Shares of State-owned iron ore miner NMDC fell over 4 per cent on Wednesday, post the disappointing June quarter results announced on Tuesday. The company reported a steep fall in revenues and profits.

 

While the poor show was in line with expectations, the current weakness in the China market and the devaluation of the yuan could mean more pain ahead for the Indian iron-ore major. 

The company has been reducing ore prices for a few quarters now, owing to a fall in global prices and weak local steel demand. Prices of lump ore were cut to Rs 2,950 a tonne in July 2015, a 30 per cent reduction from Rs 4,200 per tonne in January 2015. Fine ore prices have been slashed by 45 per cent to Rs 1,660 per tonne now over the same period.

 

NMDC’s revenue and profits in the June quarter came in at Rs 1,806 crore and Rs 1,010 crore respectively, nearly half of the June 2014 revenue and profits. The current quarter performance was worse than the March quarter numbers when income and profits fell nearly 30 per cent year-on-year. The bright spot was that margins continued to remain healthy at 55 per cent.

 

The company is likely to face continued pressure as iron ore prices are expected to fall further globally. However, a revival in local steel demand may help sales growth and the company is looking at further expansion. Its 7 mt per year capacity mine in Bailadila, Chhattisgarh, was commissioned in April 2015. It also received environment clearance for its 10 mt per year greenfield iron ore mine in the same region. From the current levels of less than 35 mt per year, the company’s targeted output is set at 75 mt by 2018-19 and 100 mt by 2022.

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