Hindustan Zinc's Q3 net slides 24%, Q4 output seen muted

Hindustan Zinc Ltd (HZL) today reported a 24% decline in net profit at Rs 1,811 crore for the December quarter, hurt mainly by higher expenses and subdued prices.

The firm led by NRI billionaire Anil Agarwal had clocked a net profit of Rs 2,379 crore in the year-ago period, it said in a regulatory filing.

Total income of the company fell 11% to Rs 3,431 crore in October-December this fiscal, from Rs 3,853 crore during the same quarter in 2014-15.

Total expenses, however, rose 8% to Rs 2,123.90 crore during the quarter under review, from Rs 1,972.95 crore a year ago.

HZL Chairman Agnivesh Agarwal said: "We are happy to report a strong refined metal production, with silver touching new highs. However, the current low zinc metal prices are contrary to the market fundamentals."

He added that the firm is carrying out a review of its high-cost operations to ensure they are sustainable in the present weak zinc market.

On outlook, the company said: "While the fourth quarter is expected to be weak as per mine plan, full-year guidance of marginal growth in mined metal production is maintained; production of refined metals will also be ahead of the previous year, with silver being significantly higher."

In the filing, HZL said the company has provided for a liability of Rs 176 crore relating to the period till March 31, 2015 for renewable power obligations.

On financial performance, it said the decline in revenue was due to "impact of higher volumes and rupee depreciation was more than offset by lower LME (London Metal Exchange) prices and zinc premium.

"Ebitda during the quarter was Rs 1,469 crore, which is 30% lower from a year ago, primarily on account of lower LME prices and impact of newly-levied contribution to the District Mineral Foundation of Rs 84 crore," it added.

The decline in net profit is in line with above and due to lower investment income, which has been partly offset by lower tax, HZL said.

As of December 2015, HZL cash and cash equivalents stood at Rs 32,639 crore, of which Rs 23,581 crore was invested in mutual funds, Rs 5,575 crore in bonds and Rs 3,480 crore in fixed deposits.

"The company follows a conservative investment policy and invests in high-quality debt instruments," it added.

Mined metal production was 2,28,082 tonnes in the third quarter compared with 2,42,416 tonnes a year earlier. The fall was mainly on account of a change in mining mix due to higher contribution from Kayad and Sindesar Khurd mine, resulting in lower-average grades.

"Looking at the current downturn in LME prices, the firm has embarked on a journey of reducing cost structures to sustain the competitiveness of its operations," HZL said.