The Directors are pleased to inform that Hindustan Zinc delivered strong performancefrom all our underground mines and many benchmarks in operational and financialperformance were set during the year.
I. FINANCIAL PERFORMANCE
We share with you our 52nd Annual Report together with the Audited FinancialStatements for the year ended March 31 2018.
Rs in Crore
|Particulars ||FY 2018 ||FY 2017 |
|Revenue from operations (net of Excise Duty) ||22084 ||17273 |
|Other Income ||1751 ||2474 |
|Profit before depreciation interest and tax ||14263 ||12213 |
|Less: Interest ||283 ||202 |
|Less: Depreciation and amortization expense ||1483 ||1811 |
|Profit before tax ||12497 ||10200 |
|Less: Net tax expense ||3221 ||1884 |
|Net Profit ||9276 ||8316 |
|Earnings per share Rs ||21.95 ||19.68 |
Revenue The Company reported Revenue from operations' (net of excise duty) ofRs 22084 Crore an increase of 28% y-o-y driven primarily by higher metal volumes andprices partly offset by impact of rupee appreciation.
The Other income' was Rs 1751 Crore during the year compared to Rs 2474 Crorein the previous year on account of lower rate of return resulting from a broader declinein interest rates as well as lower investment corpus on account of special dividendpayment.
Net zinc metal cost without royalty during the year was higher by 14% in INR (18% inUSD) at Rs 63583 ($976) primarily due to 38% increase in imported coal prices and metcokeprices and about 15% increase in diesel prices as well as lower ore grades partly offsetby higher metal production.
The above revenue and production cost resulted in Profit before depreciation interestand tax (PBDIT) of Rs 14263 Crore in FY 2018 up 17%.
nET PROFiT The Company reported record net Profit of Rs 9276 Crore 12% higherthan previous year on account for higher PBDIT and lower depreciation partly offset byhigher tax. With effect from April 1 2017 the Company has changed its depreciationmethod and revised certain estimates relating to depreciation resulting in a lower chargefor the full year by Rs 321 Crore.
Net Profit was also impacted by a one-time exceptional gain of Rs 291 Crore related tothe Supreme Court's favourable judgement on District Mineral Foundation (DMF) leviesleading to write back of excess DMF liability for the period January 12 2015 to September16 2015. This was reduced by a one-time exceptional loss of Rs 51 Crore related togratuity provision for earlier years as per the ceiling enhancement announced towards endof the year.
EARNINGS PER SHARE (EPS)
The EPS for the year was Rs 21.95 per share as compared to Rs 19.68 per share in FY2017.
On March 16 2018 the Board of Directors declared second interim dividend of 300% i.e.Rs 6 per share on equity share of Rs 2. Together with the interim dividend of Rs 2 (100%)paid in October 2017 the aggregate interim dividend paid during FY 2018 was Rs 8 pershare (400%) amounting to Rs 4068 Crore including DDT. In view of the second interimdividend no final dividend is recommended.
CREDIT RATING AND LIQUIDITY
CRISIL has reaf_rmed the Company's long-term rating of AAA/Stable and short-term ratingof A1+. The Company's strong financial risk pro_le is driven by its sustained strongliquidity and conservative capital structure as well as its integrated operations highlycompetitive cost position and high-grade reserves.
The Company follows a conservative investment policy and invests in high quality debtinstruments. As on March 31 2018 the Company's cash and cash equivalents was Rs 20395Crore invested in high quality debt instruments and the portfolio is rated "Tier1" implying Highest Safety by CRISIL. During the year the Company paid off Rs8000 Crore of short term commercial paper raised in March 2017 to meet the specialinterim dividend funding requirement.
Rs in Crore
|Particulars ||FY 2018 ||FY 2017 |
|Opening Cash* ||23972 ||35272 |
|Add: EBITDA** ||12376 ||9734 |
|Add: Net Interest Income ||1291 ||2166 |
|Less: Income Tax & Dividend ||13497 ||21310 |
|Less: Capital Account Payments ||2733 ||2008 |
|(Increase) / Decrease in Working Capital & Others ||-1014 ||118 |
|Closing Cash* ||20395 ||23972 |
(*) Includes Cash and Equivalents (refer Note 11 of the Audited Financial Statements)and Current Investments (refer Note 9 of the Audited Financial Statements) (**) Earningsbefore Interest Tax Depreciation and Amortization expenses and Income on investments.
GROSS WORKING CAPITAL
Gross working capital represented by inventory trade receivables and other currentassets decreased from Rs 2486 Crore to Rs 1956 Crore as at March 31 2018 primarily dueto reduction of ore mined metal and stores inventory. The working capital cycle was 32days in FY 2018 as compared to 52 days in FY 2017.
The gross block during the year increased from Rs 20975 Crore to Rs 23879 Crore. Thiswas largely due to the ongoing mining projects and other sustaining capex.
The total capital employed as at March 31 2018 was Rs 15537 Crore as compared to Rs14740 Crore at the end of previous fiscal year. The increase is mainly due to addition infixed assets as reduced by reduction in gross working capital and repayment of temporaryborrowings.
CONTRIBUTION TO THE GOVERNMENT TREASURY
The Company has contributed Rs 9301 Crore during FY 2018 in terms of royalties taxesand dividends to the Government treasury on cash basis aggregating to approximately 42%of the total revenue.
II. OPERATIONAL PERFORMANCE
Mined metal production for FY 2018 was 947 kt 4% higher from a year ago and thehighest ever. This was driven by higher ore production from underground mines partlyoffset by lower open-cast production and lower ore grades. Performance from undergroundmines remained robust attaining best ever ore and mined metal production during the year.
In FY 2018 the Company delivered record integrated refined zinc-lead metal productionat 960kt up 18% from a year ago driven by higher smelter efficiency and uniformavailability of mined metal throughout the year. Integrated zinc production was 791kt ascompared to 672kt a year ago an increase of 18% while integrated saleable leadproduction was 168kt as compared to 139kt from a year ago an increase of 21%.
During the year integrated saleable silver production was a record 558 MT as comparedto 453 MT a year ago an increase of 23% in line with higher lead production.
The Company generated record 4155 million units of power in FY 2018 as compared to3345 million units in FY 2017. Total wind power generation was 414 million units ascompared to 448 million units in FY 2017.
The refined zinc metal sales in the domestic market during the year was 515 kt whileexport sales accounted for 278kt. The aggregate sales were higher by 13.9% than previousyear. Lead metal sales in the domestic market were 139 kt while export sales were 30 ktleading to higher aggregate sales of 22.1% from a year ago. The increase was in line withhigher metal production during the year. Silver sales were 556 MT in FY 2018 all in thedomestic market and 23.9% higher than previous year.
III. RESERVE AND RESOURCE (R&R)
During the year the Company added 19.5 million MT to its R&R prior to a depletionof 12.6 million MT during the period. Total R&R on March 31 2018 were 411.3 millionMT containing 35.7 million MT of zinc-lead metal and approximately 28500 MT of silver.
The announced mining projects are progressing in line with the target of reaching 1.2million MT per annum of mined metal capacity in FY 2020.
UPDATE ON ONGOING EXPANSION PROJECTS
The announced mining projects are progressing in line with the expectation of reaching1.2 million tonnes per annum of mined metal capacity in FY 2020. Capital mine developmentwas 38.5 km during the year an increase of 65% y-o-y.
Rampura Agucha underground reached an ore production run-rate of 3.0 mtpa towards theend of the year. The main shaft hoisting and south ventilation shaft systems werecommissioned during the year while off-shaft development is on track. Production from themain shaft is expected to start as planned from Q3 FY 2019.
Sindesar Khurd mine achieved its target capacity of 5 million tonnes towards the end ofthe year and is gearing up for higher production. The main shaft was equipped during theyear and winder installation work has begun. Production from the shaft is expected tostart as scheduled in Q3 FY 2019. Civil and structure erection for the new mill is ongoingand expected to be commissioned in Q2 FY 2019.
Towards the end of the year orders were placed for paste _ll plants for both theRampura Agucha and Sindesar Khurd mines.
Zawar mines achieved record ore production of 2.2 million tonnes during the year andproduction capacity has been ramped up to 3.0 mtpa. The existing mill capacity wasdebottlenecked to 2.7 mtpa. Civil construction work for the new mill is progressing wellwith commissioning expected by Q4 FY 2019.
Ministry of Environment Forest and Climate Change (MoEF) has given environmentalclearance for the expansion of ore production at the Kayad mine from 1.0 to 1.2 mtpa. TheKayad project is now operating at its rated capacity of 1.2 mtpa.
The Fumer project at Chanderiya is progressing as scheduled and expected to commissionin mid FY 2019
NEXT PHASE OF EXPANSION ANNOUNCED
Based on a long-term evaluation of assets and in consultation with global experts theCompany is evaluating plans to increase its mined metal capacity from 1.2 to 1.5 millionMT per annum. The Board has approved the Phase I of this expansion which will increasemined metal from 1.20 to 1.35 million MT per annum through brown_eld expansion of existingat an estimated capital expenditure of Rs 4500 Crore.
Phase I includes incremental ore production capacity of 0.5 million MT per annum eachat Rampura Agucha Sindesar Khurd and Rajpura Dariba mines bringing the total capacity to5.0 6.5 and 2.0 million MT per annum respectively. The capacity of Zawar mines will beincreased by 1.2 to 5.7 million MT per annum. These projects will take total oreproduction capacity to 20.4 million MT per annum and mined metal capacity from 1.20 to1.35 million MT per annum. Phase I will be completed in three years and will be doneconcurrently with the ongoing expansion which is now in its final stages.
Mined metal and refined zinc-lead production in
FY 2019 is expected to be slightly higher than that of last year filling the gapcaused by completion of open-cast production. Silver production is expected to be in therange of 650 to 700 MT.
COP before royalty is projected to be in the range of USD 950 to 975 per MT in FY 2019.Tax rate is expected to trend up while quarterly depreciation expense is expected to be inthe range of Rs 350 to Rs 400 Crore. The project capex on mining and smelter expansions isexpected to be approximately USD 400 million in FY 2019.
VI. HEALTH SAFETY AND ENVIRONMENT
The Company's efforts towards building a safety culture and achieving its goal of zeroharm has led to reduction in Lost Time Injury Frequency Rate by 10% for the year and by69% over the last 5 years to the lowest ever at 0.27.
Despite our best efforts there were regrettably two fatalities during the year atChanderiya Fumer and Rampura Agucha underground mine project sites. Both the accidentswere investigated and corrective actions have been taken to make workplace safe. Safetyand sustainability initiatives have been discussed in detail in Business Review'which forms a part of this Annual Report.
VII. CORPORATE SOCIAL RESPONSIBILITY (CSR)
The Company's CSR focuses on Education; Sustainable Livelihoods; Women's Empowerment;Health Water and Sanitation; Sports and Culture; Environment; and Community Developmentincluding Community Assets Creation.
During the year the Company spent Rs 92.18 Crore on CSR programs as compared to Rs49.40 Crore in previous year. For further details refer Annexure 5 and BusinessReview' section of this Annual Report.
During the year under review there has been no change in the Directors of the Company.
IX. MANAGEMENT DISCUSSION AND ANALYSIS
The Business Review section of this Annual Report gives a detailed account of theCompany's operations and the market in which it operates including its initiatives inareas such as human resources sustainability and risk management.
X. CORPORATE GOVERNANCE AND BUSINESS RESPONSIBILITY REPORT
As a listed company necessary measures are taken to comply with the listing agreementsof the Stock exchanges. A report on Corporate Governance along with a certi_cate ofcompliance from the statutory auditors forms part of this report. Further BusinessResponsibility Report describing the initiatives taken by your Company from anEnvironmental Social and Governance perspective also forms a part of this report.Various disclosures as required under section 134 and 135 of the Companies Act 2013 areannexed to this report or covered in the Corporate Governance Report such as RelatedParty Transactions; Information and details on conservation of energy technologyabsorption foreign exchange earnings and outgo; extract of annual return; constitution ofvarious Board level Committees; Annual Report on CSR.
XI. DIRECTORS RESPONSIBILITY STATEMENT
As required under Section 134(5) of the Companies Act 2013 the Directors herebycon_rm that:
i. In the preparation of the annual accounts the applicable accounting standards readwith requirements set out under Schedule 3 to the Act have been followed and there are nomaterial departures in the same.
ii. The Directors have selected such accounting policies applied them consistently andmade judgements and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe Profits of the Company for that period.
iii. The Directors have taken proper and suf_cient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities.
iv. The Directors have prepared the annual accounts on a Going Concern' basis.
v. The Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and vi. The Directors have devised proper systems to ensure compliance withthe provisions of all applicable laws and that such systems are adequate and operatingeffectively
The Company had appointed M/s. SR Batliboi & Co. LLP Chartered Accountants asStatutory Auditors of the Company to conduct audit of Financial Statements for the yearended March 31 2018. The Notes to Financial Statement referred to in the Auditors' Reportare self-explanatory and do not call for any further comments. The Auditors' Report doesnot contain any quali_cation or reservation. The only adverse remark given by StatutoryAuditors and Secretarial Auditors (M/s. V. M. and Associates) is for not fulfilling thecriteria of adequate number of Independent Directors which is expected to be compliedsoon.
Pursuant to the orders issued by the Central
Government under section 148 of The Companies Act 2013 the Board has appointed M/s KG Goyal & Co. Cost Accountants for conducting the audit of the cost accounting recordsmaintained by the Company for all its products and M/s V M & Associates CompanySecretaries as the Secretarial Auditors for conducting the Secretarial audit of theCompany.
As per provisions of Section 136 of the Companies Act 2013 the Annual Reportincluding the Audited Accounts for the year will be sent to all the Shareholders.
XIII. PARTICULARS OF EMPLOYEES
Disclosures pertaining to remuneration and other details as required under Section197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 are attached to this report. In terms of the provisionsof Section 197(12) of the Companies Act 2013 read with Rules 5(2) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 a statement showingthe names and other particulars of employees drawing remuneration in excess of the limitsset out in the said Rules forms part of the Report. However having regard to theprovisions of the _rst proviso to Section 136(1) of the Companies Act 2013 the AnnualReport excluding the aforesaid information is being sent to the Members of the Company.The said information is available for inspection at Registered Office of the Companyduring working hours. Any member interested in obtaining such information may write to theCompany Secretary at the registered office and the same will be furnished on request.Further the details are also available on the Company's website: www.hzlindia.com.
The Board of Directors places on record its sincere appreciation of the contributionmade by the employees and the employees' unions in the success of the Company. TheDirectors also sincerely thank the Central Government and the State Governments ofRajasthan Andhra Pradesh Gujarat Karnataka Tamil Nadu Maharashtra Jharkhand andUttarakhand; and the bankers auditors vendors customers and the shareholders of theCompany for their continued support.
For and on behalf of the Board of Directors
|Sunil Duggal ||A. R. Narayanaswamy |
|CEO and Whole-time Director ||Director |
|Place: Mumbai || |
|Date: April 30 2018 || |