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“Quarterly PAT up 85% (YoY); Highest-ever annual silver production” Hindustan Zinc Limited

“Quarterly PAT up 85% (YoY); Highest-ever annual silver production” Hindustan Zinc Limited 1

Hindustan Zinc Limited, the leading global integrated producer of zinc, lead and silver, reported its results for the fourth quarter and full year ended March 31, 2021.

Commenting on the Q4 and FY performance, Mr Arun Misra, CEO, said: We are conscious of the fact that our country is going through COVID Pandemic the scale of which has not been seen before. We are doing whatever we can including supplying liquid oxygen from our smelters to hospitals in and around Udaipur. We are proud to announce that we delivered record production volumes of mined metal, finished metal and silver production, while ensuring 22-months of fatality-free operations. I am also happy to inform that we exited the year at run-rate of 1.2mtpa. We also maintained our first rank in Asia pacific region in the metals & mining category in Dow jones Sustainability Index for third consecutive year and amongst India’s first companies to be rated ‘A’ in climate change CDP 2020.”

Mr Vinaya Jain, Sr. VP & Head Finance, said: ““Our firm focus on operating efficiencies has led to cost optimization and improved profitability. We delivered highest ever quarterly EBITDA which nearly doubled from same quarter last year, Our PAT is up 85% Y-O-Y and we have achieved lowest ever annual dollar cost of production since the transition to underground mining operations. We will continue our endeavour to improve business efficiencies and reduce costs through enhanced use of technology, digitalization efforts, data-driven decision making and most importantly, investment in people capabilities to sustainably generate industry leading returns and create long term value for all stakeholders.”

Financial Summary

INR. Crore or as stated

ParticularsQ4Q3 FY
Profit After Taxes2,4811,33985%2,20013%7,9806,80517%
Earnings per Share5.873.1785%5.2113%18.8916.1117%
(INR, not annualised)        
Mined Metal Production (‘000 MT)28824915%24418%9729176%
Refined Metal Production (‘000 MT)       
Total Refined Metal       
Saleable Lead2614924%5316%21418218%
Zinc & Lead25622116%2359%9308707%
Saleable Silver3,4 (in MT)20316821%18311%70661016%
Wind Power (in million units)6571-8%617%351437-20%
Zinc CoP without Royalty (INR/MT)68,96972,220-5%69,744-1%70,68174,172-5%
Zinc CoP without Royalty ($/MT)945997-5%9460%9541,047-9%
Zinc LME ($ / MT)2,7502,12829%2,6285%2,4222,4021%
Lead LME ($ / MT)2,0181,8479%1,9016%1,8681,952-4%
Silver LBMA ($ / oz.)26.316.955%24.48%22.916.538%
USD-INR (average)72.9572.451%73.74-1%74.1170.865%

Operational Performance

Mined metal production for the quarter was up 15% y-o-y to 288kt on account of higher ore production, partly offset by lower overall grade. Sequentially, MIC production was up 18% on account of higher ore production and better overall grades. For the full year, MIC production was up 6% y-o-y to record 972 kt primarily on account of higher ore production partially offset by slightly lower grades. This was despite losing 18 days equivalent of production in the fiscal year 2021 due to lockdown and other workforce related restrictions to combat Covid-19.

Sequentially, mined metal production was up 18% mainly on account of improvement in ore grades across mines. For the full year, mined metal production was 972kt, up 6% y-o-y primarily on account of higher ore production.

Integrated metal production was 256kt for the quarter, up 16% y-o-y and up 9% sequentially in line with higher mined metal availability and higher closing MIC inventory. Integrated zinc production was 195kt, up 14% y-o-y and 7% sequentially. Integrated lead production was 61 kt, up 24% y-o-y and 16% sequentially in line with higher mined metal availability.

Integrated silver production was 203 MT, up 21% from a year ago in line with higher lead production, partly offset by lower grades at Sindesar Khurd (SK) mine, while it was up 11% sequentially on account of higher lead production and better grades at SK.

For the full year, metal production was up 7% to 930kt and silver production was up 16% to a record 706 MT in line with higher lead production and better silver grades at SK.

Financial Performance      

Revenue from operations during the quarter was INR 6,725 Crore, an increase of 56% y-o-y led by higher metal & silver volumes, higher zinc, lead & silver prices. Zinc sales volume increased 15% y-o-y and lead by 29% y-o-y in line with higher production and robust demand.

Sequentially, revenue was up 14%, primarily driven higher zinc, lead and silver prices, higher metal premium, partly offset by rupee appreciation. Zinc LME prices were sequentially up 5%, while lead prices were up 6%. For the full year, revenue was higher by 20% to INR22,071 on account of an average 38% increase in silver prices, higher metal & silver volumes, rupee depreciation partly offset by lower zinc premium.

Zinc cost of production before royalty (COP) during the quarter was $945 (Rs. 68,969) per MT, lower by 5% y-o-y, both in INR & USD terms and flat sequentially (down 1% in INR terms). The y-o-y decline in COP is primarily due to higher volume, lower power costs, higher sulphuric acid credits and lower cement costs partly offset by higher met coke and diesel costs.

For the full year, zinc COP excluding royalty was $954 (Rs. 70,681), lower by 9% y-o-y (5% lower in INR terms).  The full year COP decrease reflects higher production volume, lower met coke and power costs, lower cement costs partly offset by higher diesel costs and Covid-related donation.

Overall, the COP for the quarter and FY benefitted from ongoing structural cost reduction initiatives partly offset by increase in mine development. Our steadfast focus on executing critical priorities on all fronts of consumption, contracting, procurement and fixed costs resulted in sustained reduction in costs.

EBITDA for the quarter soared to INR 3,875 Crore, up 98% y-o-y and 17% sequentially on account of higher revenue, favourable pricing environment and well controlled operating costs. EBITDA for the full year was at INR 11,739 Crore, up 33% from a year ago primarily on account of higher LME prices and lower costs.

Net profit for the quarter was INR 2,481 Crore, up 85% y-o-y and 13% sequentially, driven by recovery in metal prices and strict cost discipline. For the full year, Net profit was INR 7,980 Crore, up 17%, wherein higher EBITDA and lower D&A expense was partly offset by lower investment income due to lowering interest rate environment.

Outlook for FY22

Both mined metal and finished metal production in FY2022 will be higher than last year and is expected to be c.1025-1050 KT each.

FY2022 saleable silver production is expected to be higher and projected at c.720 MT.

Zinc cost of production in FY2022 is expected to remain below $1000 per MT.

The project capex for the year is expected to be approximately US$100 million.

Expansion Projects

During the quarter, Shaft Integration at Rampura Agucha Shaft was complete. This improved the accessibility of shaft section, alternate emergency evacuation, ease in mine equipment deployment at lower levels, face charging with emulsion explosives, face drilling with long feed jumbo.

During the quarter, RKD circuit of Fumer plant was commissioned & is now in operation. Delay is primarily on final commissioning of complete plant. This is on account of restrictions around travel outside China. Given the fast-evolving situation with Covid-19 infections in the country, we expect to commission complete Fumer plant by Q2 of this year.

Reserve & Resource (R&R)

Total ore reserves increased from 114.7 million tonnes at the end of FY 2020 to 150.3 million MT at the end of FY 2021 while mineral resources totalled 297.6 million MT. Total R&R increased to 448 million MT as we replenished more than we consumed during the year.

Total contained metal in ore reserves is 9.16 million MT of zinc, 2.55 million MT of lead and 295.5 million ounces of silver and the mineral resource contains 14.9 million MT of zinc, 6.3 million MT of lead and 618.7 million ounces of silver. At current mining rates, the R&R underpins metal production for more than 25 years.

Contribution to the exchequer

During the year, the Company contributed Rs. 15,008 Crore to the Government treasury through royalties and taxes, which is 66% of revenue.

Liquidity and investment

As on March 31, 2021, the Company’s gross cash and cash equivalents was Rs.22,308 Crore as compared to Rs. 21,024 Crore at the end of the third quarter (Dec’20).

The Company’s net cash and cash equivalents as at end of March 31, 2021 was Rs.15,130 Crore as compared to Rs. 10,988 Crore at the end of the third quarter (Dec’20) and was invested in high quality debt instruments.

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