Hindustan Zinc Limited, the leading global integrated producer of zinc, lead and silver, reported its results for the second quarter and half year ended September 30, 2020.
Commenting on the Q2 performance, Mr Arun Misra, CEO, said: “On back of streamlined operations, we continue to deliver record volumes despite the challenges posed by the pandemic. We are setting up Hindustan Zinc for its next phase of growth and are confident to deliver superior value to our stakeholders in a sustainable manner.”
Mr Swayam Saurabh, CFO, said: “Our operational discipline and focussed cost optimisation programmes leveraging technology & digitalisation are driving our cost lower and is evident in our financial performance. Our unwavering focus to invest in high IRR projects and strong cash conversion discipline is enabling us to stay ahead of the curve and deliver industry leading returns”
Financial Summary
INR. Crore or as stated
| Particulars | Q2 | Q1 | H1 | |||||
| 2021 | 2020 | Change | 2021 | Change | 2021 | 2020 | Change | |
| Sales1 | ||||||||
| Zinc | 3,323 | 3,052 | 9% | 2,562 | 30% | 5,885 | 6,561 | -10% |
| Lead | 861 | 672 | 28% | 604 | 42% | 1,465 | 1,356 | 8% |
| Silver | 1,237 | 577 | 114% | 643 | 92% | 1,880 | 1,153 | 63% |
| Others | 239 | 210 | 13% | 180 | 33% | 419 | 428 | -2% |
| Total | 5,660 | 4,511 | 25% | 3,989 | 42% | 9,649 | 9,498 | 2% |
| EBITDA | 2,952 | 2,120 | 39% | 1,599 | 85% | 4,551 | 4,600 | -1% |
| Profit After Taxes | 1,940 | 2,081 | -7% | 1,359 | 43% | 3,299 | 3,846 | -14% |
| Earnings per Share | 4.59 | 4.93 | -7% | 3.22 | 43% | 7.81 | 9.10 | -14% |
| (INR, not annualised) | ||||||||
| Mined Metal Production (‘000 MT) | 238 | 219 | 9% | 202 | 18% | 440 | 432 | 2% |
| Refined Metal Production (‘000 MT) | ||||||||
| Total Refined Metal | ||||||||
| Zinc | 180 | 166 | 9% | 157 | 15% | 338 | 338 | 0% |
| Saleable Lead2 | 57 | 44 | 29% | 44 | 28% | 101 | 91 | 10% |
| Zinc & Lead | 237 | 210 | 13% | 202 | 18% | 439 | 429 | 2% |
| Saleable Silver3,4 (in MT) | 203 | 134 | 51% | 117 | 73% | 320 | 293 | 9% |
| Wind Power (in million units) | 113 | 164 | -31% | 112 | 0% | 225 | 298 | -24% |
| Zinc CoP without Royalty (INR/MT) | 68,228 | 73,754 | -7% | 76,920 | -11% | 72,235 | 73,987 | -2% |
| Zinc CoP without Royalty ($/MT) | 919 | 1,048 | -12% | 1,019 | -10% | 965 | 1,057 | -9% |
| Zinc LME ($ / MT) | 2,335 | 2,348 | -1% | 1,961 | 19% | 2,154 | 2,549 | -15% |
| Lead LME ($ / MT) | 1,873 | 2,028 | -8% | 1,673 | 12% | 1,776 | 1,958 | -9% |
| Silver LBMA ($ / oz.) | 24.26 | 16.98 | 43% | 16.38 | 48% | 20.44 | 15.96 | 28% |
| USD-INR (average) | 74.24 | 70.35 | 6% | 75.48 | -2% | 73.63 | 69.97 | 5% |
(1) Including other operating income
(2) Excluding Captive consumption of 1,786 MT in Q2 FY 2021 as compared with 1,574 MT in Q2 FY 2020 and 1,202 MT in Q1 FY2021.
(3) Excluding captive consumption of 10.2 MT in Q2 FY2021 as compared with 8.2 MT in Q2 FY 2020 and 6.2 MT in Q1 FY2021.
(4) Silver occurs in Lead & Zinc ore and is recovered in the smelting and silver-refining processes.
Contents
Operational Performance
Mined metal production for the quarter was up 9% y-o-y to 238kt on account of higher ore production. Sequentially, mined metal production grew by 18% driven by higher ore production resulting from better mine planning and effective targeting with increased use of technology. However, this was partly offset by decline in metal grades and lesser ore treatment. H1FY21 MIC production was up 2% y-o-y in line with higher ore production and increased recoveries, offset by a slight dip in overall metal grades.
Integrated metal production was 237kt for the quarter, up 13% from a year ago. Integrated zinc production was 180kt, up 9% y-o-y, while integrated lead production was up 29% y-o-y to 57kt in line with higher MIC production, better grades and increased operation of pyro-lead smelter. Integrated silver production was 203 MT, soaring 51% y-o-y on account of higher lead production and better silver grades at SK. Sequentially, integrated metal production was up 18% on account of higher MIC availability. Integrated silver production was up 73% sequentially in line with higher lead production and higher concentrate inventory. H1FY21 metal production was up 2% at 439kt in line with mined metal availability, while silver production was 9% higher y-o-y to 320 MT in line with lead production and improved silver grades at SK.
Financial Performance
Revenue from operations during the quarter was INR 5,660 Crore, an increase of 25% y-o-y led by higher metal volumes, higher silver prices aided by rupee depreciation partly offset by lower zinc & lead LME prices. Zinc sales volume increased 8% y-o-y and lead by 30% y-o-y in line with higher production.
Sequentially revenue soared 42%, primarily driven higher LME prices, higher metal premium, partly offset by rupee appreciation. Zinc & lead LME prices were sequentially up 19% & 12% respectively.
Zinc cost of production before royalty (COP) was $919 (INR 68,228) per MT for the quarter, lower by 12% y-o-y and down 10% sequentially. H1FY21 COP was $965, down 9% y-o-y. The COP benefitted from a number of cost reduction initiatives yielding results, further supported by decline in coal, metcoke and cement prices.
As a continuation from last quarter, we remained focussed on executing critical priorities on all fronts of consumption, contracting, procurement and fixed costs resulting in sustained reduction in costs which has reached its lowest level for a quarter in dollar terms since our transition to a fully underground mining operation in March 2018.
EBITDA for the quarter was INR 2,952 Crore, up 39% y-o-y and 85% sequentially on account of higher revenue and lower operating costs.
Net profit for the quarter was INR 1,940 Crore, up 43% sequentially and down 7% y-o-y due to higher depreciation & amortisation, finance cost and higher tax rate due to change in income mix.
Outlook
We previously guided to achieve mined metal and finished metal production of 925-950 KT each and saleable silver production of c.650 MT in FY21. We also guided zinc cost of production to remain below $1,000 per MT and project capex between USD100 million and USD140 million for the year.
We remain on track to achieve the above guided numbers for FY21.
Expansion Projects
Environmental Clearance (EC) recommended by Expert Appraisal Committee for Zawar mine expansion from 4 to 4.8 mtpa.
Both the back-fill plants at Zawar are under commissioning and operation is expected to start in Oct’20.
Due to ongoing Covid-19 restrictions including visa restriction of Chinese nationals, commissioning of Fumer plant at Chanderiya is delayed and efforts are ongoing for an early commissioning.
Liquidity and investment
As on September 30, 2020, the Company’s gross cash and cash equivalents was INR 27,631 Crore as compared to INR 20,437 Crore at the end of the first quarter (June’20).
During the quarter, we raised INR 5,020 Crore through issuance of non-convertible debentures and a term loan. In addition, short-term commercial paper of INR 4,778 Crore is outstanding as at end of September 2020.
Consequently, the Company’s net cash and cash equivalents as at end of September 2020 was INR 17,833 Crore as compared to INR 15,480 Crore at the end of the first quarter (June’20) and was invested in high quality debt instruments and fixed deposits.
