NATIONALUM - National Aluminium Co. Ltd. Share Price

Management provided a strong outlook for National Aluminium Company Limited (NALCO) following its record-breaking financial performance for FY25. Key highlights include achieving historic revenue and profit margins, supported by integrated operations across the bauxite, alumina, aluminum, and power sectors. The company aims to maintain a robust EBITDA margin of approximately 36-37% in FY26.

Important forward-looking points include:

1. Production Expansion: NALCO is on track with its alumina capacity expansion project, expected to complete mechanical work by early 2026, leading to commercial operations potentially beginning in May or June 2026. The anticipated increase in alumina production for FY26 is targeted at around 22.5 lakh tonnes, reflecting a 2 lakh tonne increase from the previous year.

2. Financial Guidance: For FY26, the company plans a CAPEX of approximately Rs.1,700 crores to enhance operations while projecting a revenue generation similar to FY25.

3. Coal Production: The Utkal coal mines are expected to reach a production capacity of 4 million tonnes in FY26, meeting a significant portion of the company's energy needs, which total around 7.2 million tonnes for its power plant.

4. Cost Management: The CMD indicated ongoing efforts to improve efficiency and reduce costs by optimizing caustic soda consumption, as it contributes a significant portion of alumina production costs. The target cost reduction is projected to be around Rs.1,000 to Rs.2,000 per tonne for alumina.

5. Market Outlook: NALCO projects that while global aluminum demand will grow by 1.5% from FY25 to FY26, alumina prices may stabilize around $400 per tonne amidst fluctuating market conditions influenced by geopolitical factors.

6. Environmental and CSR Initiatives: NALCO continues to prioritize sustainable mining practices and community development through various CSR activities.

Overall, management remains optimistic about overcoming challenges in the aluminum market, driven by increased production efficiencies and strategic expansions. The focus on maintaining financial health and sustainable operations underscores NALCO's commitment to growth and shareholder value.

Questions and Answers from the Earnings Transcript

1. Question: "What were the realisations for alumina in this quarter and how do you see going forward in Q1 and if you can give some output on the Q2 as well?"

   • Answer: In Q4, the net sales realisation for alumina was around $600 per tonne, while the cost of production was Rs.22,000 per tonne. Currently, for Q1, we expect a net sales realisation of approximately $400, with average spot prices slightly improving to about $400.

2. Question: "What is the timeline for our alumina capacity expansion? When will it be commissioned?"

   • Answer: Originally, we projected September 2025 for alumina capacity expansion, but we now anticipate finishing by January or February 2026 due to local issues. Commissioning should start around May or June 2026, following a 2-3 month commissioning phase.

3. Question: "What is your guidance on third-party alumina sales for fiscal 2026?"

   • Answer: This year, we expect to increase domestic sales to around 50,000 to 80,000 tonnes, up from significantly lower sales last year. However, external sales may encounter challenges due to increased alumina availability globally.

4. Question: "What are the CAPEX expectations for the brownfield smelter expansion?"

   • Answer: CAPEX is estimated at Rs.17,000 crores for the smelter expansion, with additional power plant costs. This will take place primarily from FY 2026-27, as the related DPR is being revised.

5. Question: "On the coal mining front, what is your total coal requirement and current performance?"

   • Answer: Our total coal requirement is approximately 7.2 million tonnes. This year, we aim to mine 4 million tonnes from Utkal D and E, with 2 million tonnes already mined last year.

6. Question: "What are the drivers behind the 12% decline in employee costs in FY25?"

   • Answer: Employee costs decreased due to around 430 separations combined with reduced new hire induction, leading to a net reduction. This trend is expected to continue with a further reduction of approximately 250 employees yearly.

7. Question: "Can you explain the status of your GNAL investment?"

   • Answer: GNAL faced challenges leading to a cumulative erosion of net worth. To ease the situation, we're raising funds through a CCD arrangement, with expectations of improved operations if capacity utilization exceeds 90% in the future.

8. Question: "How do you see the alumina demand-supply scenario?"

   • Answer: The alumina market has recently experienced oversupply as new refineries come online in Indonesia and India, which has led prices to drop from previous expectations of around $500 to about $400, and we're projecting a continuing price stabilization around $400.

All answers reflect the organization's insights and forward guidance, encapsulated within the allowed character limit.