Gujarat Narmada Valley Fert & Chem (GNFC) recently held its quarterly earnings call to discuss the Q1 FY26 results, revealing significant impacts from production shutdowns and strategic moves in its key business segments.

Production Shutdown Impact

The company experienced substantial production shutdowns during the quarter, which had a considerable effect on its financial performance:

• Revenue impact: Rs 375.00 crores
• Bottom-line impact: Rs 148.00 crores

TDI Production and Pricing

Despite the challenges, GNFC reported progress in its Toluene Diisocyanate (TDI) segment:

• TDI production reached 16,000 metric tons for both plants combined in Q1
• The company maintains expectations of 67,000 tons annually
• TDI prices were increased by Rs 12,000.00 effective August 1st
• Sales mix: 90% on contract basis, 10% spot sales

Fertilizer Segment Performance

The fertilizer segment faced increased losses due to multiple factors:

• Losses increased to Rs 100.00 crores
• Lower urea production by 40,000 tons
• Energy under-recovery of Rs 13.00 crores
• Higher repair costs of Rs 45.00 crores

The company expects energy and fixed cost revisions by Q3 FY26, which could potentially improve the segment's performance.

Strategic Initiatives

GNFC has taken several strategic steps to enhance its operations:

• Appointed Kearney as a strategic consultant for cost reduction initiatives and investment pathway planning
• Implementation of these initiatives is expected to begin in Q2
• The company is focusing on both financial benefits and strategic aspects for future growth

Outlook

Management confirmed that no further plant shutdowns are expected for the rest of the year, which should contribute to more stable production levels. The company is also optimistic about potential improvements in the chemical segment, particularly in the second half of the fiscal year when demand typically increases.

Financial Highlights

• The balance sheet saw capitalization of around Rs 225.00 crores during the quarter for ongoing projects
• Other comprehensive income improved due to fair value improvements in investments

GNFC's management remains focused on optimizing production, managing costs, and implementing strategic initiatives to navigate the challenges and capitalize on market opportunities in the coming quarters.

Gujarat Narmada Valley Fertilizers & Chemicals Limited (GNFC) has reported a significant decrease in its financial performance for the first quarter, primarily due to a planned annual shutdown at its Bharuch complex.

Financial Highlights

• Revenue from operations fell to ₹1,601.00 crore, compared to ₹2,021.00 crore in the same quarter last year.
• EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) dropped to ₹310.00 crore from ₹1,530.00 crore year-over-year.
• EBITDA margin contracted to 1.94% from 7.57% in the comparable period.
• Net profit decreased to ₹78.00 crore from ₹115.00 crore in the previous year's corresponding quarter.

Segment Performance

The company's performance was affected across both its major segments:

In the corresponding quarter of the previous year:

• Fertilizers segment revenue was ₹701.00 crore with a loss of ₹44.00 crore.
• Chemicals segment revenue was ₹1,304.00 crore with a profit of ₹150.00 crore.

Factors Affecting Performance

Dr. T. Natarajan, Managing Director of GNFC, attributed the decline in financial results to several factors:

1. Annual Turnaround: The company underwent a planned annual shutdown at its Bharuch complex for 18 days (April 1-18), impacting production volumes.
2. Lower Volume Availability: This affected revenue in both Fertilizer and Chemical segments.
3. Unproductive Costs: The shutdown led to increased unproductive costs.
4. Higher Fixed Costs: Mainly due to repairs and maintenance during the turnaround period.
5. Market Conditions: Tough market conditions prevailed for products like Aniline and TDI, affecting realizations in the chemical segment.

Positive Developments

Despite the challenges, GNFC reported some positive developments:

• Successfully extended the Anti-Dumping Duty on Aniline until July 2030.
• Experienced significant cash flow improvement due to timely receipt of subsidies from the Government of India.
• The company is pursuing revision in both energy and fixed costs with the government, with an expected announcement by the end of the calendar year.

Future Outlook

GNFC remains optimistic about its future prospects:

• The company expects better operational costs for TDI at its Dahej Plant with the likely operationalization of a power plant, potentially improving margins at the Dahej complex.
• At the Bharuch Complex, throughput has stabilized following the annual turnaround.
• GNFC is working on operational improvements and a capex roadmap, with feasibility studies underway for various identified options.

The company continues to work closely with government bodies to ensure fertilizer availability as per allocated priorities. While the Q1 results show a significant decline, GNFC's management emphasizes that these figures are not directly comparable to previous periods due to the impact of the annual turnaround.