Hindustan Zinc Q3 Financial Results – PAT at Rs. 2,320 Crore – Revenue Rs. 5,348 Crore
Mr. Agnivesh Agarwal, Chairman –
“2016 was a strong year as zinc prices surged over 55 percent during the quarter compared to a year ago. With no new zinc mines being commissioned in the near future, zinc market outlook remains positive for 2017 also. I am pleased to report a five year CAGR of 38 percent in our underground mined metal production. We are uniquely poised to benefit from these dynamics, being the only primary zinc producer in the country.”
Highest ever mined metal production was achieved during the quarter, up 44% from previous quarter and 21% y-o-y. The q-o-q increase was on account of higher volumes from Rampura Agucha open cast mine in accordance with mine plan and the y-o-y increase was driven by higher volumes from Rampura Agucha underground as well as open cast mines. During the nine month period, underground mines ramped up significantly to achieve a substantial 60% y-o-y increase in ore production and 53% y-o-y increase in mined metal production. In line with the plan of substantially higher mined metal production in H2, mined metal production during the nine month period was lower by 15% y-o-y and will be higher than FY 2016 for full year with Q4 being higher than Q3.
Integrated zinc metal production during the quarter was at 205kt, up 38% from previous quarter and flat y-o-y on account of accretion of mined metal inventory. Integrated saleable lead metal production during the quarter was 39kt, up 26% sequentially and 10% y-o-y. The y-o-y increase was in line with mined metal production, while the sequential increase was accentuated on account of enhanced smelter efficiencies. Integrated saleable silver production during the quarter increased by 10% to 118 MT from previous quarter and 2% y-o-y. For the full year, integrated zinc metal production will be lower than FY 2016 in accordance with the low availability of mined metal in H1, however, some quantity of mined metal will be sold in Q4. Saleable lead production for the full year will be in line with FY 2016 and silver production will be higher than FY 2016.
Revenues were at Rs. 5,348 Crore, up by 40% q-o-q and 45% y-o-y. The q-o-q increase was primarily on account of higher volumes and higher zinc & lead LME. The y-o-y increase was mainly driven by substantially higher volumes, higher metal prices and rupee depreciation
The zinc metal cost of production per MT before royalty (COP) during the quarter was at Rs. 58,067 ($861), up 7% q-o-q (6% in dollar terms) and 11% y-o-y (8% in dollar terms). The q-o-q increase in COP was largely on account of onetime change in the ore to waste ratio norm over life of mine and additional excavation in Rampura Agucha open cast, further accentuated by significantly higher mine development in underground mines, increase in coal prices and lower acid realisation, partly offset by higher volume & overall average grade. The y-o-y increase was attributed primarily to the aforementioned one time change in ore to waste ratio norm, substantially higher coal & commodity prices, lower acid realisation and higher mine development.
During the quarter, EBITDA was an all-time record of Rs. 2,757 Crore, up 33% q-o-q and 88% y-o-y.
Net profit during the quarter was at Rs. 2,320 Crore, up 22% q-o-q and 26% y-o-y. The impact of higher EBITDA was partly offset by higher depreciation & tax in both periods while investment income was sequentially lower on account of lower mark to market gains.
Total mine development, across all mines, increased by 26% sequentially and 17% y-o-y to 18,570 meters during the quarter. For nine month period, total mine development has reached 47,330 meters, up 16% from a year ago.
Rampura Agucha underground mine achieved a record ore production rate of over 2 million MT per annum (mtpa) at the exit of the quarter while mine development continued over 4,000 meters benchmark for the fourth quarter in a row. During the quarter, the main shaft sinking at Rampura Agucha reached its ultimate depth of 955 meters. Further, installation of production & service winders was also completed and shaft equipping work commenced during the quarter.
Sindesar Khurd mine achieved highest ever mine development during the quarter at 5,534 metres. Environmental clearance of expansion from 3.75 to 4.5 mtpa ore production and from 4.5 mtpa to 5 mtpa beneficiation at Sindesar Khurd was received in December. Casting of shaft collar and head gear foundation was completed during the quarter in line with the head gear erection completion scheduled for Q4. The power up-gradation project was commissioned ahead of schedule in January. The mill expansion to 1.5 mtpa capacity was also completed ahead of schedule and commissioned in the month of January. However, the Company is deeply anguished to report an unfortunate accident at the project site post mill commissioning, where a rare crane collapse caused four fatalities of contractor employees.
Environmental clearance of 4 mtpa ore production and beneficiation at Zawar was received in January following public hearings. Zawar mill expansion is advancing well and is planned to be completed by Q1 FY 2018 and the power up-gradation project is on track for commissioning by the end of this financial year.
In addition to the on-going mining expansion projects, fumer project commenced this quarter with 18 months completion period. This project will further improve cost and metal recoveries from the Company’s hydro plant and might be replicated in other hydro plants in the coming years.
Further to the Company’s commitment to green energy and subsequent to successful installation of two small roof top solar projects, the Company initiated installation of 16 MW captive solar farms at Debari and Dariba premises. Taking cognizance of green initiatives by the Company, Confederation of Indian Industry (CII)-Indian Green Building Council (IGBC) awarded the highest rating, ‘Platinum’, to the head office building ‘Yashad Bhawan’ in January. It is one of the only 14 CII-IGBC Platinum rated buildings in India and the first in Rajasthan.
Liquidity and investment
As on December 31, 2016, the Company’s net cash and cash equivalents was Rs. 25,319 Crore, out of which Rs. 20,644 Crore was invested in mutual funds and Rs. 4,593 Crore in bonds. The Company follows a conservative investment policy and invests in high quality debt instruments.