Hindustan Zinc Result Update For June Quarter 2012
DSIJ Intelligence / 24 Jul 2012
Hindustan Zinc a part of the Vedanta Group and the largest integrated producers of Zinc-Lead recently announced its result for the June quarter 2012.
Hindustan Zinc a part of the Vedanta Group and the largest integrated producers of Zinc-Lead recently announced its result for the June quarter 2012. The net sales of the company has declined by 3.6% on YoY basis to Rs 2747 crore while the bottomline has seen a marginal jump of 5.78% on YoY basis to Rs 1581 crore. The company has shown weak performance on the back of decline in the realisations of Zinc and lead and also due to lower Zinc volumes. The jump in the net profit was mainly on account of the jump in the other income portion (up by 61% on YoY) and due to fall in the tax rate to 13% VS that of 17% in the same period last year.
| Financial Performance During June Quarter 2012 (Rs Crore) | |||||
|---|---|---|---|---|---|
| Particulars | Jun ' 12 | Jun ' 11 | YoY | Mar ' 12 | QoQ |
| Sales | 2747.7 | 2847.1 | -3.5 | 3135.0 | -12.4 |
| Other Income | 574.3 | 355.4 | 61.6 | 381.1 | 50.7 |
| Raw Material | 53.7 | 21.3 | 152.8 | 83.2 | -35.4 |
| Operating Profit | 1428.6 | 1592.3 | -10.3 | 1659.0 | -13.9 |
| Interest | 12.9 | 6.5 | 98.5 | 2.4 | 436.7 |
| Depreciation | 173.4 | 134.5 | 28.9 | 167.1 | 3.8 |
| Taxation | 235.3 | 307.3 | -23.4 | 449.4 | -47.6 |
| Net Profit / Loss | 1581.3 | 1494.9 | 5.8 | 1412.8 | 11.9 |
| OPM(%) | 52.0 | 55.9 | -3.9 | 52.9 | -0.9 |
| NPM(%) | 47.6 | 46.7 | 0.9 | 40.2 | 7.4 |
The operating performance of the company was also weak. The EBITDA for the quarter has declined by 10.3% on YoY basis to Rs 1429 crore. Margins too saw contraction by 378 bps and stood at 52.7% during the quarter. This was due to jump in the cost of production of Zinc which increased by 19.0% YoY to 45628/tonne during the quarter.
The zinc prices on LME have fallen almost by 15% on YoY basis to $ 1928/ tonne on the back of weakening demand from the Chinese markets. Zinc production volumes declined 16.0% YoY to 161kt due to lower production from Rampura Agucha mines (in line with company’s guidance). However the production was higher for lead and silver which was up by 91% and 75% to 31kt and 82kt respectively.
Expansion Plan
HZL’s current underground mine development work at Rampura Agucha mine and Greenfield Kayar mine development are on running on schedule with commercial production expected from FY2014. Also the company is sitting on huge cash balance and therefore is continuously exploring Greenfield projects through as many 20 prospecting licenses and four mining lease projects across different states.
Conclusion
We believe the performance of the company during the quarter has remained weak mainly on the back of falling Zinc prices and lower demand from the domestic and Chinese market. The company will continue to see pressure on the margins in the coming months on the back of further downfall in the Zinc prices and fall in the demand from Chinese market. However the downfall in the Zinc prices may not be very significant as it is trading at the near to the marginal cost of production which will cap the contraction in the margins.
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