Lloyds Metals & Energy Ltd (BOM:512455) (Q1 2027) Earnings Call Highlights: Record Revenue ...

Negative Points

• Consolidated net debt remains high at INR19,000 crore, primarily due to the Chemaf acquisition, though renegotiation is underway.

• Thriveni's margins were impacted by higher fuel costs due to the Gulf crisis, with pass-through negotiations still pending.

• Iron ore EBITDA per tonne remained flat YoY despite higher volumes, as internal consumption increased and sales realizations stayed stable.

• The company faces uncertainty in commodity pricing, with management unable to provide clear guidance on sustainable margins.

• CapEx intensity is high, with INR11,000-11,500 crore planned over the next two years and INR15,000-20,000 crore in the third year, which could strain cash flows.

• The NTPC wage receivable of INR300 crore remains unresolved, with no provision made, and the matter is sub judice, posing a potential risk.

• The larger steel plant capacity expansion is still under study, with no finalized plans, creating uncertainty about future growth timelines.

• Copper projects, including Chemaf and Panguna, are at early stages, with financial closure and commissioning timelines not yet confirmed.

• The company's reliance on exports exposes it to geopolitical and market risks, such as the DRC's copper export ban, though management says it has no impact.

• The fund raise in Thriveni Earthmovers (INR650 crore) is aimed at reducing high-cost debt and funding CapEx, indicating existing debt levels are a concern.

Q & A Highlights

Q: What is the roadmap and CapEx for the copper division's planned growth from 8,000 to 96,000 tonnes, including cadmium? A: Hemankur Upadhyaya (Director of Finance, International Strategy and Operations) stated that one asset's CapEx is already completed as part of the acquisition, totaling around $130 million, and is currently operating at roughly 2,400 tonnes per quarter. The larger JV asset, acquired with US partners, has a total asset book size of over $800 million and requires an additional $300 million-plus to complete. This CapEx will be spent over the next nine months, with operations expected to commence in Q1 of FY28. The company is exploring financing options from US, African, and Indian institutions, with financial closure expected within three months.

Q: Can you provide a breakdown of the pellet segment's profitability, specifically how much is driven by export mix and premiums versus the captive slurry pipeline, and is this margin sustainable? A: Rajesh Gupta (Managing Director) explained that 25% of pellet production is exported. The slurry pipeline provides a structural cost saving of around INR550 per tonne, which will remain. He noted that while market conditions fluctuate between export and domestic sales, the company aims to maintain a product mix that serves both international and Indian customers regularly, implying the margin profile is sustainable.

Q: What is the progress on the BHQ beneficiation plant, and what are the expected grades and recovery rates? A: Rajesh Gupta (Managing Director) confirmed the plant is on schedule for commissioning by March 2028. The recovery rate has been confirmed at 38% against the original assumption of 35%, based on pilot plant tests. The finished product will have a grade of 66-67% iron with total gangue (alumina and silica) of less than 3%. Costs remain within the originally assumed range.

Q: What is the company's peak CapEx plan for the next few years, including international projects? A: Riyaz Shaikh (CFO) outlined that CapEx for foreign operations is planned at around $300 million for this financial year. For ongoing domestic projects, excluding the integrated steel plant (ISP) in Konsari, CapEx is expected to be around INR8,500 crore this year, with INR3,000 crore already spent in Q1. Total CapEx is projected at INR11,000-11,500 crore over the next two years, increasing to INR15,000-20,000 crore in the third year. This excludes any potential investment in the PNG Panguna copper project, which is still under exploration.

Q: Can you quantify the opening inventory of iron ore and the annualized savings from the slurry pipeline? A: Riyaz Shaikh (CFO) confirmed the company had around 1.5 million tonnes of opening iron ore stock, which will be sold during the year, bringing total sales to over 26 million tonnes. Rajesh Gupta (Managing Director) reiterated the slurry pipeline provides a structural saving of INR500-550 per tonne on pellet costs.

Q: What is the status of the projects with Tata Steel, and is there any legroom to further expand the EC limit? A: Hemankur Upadhyaya (Director of Finance, International Strategy and Operations) reported good progress, with the JV plant generating EBITDA of around INR99 crore under a long-term conversion contract. The company has started a small MDO contract at Joda West mines and is evaluating ramping up production and EC capacity at other Tata Steel mines over the next 3-5 years. They are also evaluating a slurry pipeline on a BOT model to connect Tata Steel mines to their plants.

Q: Why has EBITDA per tonne for the iron ore business remained flat year-on-year despite a sharp volume increase? A: Riyaz Shaikh (CFO) explained that while sales prices and EBITDA per tonne have remained stable, a larger portion of iron ore production is now being consumed internally for value-added products like pellets. Rajesh Gupta (Managing Director) added that the margins from iron ore are effectively being transferred to the higher-margin value-added products, which is why the overall company margin has expanded significantly.

Q: What is the reason for the INR650 crore fundraise in Thriveni Earthmovers, and what is the current interest cost? A: SK Naredi (Director of Finance, Thriveni) stated the funds are being raised to reduce high-cost debt, fund CapEx for converting conventional equipment to electric equipment, and invest in overseas subsidiaries for MDO contracts. The current blended interest rate is around 9% to 9.5%, with Q1 interest payments of approximately INR115 crore.

Q: What is the status of the NTPC wage receivable of INR300 crore, and has it affected the working relationship? A: SK Naredi (Director of Finance, Thriveni) clarified that no provision is being made as negotiations with NTPC are ongoing. The matter is sub judice after winning an arbitration award, but they are hopeful of a resolution in the next 2-3 months. He emphasized that the relationship remains strong, as Thriveni is NTPC's largest MDO producer and has recently been awarded a new contract, confirming their preferred partner status.

Q: What is the timeline for the integrated steel plant CapEx, and has the capacity plan changed? A: Rajesh Gupta (Managing Director) stated that the original 3 million tonne capacity plan is being reviewed. Given new technology, the company's success in iron ore mining, and capital market confidence, they are studying the potential to build a larger plant at the same location. However, no final decision has been made or approved by the Board, and no formal announcement can be made until the technical, commercial, and financial studies are complete.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .