Hindustan Zinc surprises street with strong Q2 performance

Lower mined metal output fails to hurt company's revenue, EBIDTA

Despite a lower year-on-year mined metal production, Hindustan Zinc, a Vedanta Group company, posted better-than-expected results in the September quarter mainly because of higher zinc prices on London Metal Exchange.

The company has reported a net profit of Rs 2,183 crore in the period under review, up 33% from same period last year and churned a topline of Rs 3,749 crore, up 6.5% from same period last year.

The year-on-year increase at revenue level was driven by higher zinc LME prices, which partially offset lower volumes, weak silver prices and appreciating trend in rupee, said the company.

As per bloomberg estimates, Hindustan Zinc was seen reporting a net profit of Rs 1,841 crore and clock revenues worth Rs 3,588 crore.

Reacting to the postively surprising performance, shares of Hindustan Zinc rose 3% to Rs 164 on the BSE today.

Increased consumption of zinc metal by the construction industry have pushed up global prices of the metal on LME, said analysts.

"We are positively surprised to see even zinc premiums go up to $340 per tonne from our expectations of $300 level,"said Abhisar Jain, analyst with Centrum Brokerage. "Higher premiums have also lent strong support to the positive performance of the company," he said.

Premium is a price a consumer pays to the seller on top of the LME price.

Hindustan zinc saw its mined metal production decline 4% year-on-year to 212,575 tonne.

Lower finance cost and increased other income on a year-on-year basis also helped push up the bottomline of Hindustan Zinc in the period under review.

The company reported as finance cost of Rs 1.31 crore as against Rs 8.03 crore last year, while its other income more than doubled to Rs 697 crore.

Earnings before interest, depreciation, taxes and ammortisation of the company in the September quarter rose 5% year-on-year to Rs 2,000 crore and was also up from the market expectation of Rs 1,818 crore. EBITDA was up despite the significant rise in material consumed and increase in mining royalty.

"Positive zinc fundamentals have translated into improved LME prices. At the same time, we continue to demonstrate our committment towards project development and delivering value to stakeholders. We remained focussed on improving the profitability of our operations," the company release said quoting chairman Agnivesh Agarwal.

Though progress at Rampura Agucha underground mine was slower-than-expectation during Apr-Sep period, the mining development rate is expected to pick up during Oct-Mar due to enhancement in productivity and resources, said the company.

The company has reiterated its guidance of marginal growth in mined metal and silver production in the current fiscal and sees integrated zinc-lead metal production move up in line with the mined production in the second half.