National Aluminium Company Q1 FY27 earnings call

National Aluminium Company Limited (NALCO) delivered a robust performance in Q1 FY27, with total income growing by 39% year-on-year to INR 5,400 crores. This strong top-line growth translated into significant profitability improvements, with Profit Before Tax (PBT) surging by 88% and EBITDA increasing by 78% compared to the same quarter last year. The company also reported its best-ever Q1 production figures for bauxite, hydrate, and wind power, underscoring strong operational efficiency and capacity utilization.

The commissioning of the 5th Stream refinery, a key expansion project, is experiencing a 2-3 month delay. Mechanical completion is now targeted for September end 2026, with actual production expected to commence from November/December 2026. Despite the delay, the refinery is projected to contribute 2 lakh tons of alumina in FY27 and 1 million tons annually from the next fiscal year, which will increase NALCO's total alumina production capacity to 3.1-3.2 million tons.

NALCO is actively pursuing ambitious long-term expansion plans, including a 0.5 million-ton smelter and a 1000 MW power plant. The Detailed Project Report (DPR) for these projects is anticipated to be ready and approved by the Board by October/November 2026. The total capital expenditure for these ventures is estimated at INR 25,000 crores, with the smelter accounting for INR 17,000-18,000 crores. The power plant, a joint venture with Neyveli Lignite, has a total cost of INR 6,000 crores, with NALCO's equity contribution being INR 1,750 crores, and completion targeted by December 2030.

The company faced increased raw material costs in Q1 FY27, with caustic soda, CP coke, and HFO contributing to a INR 15,000-16,000 per ton rise in metal production costs compared to the previous year. However, this was largely mitigated by higher alumina realizations, which averaged $323 per ton in Q1 and are expected to reach $370 per ton in Q2. This increase in alumina prices is attributed to global supply disruptions from Russia and China, helping to offset the rising input costs.

Development of the Pottangi mine, crucial for future bauxite supply, is encountering delays. Local resistance is hindering the construction of an 8-kilometer road necessary for mine operations. Management is actively engaging with district authorities and local communities to resolve these issues, with a revised target to commence production from October onwards. This mine is expected to provide better quality bauxite, potentially improving cost efficiency in alumina production.

Employee costs in Q1 FY27 stood at INR 395 crores, reflecting a reduction compared to previous periods. This decrease is primarily due to the superannuation of high-paid employees, the induction of new staff at entry-level positions, and adjustments in provisions for retirement benefits and Performance Related Pay (PRP). The company anticipates a continued reduction of 170-200 employees per year over the next 3-4 years, contributing to sustained cost management.

NALCO maintains a robust financial position, operating as a zero-debt company with a strong cash balance exceeding INR 10,500 crores as of June 30, 2026. This healthy liquidity provides a solid foundation for funding its significant capital expenditure plans, including the new smelter and power plant projects, primarily through internal accruals and its joint venture for the power plant, without relying on external borrowings.