India: Godawari’s profit drops over 40% q-o-q on lower realisations

Central India’s leading steelmaker, Godawari Power and Ispat Limited (GPIL), recently announced its Q2FY’23 results. GPIL’s profit after tax (PAT) fell sharply by 48% q-o-q to INR 1,685 million in Q2FY’23 from INR 3,271 million in Q1FY’23.

Performance highlights:

• Iron ore production in Q2 was at 0.62 million tonnes (mnt), a decrease of 18% q-o-q as compared to 0.76 mnt in Q1FY’23.
• The company’s (GPIL’s) pellet production stood at 0.64 mnt in the quarter under review, a marginal decrease of 3% q-o-q compared to 0.67 mnt in Q1FY’23.
• Total pellet sales in Q2 stood at 0.53 mnt, a rise of 30% q-o-q as compared to 0.41 mnt in the previous quarter.
• Total steel billets output for the quarter stood at 34,705 t, a q-o-q fall of 21% compared to 43,942 t in the previous quarter.

Highlights 

• Average pellet sales realisation edges down: GPIL’s average sales realisation stood at INR 8,186/t in Q2FY’23, a fall of 29% q-o-q from INR 11,596/t in Q1FY’23 because of a fall in market rates due to the imposition of export duty.
• EBIDTA down q-o-q: The company’s EBIDTA was recorded at INR 2,308 million in Q2FY’23, a sharp q-o-q fall of 50% as against INR 4,608 million in the previous quarter.
• FY23 pellet output guidance rises: The company increased its iron ore pellets production guidance to 2.6 mnt for FY23.
• Strategies to tackle export duty: GPIL was exporting iron ore pellets prior to the imposition of export duty. As per reports, post the 45% export duty imposition on pellets, the steelmaker diverted its sales to the domestic market due to the company having a competitive advantage for high-grade iron ore pellets.
• Iron ore production capacity to increase in FY’23: The company announced that iron ore production capacity, crushing and beneficiation facilities will increase to 3.05 mtpa in FY23 from the current 2.1/year. A beneficiation plant will be commissioned at the mine in H2FY’23.
• Greenfield steel project delayed: The greenfield steel project is still under the evaluation process owing to delays in land acquisition and environmental clearance.
• Solar plants to replace grid power: The first solar power plant with a capacity of 70MW in Rajnandgaon has been commissioned on 6 August. A 38MW plant will be installed in Khairagarh (earlier Bemetara). The land acquisition is in process and commissioning is expected by Q3FY’23. The third plant with a capacity of 60MW will be set up at the Hira Ferro Alloys Limited facility in Bemetara for which the construction activities have started in mid-April this year and commissioning is expected by Q4FY’23.