India’s major state-owned manganese ore producer – MOIL announced their financial results for Q2 FY21 and in the investor call today they stated that Covid-19 pandemic and lockdown protocols led to severe disruptions in both production and sales, affecting both the turnover and the profit during the current reporting period, Hence, the performance of the company for this period is not comparable with the corresponding period or any period of the previous year. The target for the year was INR 380 Cr, while only INR 220 Cr will be achievable considering the unprecedented times, MOIL confessed.
In the investor’s conference call held today for Q2 FY21 the financial results of MOIL were discussed. Here are some key takeaways from the call:
Production in H1 FY21 fell by 32% CPLY
Production was down in the first six months of FY21, on the back of Covid-led disruption with the trained labourers leaving for their hometowns and as they have mostly underground mines, only the trained labour can operate in these mines. However, the production has picked up in the previous month. In Sep’20 the production reached higher than that in Sep’19.
Sales quantity recorded a drop of 9% in H1 FY21
Sales quantity also had a major drop in H1 FY21, primarily due to the fall in sales volume in Q1 FY21. However, the sales volume improved in Q2 FY21, post the easing up of restrictions and ferro alloys industries came back into operations.
Projects in progress are expected to be delayed by more than half-year
Projects for two new ferro alloys plants and shaft sinking operation at Balaghat and Ukwa mine are still under progress. However, the benefits will be realized only after a few years. Meanwhile, the projects have been delayed by 6-7 months due to the pandemic.
Prices dependent on many factors other than international price parity
MOIL also discussed the pricing strategy for manganese ore, as they are also dependent on Chinese port inventory which is currently at 6.6mn t. Meanwhile, MOIL also stated that pricing will also be adjusted according to the market sentiments prevailing in the manganese alloys industry and the liquidity issue with the producers.
MOIL’s cost of production increased
The cost of production has gone up due to low volume of production during the 6 months of FY 2020-21. As the cost of production is more than net realisable value of inventory in case of some of the grades of Manganese ore, the inventory has been valued at net realizable value for those grades as per the Accounting policy of the Company.
Manganese ore inventory at the beginning of Q2 FY21 was at 190,000t and at the end of the quarter it reduced to 87,000t. The inventory that was there at the close of year-end 31st March 2020 has been liquidated. So, the new sales will be from the newly produced manganese ore.
MOIL expects that the results will be even better in the coming months and that production might reach 1.25mn t in this financial year, while the production target for next year is pegged at 1.5mnt.
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