Lloyds Metals & Energy: Q2-25 Earnings Call Highlights
Strong Q2-25 performance. Ambitious capex plan. Favourable iron ore market dynamics. Improving operational efficiency. Beneficiation a key driver of growth. Management confident of achieving targets
lloyds.in | NSE: LLOYDSME
1. Key Takeaways
1.1 TLDR
Lloyds Metals and Energy Limited is in a strong position for continued growth and profitability.
The company is executing its ambitious capex plan efficiently, capitalizing on the favourable iron ore market dynamics, and taking proactive steps to enhance its operational efficiency and environmental sustainability.
The beneficiation project is poised to be a key driver of future growth and profitability, reducing reliance on external sources and providing access to higher-margin products.
The management's confidence in achieving their targets and continued commitment to a debt-free growth trajectory signal a positive outlook for the company.
1.2 Operational Highlights:
Iron Ore:
H1 FY25 volume: 5.37 million tons
Q2 FY25 realization: INR 5,516 per ton (up 19% YoY)
FY25 volume guidance: 13-14 million tons
Beneficiation cost: INR 800 per ton, offset by reduced royalty and transport costs
Sponge Iron:
H1 FY25 volume: 160,974 tons
Realizations: Stable YoY and QoQ
FY25 DRI plant capacity: 330,000 tons
Financial Performance:
H1 FY25 revenue: Up 26% YoY
H1 FY25 EBITDA: Up 37% YoY
H1 FY25 Capex: INR 1,714 crores
FY25 Capex guidance: INR 3,400-3,500 crores
Project Timelines:
Mine expansion (25 million tons): February 2025
Beneficiation plant (all phases): September 2027 (6 months ahead of schedule)
Slurry pipeline: Completed
Grinding unit (10 million tons): March 2025
Pellet plant 1: March 2025
Pellet plant 2: March 2026
DRI plant capacity enhancement: March 2025
Integrated steel plant (phase 1): March 2025
Integrated steel plant (1.2 million tons): September 2026
1.3 Key Themes:
Strong Operational and Financial Performance:
26% YoY revenue growth in H1 FY25 driven by higher iron ore and sponge iron volumes.
37% YoY EBITDA increase in H1 FY25, supported by high margins in both segments.
Positive outlook for the iron ore business due to buoyant domestic demand and strong international prices.
"Our Q2 and H1 FY25 results have been very satisfying and robust, reflecting strong performance on both operations and financial metrics."
Project Updates and Capex:
Completion of the 85km slurry pipeline in record time.
Progressing well on DRI plant in Ghugus, 2nd pellet plant, and 1.2 million ton wire rod mill in Konsari and Ghugus.
Mine expansion permissions received in stages, with anticipated completion within the fiscal year.
INR 1,714 crores capex incurred in H1 FY25, with similar spending expected in H2 FY25.
"All our projects are progressing at breathtaking speed. Several projects are ahead of schedule..."
Iron Ore Price Increase and Beneficiation:
Domestic iron ore prices are rising, with demand outstripping supply. The long-term outlook is positive, with expectations of continued price increases.
Followed NMDC's lead with two price increases in October, leading to higher realizations.
Anticipate cost reduction per ton through operating leverage, slurry pipeline, and beneficiation.
Pilot beneficiation plant achieving better-than-expected results with 68% Fe output.
"We have also taken price hikes... This month...the price increase of two times has been announced by NMDC and we have followed suit – little bit better than that."
Strategic Initiatives and Future Outlook:
Pellet trading commenced as a seed marketing effort for upcoming higher grade pellet production.
Focus on funding future capex through internal accruals and maintaining a debt-free structure.
Expecting robust H2 FY25 performance and continued benefits from strategic projects.
"The fundraising undertaken by the company has supported fast execution of all the projects. Taking queue from Rajesh ji, we foresee a much better H2 FY25."
Important Facts and Figures:
Iron ore volume: 5.37 million tons in H1 FY25
Iron ore realization (Q2 FY25): INR 5,516 per ton (up 19% YoY)
Iron ore EBITDA per ton (Q2 FY25): INR 1,668 (up 17% YoY)
DRI production (H1 FY25): 160,974 tons
IPS benefits received: INR 72 crores
Targeted FY25 capex: INR 3,400 - 3,500 crores
Anticipated FY24-25 iron ore volume: 13-14 million tons
Expected cost reduction per ton post expansion: INR 300 - 400 (mining) + INR 600 (slurry pipeline)
Beneficiation cost: INR 800 per ton, offset by lower royalty and transport costs.
1.4 Key Quotes
On beneficiation: "We believe that the cost would be well under control compared to current in spite of a higher grade."
On capex: "As of today we have all decided it should be without debt, that is what we have decided – we should be continuing."
On the slurry pipeline: "The truck movement is with diesel and this is through pumped power and the slurry reduces this."
Lloyds Metals and Energy Limited Q2 FY25 Earnings Call FAQ
1. What were the key highlights of Lloyds Metals and Energy's Q2 and H1 FY25 performance?
Both Q2 and H1 FY25 results were positive, demonstrating strong operational and financial performance. Iron ore volume reached 5.37 million tons in the first half, and sponge iron production increased significantly year-on-year due to two operational plants. Revenue grew by 26% year-on-year and EBITDA increased by 37% year-on-year. These positive results were driven by higher iron ore and sponge iron volumes and realizations, as well as a one-time income of INR72 crores from the Industrial Promotion Scheme (IPS).
2. What are the updates on Lloyds Metals' key projects and expansion plans?
Several projects are ahead of schedule. Key updates include:
Slurry Pipeline: The 85km slurry pipeline has been completed in record time.
Pellet Plants: The first pellet plant in Konsari will be operational within this fiscal year, with the second plant in Konsari expected to be completed by March 2026.
DRI Plant: The DRI plant in Ghugus is progressing well, with completion targeted for March 2025.
Wire Rod Mill: A 1.2 million ton wire rod mill is progressing as per schedule in both Konsari and Ghugus.
Mine Expansion: Necessary permissions are being received in stages, with expansion expected to be announced within this fiscal year.
Beneficiation Plant: The pilot plant is operational and producing better-than-expected results, with the first phase targeted for completion by the end of FY 2026-27.
3. What is the impact of the recent iron ore price hikes?
Lloyds Metals has increased iron ore prices in line with market trends, including two recent hikes by NMDC. These price increases, excluding royalty payments, are expected to positively impact EBITDA in the third and fourth quarters of FY25, assuming current price levels are maintained.
4. What is the expected iron ore production volume for FY25?
The company anticipates iron ore production to reach 13 to 14 million tons in FY25, assuming the environmental clearance (EC) for the mine expansion is received by mid-February 2025.
5. How will the expansion and operational improvements impact iron ore production cost per ton?
The cost per ton is expected to decrease due to several factors:
Increased Mining: Enhanced mining is projected to reduce the mining, development, and overburden (MDO) cost by INR 150 to INR 200 per ton after stabilization.
Beneficiation: The beneficiation process is expected to further reduce costs by another INR 150 to INR 200 per ton.
Slurry Pipeline: The operational slurry pipeline is projected to decrease transport costs by around INR 600 per ton.
6. How is Lloyds Metals utilizing the newly commissioned slurry pipeline?
Although the pipeline is complete, full utilization is expected to commence around March 2025, coinciding with the pellet plant's operational start date. In the meantime, the company plans to transport ground iron ore to the pellet plant area and potentially dispatch some to customers. The slurry pipeline will significantly reduce transportation costs to the pellet plant, estimated at around INR 50 per ton.
7. What are the future expectations for receiving benefits from the Industrial Promotion Scheme (IPS)?
The recent receipt of INR 72 crores is considered the final installment related to past investments. However, new benefits are expected to commence in FY26 following the completion of the pellet plant and the new DRI plant in Gadchiroli. This will include a 150% benefit on investments in Gadchiroli.
8. What is the outlook for domestic iron ore pricing?
The domestic iron ore market is currently experiencing a price increase due to several factors:
Increased Steel Capacity: An 8% increase in steel plant capacity in the recent quarter has led to higher iron ore demand.
Limited Mine Supply: A lack of new mine announcements has contributed to the supply-demand imbalance.
Discount to International Prices: The Indian iron ore market continues to trade at a significant discount to international prices, potentially leading to further price increases.
Lloyds Metals has commissioned a detailed market study to assess the long-term outlook for iron ore pricing, particularly considering the potential impact of mine expirations in 2030. The study, conducted by BigMint, will also analyze the growth of the steel market and the potential mismatch between steel demand and iron ore supply.
Source: Link to Earning Call Transcript
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