Hindustan Zinc Limited : Results for the Second Quarter Ended September 30, 2014
Udaipur. Hindustan Zinc Limited today announced its results for the second quarter ended September 30, 2014.
Mr. Agnivesh Agarwal, Chairman – “Positive zinc fundamentals have translated into improved LME prices. At the same time, we continue to demonstrate our commitment towards project development and delivering value to stakeholders. We remain focused on improving the profitability of our operations.”
Operational Performance
Mined metal production in Q2 FY 2015 was up by 30% sequentially at 212,575 MT, as compared with 163,131 MT in previous quarter and down 4% from 221,646 MT a year ago. For six month period, mined metal production was 375,706 MT as compared to 459,471 MT in H1 FY 2014. This is in line with our mine plan at Rampura Agucha of lower mined metal production in the first half of the year as we excavated more waste than ore and exposed the ore body by September; this will contribute higher volumes in the second half of the year.
Integrated production of refined zinc, lead and silver were up sequentially by 25%, 18% and 21% respectively but were down on year on year basis due to planned lower MIC production in H1 and smelter shutdowns.
The zinc metal cost of production before royalty during the quarter was Rs. 55,154 ($910), which is higher by 9% (12% in USD terms) from a year ago, though it improved significantly from Q1. The increase is attributed to lower production volumes, smelter shutdown costs, increased employee expense on account of long-term wage agreement and higher mine development expenses, partly offset by higher credits and rupee appreciation.
The long term wage agreement will result in an increase of $16 per MT on zinc cost of production on a recurring basis, which is already factored in the above mentioned COP.
Financial Performance
Revenues were up 6% to Rs. 3,749 crore in Q2 FY 2015 from a year ago. The y-o-y increase was driven by higher zinc LME price, partly offset by lower volumes & silver prices and rupee appreciation. In H1 FY 2015, revenues increased by 4% to Rs. 6,712 crore.
EBITDA was up by 5% to Rs. 2,000 crore in Q2 FY 2015 as compared to previous year, primarily due to higher LME prices despite lower volumes and the recent increase in royalty rates[1]. For six month period, EBITDA witnessed a marginal decline of 2%.
Net profit increased by 33% to Rs. 2,184 crore in Q2 FY 2015 as compared to corresponding prior quarter. The impact of EBITDA increase was further accentuated by strong treasury income during the period. In H1 FY 2015, net profit was up by 15% to Rs. 3,801.
Expansion Projects
Mine development has increased 21% in H1 to 24.9 km from 20.6 km a year ago.
All expansion projects are advancing well although the progress of Rampura Agucha underground was slower than expectation in H1. Underground mine development rates at Rampura Agucha are expected to improve during H2 due to enhancement in productivity and resources. To mitigate the risk of delay in expansion projects, mine design and planning for further deepening of the pit at Rampura Agucha is under progress, which will extend the life of the open pit. The preparatory work for pit deepening is likely to be initiated in the last quarter.
Shaft sinking at Sindesar Khurd is ahead of schedule and has reached a depth of 950m while Rampura Agucha main shaft has reached a depth of 430m. Paste fill plants at these locations were completed and capitalised during the quarter.
During the quarter, environmental clearance was received for enhancement of production capacity of Kayad mine from 0.35 MTPA[2] to 1.0 MTPA.
Outlook
We reiterate our guidance of marginal growth in mined metal and silver production in FY 2015. Integrated zinc-lead metal production is expected to witness a strong growth in H2 over H1, in sync with mined metal production growth.
Interim Dividend
The Board of Directors had declared an interim dividend of 95% i.e Rs 1.90 per share on equity share of Rs 2.00 each, as compared to interim dividend of Rs 1.60 per share last year. This was paid out towards the end of the quarter.
Liquidity and investment
As on September 30, 2014, the Company had cash and cash equivalents of Rs. 27,475 crore, out of which Rs. 25,241 crore was invested in mutual funds and Rs. 2,214 crore in bonds. The Company follows a conservative investment policy and invests in high quality debt instruments.