Covid impact: NMDC sticks to last year’s production target of 32 mt

After taking a hit in the final quarter of FY20 due to Covid-19, NMDC, the country’s largest iron ore miner, is sticking to last year’s production target of 32 million tonnes (mt) this financial year.

“We hope to achieve what we did in FY20 and that itself will be a great positive for the company.

April was a complete wash out for us as nearly 50 per cent of production declined. But in May, ore production picked up and we have done 4.1 mt of production and sales,” Amitava Mukherjee, director of finance at NMDC, told Business Standard.

State-owned NMDC was unable to meet its production target last year. The firm produced 31.49 mt and sold 31.51 mt of iron ore in FY20, against production of 32.36 mt and sales of 32.36 mt in FY19.

“We would have beaten the FY19 target in FY20 had Covid-19 not been there. This fiscal, even if there is production or sales slippage in the first quarter, we should be able to cover it up over the next nine months,” added Mukherjee.

The firm’s Q4FY20 results showed earnings before interest, taxes, depreciation, and amortisation (Ebitda) declining by 23 per cent on a year-on-year basis on lower volumes and weaker-thanexpected realisation.

With regard to realisations in FY21, where outlook for domestic steel demand looks bleak amidst slow economic growth, NMDC remained silent about ore price movement during the fiscal.

“We cannot speculate about ore pricing during the year. We will have to take a call as and when, so I rather refrain from speaking on pricing at this juncture,” said Mukherjee.

Brokerages are, however, bearish on iron ore prices in the near term. “While we expect the recent iron ore price cuts to support volumes in the near term, we feel prices will recover from H2FY21. We have lowered our FY21 and FY22 Ebitda estimates by 12 per cent and 13 per cent, respectively,” said Motilal Oswal Research in its report.

During April–may, NMDC has taken a cumulative price cut of ~900 a tonne. Though the challenging business climate is expected to prevail in this fiscal year, too, NMDC hopes to commission its steel plant and could also look at hiring at the plant in a phased manner.