Hindustan Zinc Q2 Result – PAT Rs. 2,545 Crore, up 34% y-o-y

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Udaipur: Hindustan Zinc Limited today announced its results for the second quarter and half year ended September 30, 2017.

Mr. Agnivesh Agarwal, Chairman said “I am delighted to note the smooth transition to underground mining. Against a 5 year CAGR of 39% of our mined metal production, we expect this year’s underground growth to be over 60%, demonstrating one of the best transitions globally. As our journey of 1.2 million MT of mined metal is coming closer, we are evaluating the next phase of our capacity expansion. The accelerating LME and record silver volumes are key drivers of our performance this quarter, though the higher commodity cycle is putting some pressure on our cost.”

Mined metal production was at 219kt, 14% higher y-o-y, on account of higher volumes from underground mines. Q-o-Q production declined by 6% due to lower ore treatment. For H1, mined metal production was at 452kt, up 42% y-o-y driven by higher ore production across all mines.
Integrated zinc metal production was 192kt, 29% higher y-o-y and flat sequentially. Integrated lead metal production was 38kt, 24% higher y-o-y and 9% higher q-o-q. This was in line with availability of mined metal. Integrated silver production was at a record high of 140 MT, up 31% y-o-y and 22% q-o-q in line with higher feed from mines.
For H1, integrated zinc, lead and silver production were higher by 54% y-o-y, 32% y-o-y and 30% y-o-y respectively, in line with availability of mined metal.

Financial Performance
Revenues during the quarter were at Rs. 5,232 Crore, an increase of 37% y-o-y and 5% q-o-q (excluding excise duty of previous quarters, revenues would have been up 51% y-o-y and 16% q-o-q). The increase was on account of higher volumes and strong zinc & lead LME, partly offset by rupee appreciation. For H1, revenues were up by 55% y-o-y driven by the reasons mentioned above.
The zinc metal cost of production per MT before royalty (COP) during the quarter was at Rs. 63,288 ($984), up 17% y-o-y (22% in dollar terms) and flat compared to previous quarter. The y-o-y increase was primarily on account of 74% increase in dollar price of imported coal, almost doubling of metcoke prices and higher mine development, partially offset by increase in volumes. For H1, COP was higher by 10% y-o-y (15% in dollar terms) primarily on account of increase in coal and input commodity prices.
The above revenue and cost of production resulted in EBITDA at Rs. 3,052 Crore, up 47% y-o-y and 27% q-o-q while in H1 EBITDA increased by 70% y-o-y to Rs. 5,456 Crore.
During the quarter, exceptional gain was recorded related to reversal of royalty due to write back of Rs. 291 Crore of excess District Mineral Foundation liability for the period January 12, 2015 to September 16, 2015. This was pursuant to judicial pronouncement during the quarter.
Net profit during the quarter was at Rs. 2,545 Crore, up 34% y-o-y and 36% q-o-q while for H1 net profit was up by 50% y-o-y to Rs. 4,421 Crore. The substantial y-o-y increase in EBITDA was partly offset by higher tax rate and lower investment income on account of smaller corpus, in line with the guidance.

During the quarter, the Company sold 220kt of zinc and 30kt of lead forward at a price of $3,084 and $2,418 respectively. Of this, 165kt is for the period January to March 2018 and remaining is for April to June 2018.

Outlook

Production guidance is reiterated with mined metal to be higher than FY 2017, refined zinc-lead metal to be around 950kt and refined silver metal over 500 MT. Based on the significant increase in the commodity prices compared to last year, COP for FY 2018 is likely to be in the range of $900 – $950 per MT. The project capex for the year will be around $300-$325 million. The Company is on track to achieve 1.2 million MT per annum (mtpa) mined metal production capacity by FY 2020.

Expansion Projects
Capital mine development increased by 77% y-o-y and 11% q-o-q to 9,765 meters during the quarter across all mines. For H1, capital mine development was 18,593 meters, up 79% as compared to corresponding prior period.

Rampura Agucha
Mine development of 3,755 meter was achieved during the quarter. The main shaft service winder was commissioned during the quarter while the production winder installation has been completed in October 2017. Four ventilation fans of 2 MW each will be commissioned by year end. Shaft commissioning is on track and production is expected to start as per schedule in Q3 FY 2019.
Sindesar Khurd
Sindesar Khurd mine achieved mine development of 4,619 meters during the quarter. Main shaft equipping was commenced and production is expected to start in Q3 FY 2019. Construction, engineering works and procurement ordering is in full pace for the third mill of 1.5 mtpa capacity scheduled for commissioning by Q2 FY 2019. This will take the total milling capacity at Sindesar Khurd to 5.8 mtpa
Zawar
Zawar mine achieved ever highest mine development during the quarter 7,395 meter. During the quarter, the new Mochia decline was connected to production level enhancing its hauling capacity. Zawar mill debottlenecking was completed and the upgraded capacity of 2.7 mtpa was commissioned. Award of order for a second mill of 2 mtpa capacity was done during the quarter with commissioning scheduled by Q3 FY2019.
Fumer
The Fumer project at Chanderiya is progressing well as per schedule for completion by mid FY 2019. Structure erection and delivery of equipment material has commenced.

Interim Dividend
The Board of Directors has declared an interim dividend of 100% i.e. Rs. 2 per share on equity share of Rs. 2 each. Record date fixed for the interim dividend is October 31, 2017.
Liquidity and investment
As on September 30, 2017, the Company’s cash and cash equivalents was Rs. 19,979 Crore invested in high quality debt instruments. The Company also had Rs. 593 Crore of residual short term commercial paper out of Rs. 7,908 Crore raised in March 2017 to meet the special interim dividend fund requirement.

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