 lakhs to 6 lakhs is a 10 lakh capacity line. We'll be producing around 5 lakhs next year -- next financial year, that is '26, '27. After that, it will go to the rated capacity of 10 lakhs.

And sir, what is the number that you can see from the existing alumina like you were earlier, we are seeing growth in alumina sales. So from the existing one, what kind of capacity utilization are you expecting on the existing capacity?

Existing capacity, almost we are overutilizing. Our production capacity of alumina is 22.5 lakhs around -- around 22 lakhs or 22.5 lakh. This year, we are planning to do more than that, maybe 23 lakhs, we will be doing. So we will be doing 100% of the rated capacity of the existing line, more than 100%.

We'll take our questions now. We have the first question from Amit Murarka from Axis.

So on alumina, generally, like we have been reading that the U.S., Russia are engaging for de-escalation of the current situation in Ukraine, and that could prompt the removal of the export kind of restrictions on Russian alumina. So how do you read the situation? What's your expectation of Russian alumina coming back to the market? Because I believe that could kind of -- that could create maybe an oversupply situation. So just wanted some view on that.

Russian -- as far as Russian -- you're talking about Russian alumina or aluminum.

Yes. Like alumina as well.

Aluminum.

Both rather, but yes, like...

I don't think in Russia, excess of alumina is there. Of course, aluminum is there. aluminum, which they were sending to Europe, Europe is already -- has imposed the sanctions on Russia. So Russian aluminum is not able to go into the European market. And with the Indian Prime Minister signing a free trade agreement with U.K., a lot of opportunities are there with Indian aluminum industries to go into the U.K. market. Because U.K. market is, again, market where there are a lot of potential for increase in EVs, solar panels and other where usage of aluminum will be there. So that will be a boost for Indian aluminum industry as far as U.K. is concerned. As far as U.S. tariffs are concerned, again, that is a concern area. U.S. tariff increased to around 50% from 25%. But our aluminum, which is especially from NALCO, we are not exporting any of the aluminum as of now. We are most -- all aluminum is getting consumed in the domestic market. So NALCO will not be affected by that. Of course, Vedanta was exporting aluminum to U.K. -- U.S.A. So that may come down if the tariffs is going to remain at the 50% level. But still, the demand is there in U.S. also. So they might go in taking aluminum with higher prices also.

All right. So specifically on Russian supplies, like how much supply would have been impacted of aluminum, let's say, if you have any number in your mind?

Russian supplies of?

Aluminum in the global markets.

Russian supply of aluminum to the global market. I don't think I have the figure right now. We'll have to check what amount of aluminum Russia is exporting.

Russia is -- what he is asking is alumina. Alumina, Russia was...

I don t know how much aluminum Russia is exporting? So aluminum, they have around 1.5 million tonne -- 1.3 million. Total 4 million, they were not producing it. They have reduced it to just 0.5 million tonnes, they had curtailed. So -- and they are not the lowest cost of producers. The lowest cost of producers are EGA or this Emirate Global in Baharin, they will be the first sufferers. This aluminum trade, anything which is coming down from America, they are the most supplier to America. They were supplying 100% to America. So they will be the first sufferers, Baharin and EGA, this is Dubai-based company.

Got it. And just secondly, on the coal supplies of your captive coal mining, I think you mentioned that the 4 million tonne has started. So how much would you have produced in Q1 for the captive mines?

Q1 almost at the rated capacity we are producing as far as our targets are there. And this year, we'll be doing around 4 million tonnes we'll be completing.

Okay. So during monsoon, then we don't anticipate any issue around with coal supplies, right? I think earlier in earlier years, we have seen some...

That is not there. That is not there. No supply disruptions are there. We have a sufficient stock of coals in our power plants and in mines also. Mines also, we are having sufficient stocks. During monsoon, some interruptions in the production is there. mines production is there. But the dispatches, the transportation from mines to our power plant, that is going as per requirement because we have sufficient stock in the mines.

We'll take the next question from Kartikeya.

Hi, am I audible?

Yes, you are audible.

I actually missed a couple of points from the starting. So I just wanted to understand what are the time lines for the new bauxite and alumina -- bauxite mine and the alumina refinery? And like what's the cost of production in the alumina refinery we are expecting?

As far as bauxite mines is concerned, we are planning to -- already tender is out for MDO, and we are planning to start the mine somewhere maybe February, March. Latest by June, we are planning, but we are early with our all dates. Maybe latest by May, June, we'll be starting the bauxite mines, [indiscernible] mines. And alumina refinery stream, as I already said, we are planning to start the commercial production from maybe June '26 onwards. As far as cost is concerned, cost of the alumina produced in this new -- our new stream refinery expansion, that will be almost similar to the cost which we are producing now because, of course, interest is not there. We have not taken any loan for that. Depreciation will be loaded, but that will be made offset by the technology. In this technology, it is a better technology where the caustic soda consumption will be on the lower side, manpower will be on the lower side, overall manpower because here in a single line, we will be producing around 10 lakh tonnes. Now with 4 lines at present, we are producing 20 lakh tonnes. So that advantage of the volume we'll be getting with a lesser manpower because manpower is the most costly thing, which is our fixed cost as far as fixed cost is concerned. So cost will be almost similar kind of as far as what we are incurring now as far as alumina is concerned.

Okay, sir. And just sir, I wanted to know what was the alumina realization for this quarter?

Alumina reduction for this quarter was around [indiscernible] it was around $400. $416 average.

Okay, sir. And sir, just another question, like what drove the other expenses for this quarter, the other expenses were quite high. So I just wanted to understand.

Other expenses, of course, what you are telling is INR 707 crores is on the higher side. I think RPO obligation is on the higher side. You can just deliberate on that. As my Director Production or maybe my ED Finance, we had some RPO obligations as far as renewable power is concerned, which cost us around INR 70 crores to INR 75 crores. That was the additional cost which we paid because the norm -- government norms has changed. We have to have 30%, 30%...

Basically, our project is basically -- so we were earlier having our RPO obligation of around 3% of our electricity consumption, but now due to [indiscernible], we are bound to have obligation of around 29.4% for the year 24. 25 and 33% for the year 25, 26, so in that connection, we have [indiscernible] around INR 75 crores for the year 24, 25. That has increased the cost.

And what is the other?

There is increase in repair maintenance and the coal [indiscernible] , which was 7.2 lakh in the earlier. Now this quarter, it is INR 9.89 lakh. So in our presentation of accounts, the transportation of coal is captured in the other expenses, not in power and fuel. So that also has added to around INR 10 crores to INR 12 crores. So these are the major things a little bit in CSR expenses and RPO obligation then general administrative expenses increased by around INR 8 crores [indiscernible]. Due to higher volume movement of alumina from refinery to smelter, there is an increase in transportation cost also and a higher export of alumina also that has increased selling distribution expenses. Freight cost is INR 12 crores because of there was little estimation change in last accounting...

We'll take the next question Aditya Welekar.

Am I audible?

Yes, you are audible, Aditya.

Yes. So just on the fifth stream of alumina refinery, sir, what kind of -- in the last call, you have guided on volumes of 5 lakh tonnes from that in FY '27. So we are keeping it that guidance unchanged, correct?

Yes, yes. In FY '27, we'll be aiming for 5 lakh tonnes from that because if you are able to start in June, that much volume we will be getting. 9 months will be there quarters. It is a 10 lakh capacity. 3 quarters, minimum 5 lakh, we should get.

And just related to that, so once the plant stabilizes, what kind of utilization can we expect post the full ramp-up?

Utilization, actually, initially, if we start in June, initially some utilization will be on the lower side. But slowly, maybe within next 6 months, we'll be trying to take it to the rated capacity of 10 lakh tonnes. It will take maybe 3, 4, 5, 6 months. But since it is only a chemical plant, chemical process plant, so it will not take a lot of time. That's why we are taking 5 lakh tonnes for financial year '27.

Understood, sir. Just on a few numbers. In the last call, we have given alumina sales volume guidance of 12.8 lakh tonnes, out of which 12.3 are exports. So those numbers are also unchanged, right?

This year, you are talking for this year?

'26, FY '26.

This year, that will increase. Our exports will increase. Whatever we have done last year. Last year, we have done around [indiscernible] shipment. If you talk in terms of shipment, 36 shipments. This year, we are planning for maybe 41 or 42 shipments. That will increase by maybe 5 shipments. 5 shipments around 1 lakh tonnes to 1.5 lakh tonnes.

So what will be...

Because we are increasing the volume. Overall production volume will increase.

What will be that, sir? Total production volume guidance for this year.

Last year, we have done -- last year, calcined alumina, we have done around 20.7. It was around 20.7. This year, we have planned for 22.5 -- but we are aiming, we will be achieving around 23. So maybe around 2 lakh tonnes or 2.5 lakh tonnes more of production will be there. So in domestic market, we are also increasing our presence. Last year, we have sold around 40,000 in the domestic market. This year, we are planning to will be selling around maybe 1 lakh or 120,000 in the domestic market, and the rest will go to the exports. So export may be around 1 lakh or 150,000 will increase.

Okay. So total sales volume will be 12.8 lakhs.

It will be around more than 12.5 lakhs, 12.8 lakhs.

Understood. Sir, my last question is on that brownfield smelter of 0.5 million tonne. Any progress on the DPR -- in the last call, we said that we can file a revised DPR.

As far as brownfield expansion of smelter is concerned, already DPR preparation activities we have started. For DPR preparation, we have to have a consultant, already appointment of consultant. We are going ahead with that within maybe next 2 months or 3 months, we'll be 2 months, we'll be having consultant 2, 3 months, and he will be there for preparing the DPR. We are planning next maybe 7, 8 months, we will be ready with the DPR to take it to the Board for the approval. What is the time line? Our Director project is here. We will further clarify it.

For this month or this financial year, we'll complete all the DPR preparation and all the activities. And one good thing is that, that land acquisition, which was held up, that has taken shape, and we have completed all the formalities of land acquisition and now the final stage of land acquisition is taking place, so which we'll be completing in another 4 to 6 months. And by this time, our -- all the preparation would be ready. So next financial year, we'll start the tendering process and onboarding the parties.

We'll take the next question from Shrikant Hemant.

Can you hear me?

Yes, you are audible.

This is Srikanth from HSBC. Three questions for the time being. I'd like to take them one by one. So first one is how much of alumina sales in this quarter were on a spot basis and how much were under long-term contracts?

Whatever we have sold in export market, every month, one shipment is going for long term and the rest is going on spot. On an average, 4 shipments per month, we are doing exports.

Okay. Understood. My second question is on pricing. So for long-term contracts, how is pricing determined? Is it linked to LME aluminum prices?

Yes. It is linked to the LME prices and that some percentage is decided on that percentage, it is decided. We do a tender on that tender basis, whoever the tender is going -- giving the maximum percentage on the LME, that is -- order is given on that.