Fourth Quarter and Full Year Ended March 31, 2015
Mumbai, April 20, 2015??? Hindustan Zinc Limited today announced its results for the fourth quarter and full year ended March 31, 2015.
Dividend
Final Dividend of 125%, taking the total dividend for the year to 220%, the highest ever
Chairman Agnivesh Agarwal sair, “In our golden jubilee year, we have delivered our best ever performance. The year witnessed favourable zinc market dynamics with falling mine surplus coupled with strong demand, which is likely to boost the price of zinc in coming years too. Another noteworthy event during the year was the enactment of new MMDRA Act 2015, which will bring greater transparency in granting of mineral concessions.”
Operational Performance
Mined metal production during the year was 887kt, marginally higher from a year ago and a new annual record. In Q4 FY 2015, mined metal output was the highest ever at 269kt as compared with 200kt in corresponding prior period and 242kt in previous quarter. The increase was as per the guidance and mine plan of Rampura Agucha mine & Sindesar Khurd mine, driven by higher ore production during the quarter.
Integrated refined zinc, lead and silver metal production was lower by 3%, 5% and 11% respectively during the year due to lower mined metal production in the first half and temporarily lower silver grades at Sindesar Khurd mine. However, higher mined metal production volumes were achieved in the second half resulting in accretion to mined metal inventory, a large part of which will be consumed in FY 2016.
Integrated zinc and lead metal production during the quarter were record high due to higher feed availability and enhanced smelter utilization. Integrated refined zinc production was 217kt, up by 21% y-o-y and 13% sequentially. Production of integrated refined lead was up by 14% y-o-y at 33kt and up 33% sequentially. Integrated saleable silver production during the quarter was up 9% y-o-y and 6% sequentially at 74 MT on account of higher recovery.
The zinc metal cost of production per MT before royalty during the quarter was Rs. 50,831 ($820), lower by 8% from a year ago in dollar terms due to higher production volumes, lower diesel cost and higher acid credits, partly offset by higher landed coal cost and increased employee expense on account of long-term wage agreements signed in mid-year. For FY 2015, net zinc metal cost per MT before royalty was Rs. 53,228 ($870) as compared to Rs. 50,654 ($837) in previous year. The increase was primarily on account of long term wage agreement and higher landed coal cost, partly offset by higher acid realization and lower diesel cost.
Mines and Minerals (Development and Regulation) Amendment Act, 2015 (MMDRA Act)
The new MMDRA Act, notified towards the end of the financial year, brings greater transparency in granting of mineral concessions. It also removes uncertainties relating to mine lease renewals, providing continuity of all our mining leases. However for existing mining leases, it notifies an amount not exceeding royalty, to be contributed to District Mineral Foundation (DMF) for the benefit of people affected by mining and an additional amount equivalent to 2% of royalty to National Mineral Exploration Trust (NMET). While the exact percentage for DMF contribution has not been notified, it can potentially impact mining of low grade and deep ore bodies which will not be conducive to growth of mining in the country.
Financial Performance
Revenues in Q4 FY 2015 were up 13% from a year ago to Rs. 4,073 Crore. The increase was driven by higher zinc sales & LME, partly offset by lower lead & silver prices and silver volumes. For the full year, revenues increased by 8% to Rs. 14,589 Crore primarily on account of higher zinc LME and sulphuric acid realization, partly offset by lower silver prices and lower zinc & silver sales.
The increase in revenue along with reduction in cost of production resulted in 14% y-o-y increase in EBITDA to Rs. 1,978 Crore in Q4. For the year, EBITDA was up 7% to Rs. 7,420 Crore primarily on account of higher revenue and was adversely impacted by higher royalty rates. Zinc royalty increased
from 8.4% to 10% and lead royalty increased from 12.7% to 14.5%, w.e.f September 1, 2014. Royalty rates for zinc and lead in India are the highest in the world and much higher compared to other base metals. In addition, an amount equal to 35% of royalty was provided w.e.f January 12, 2015 for DMF (33%) and NMET (2%), even as notification for DMF contribution under the MMDRA Act is awaited.
With effect from April 1, 2014, the Company has revised the estimated useful lives of certain assets based on a technical study and evaluation of the useful life of the assets conducted in this regard and Management’s assessment thereof. Consequently, the depreciation charge for the quarter and year ended March 2015 is lower by Rs. 180.5 Crore.
Net profit increased by 6% to Rs. 1,997 Crore in Q4 FY 2015 as compared Rs. 1,881 Crore in corresponding prior quarter. In FY 2015, net profit increased by 18% to Rs. 8,178 Crore accentuated by higher treasury income due to mark-to-market gains on account of fall in interest rates.
Dividend
The Board of Directors has recommended a final dividend of 125% i.e. Rs. 2.50 per share on equity share of Rs 2.00 each. The total dividend for FY 2015 is 220% i.e. Rs. 4.40, the highest ever, against FY 2014 dividend of 175%. The pay-out ratio is 27% as compared to 25% in FY 2014, inclusive of dividend distribution tax.
Expansion Projects
The shaft sinking project at Sindesar Khurd is ahead of schedule with the main shaft sinking almost complete; having reached the depth of over 1 km of the planned depth of 1.05 km. Development of associated infrastructure is also progressing well and production from the shaft is planned to commence ahead of schedule, in later half of 2018.
The progress of underground shaft project at Rampura Agucha is behind schedule and has reached a depth of 650 metres of the planned depth of 950 metres. With the planned extension of the open cast mine, our overall production plan will be on track.
Reserve and Resource
During the year, gross addition of 19.4 million MT were made to reserve and resource (R&R), prior to a depletion of 9.4 million MT, adding further to our R&R. Total R&R at March 31, 2015 were 375.1 million MT containing 35.3 million MT of zinc-lead metal and 970 Moz of silver. Overall mine life continues to be 25+ years.
Outlook
We expect significant progress in terms of mine development and ore production from the underground mine projects. Rampura Agucha will continue to provide majority of mined metal in FY 2016, although overall production from this mine will be less than in FY 2015. The gap in production will be made up primarily by higher volumes from Sindesar Khurd
In FY 2016, mined metal production is expected to be higher from FY 2015, while integrated refined metal production, including silver, will be significantly higher as we will process the available mined metal inventory also.
The cost of production excluding royalty is expected to remain stable. There would be an additional outflow towards DMF and National Exploration Trust in accordance with the MMDRA Act 2015.
Liquidity and investment
The Company’s cash and cash equivalents increased by 6% from the end of Q3 FY 2015 and 21% from a year ago. As on March 31, 2015, cash and cash equivalents were Rs. 30,785 Crore, out of which Rs. 23,333 Crore was invested in mutual funds, Rs. 3,921 Crore in bonds and Rs. 3,502 Crore in fixed deposits. The Company follows a conservative investment policy and invests in high quality debt instruments.