Hindustan Zinc (HZL) held its conference call on 21st January 2009 post announcing its results for third quarter ended December 2008. M S Mehta, CEO, along with other senior management members, addressed the call and discussed the business developments and future plans of the company.
Highlights of the concall
- The net revenue of the company for Q3 FY09 stood at Rs 1069 crore, down 37% Y-o-Y. OPM crashed from 63.6% to 28.5% while the PAT dipped by 56% to Rs 369 crore.
- The Company achieved its highest ever quarterly production in Q3 for both mined and saleable metal. During Q3, HZL produced 191,684 tonne of mined metal and 166,539 tonne of saleable metal, an increase of 24% and 40% Y-o-Y.
- The refined zinc and lead production for the quarter stood at 151,735 tonne (46% higher Y-o-Y) and 14,804 tonne (2% higher Y-o-Y).
- During Q3, saleable silver metal production was at 24,722 kilograms, an increase of 23% compared with the corresponding prior quarter. The average silver realization during the quarter was about Rs 17100 per kg. The company expects silver volume to increase to 150 tonne p.a. by FY10.
- The positive impact of increased volume and rupee depreciation was more than offset by the sharp decline in the LME metal prices. Average LME price for zinc and lead during Q3 was US$ 1189 and US$ 1251, 55% and 61% lower respectively.
- The cost of production during Q3 was higher on account of higher input costs of coal, petroleum products, and met coke and lower realization from the sale of by-products. However, towards the end of Q3, the downward trend in the unit cost of key inputs became visible, and is expected to lower the cost of production going forward.
- The construction activities at the 210,000 TPA zinc smelter and 100,000 lead smelter at Rajpura Dariba with its associated 160 MW captive power plant is progressing well and as per schedule. Progress of work at the mining projects at Rampura Agucha, Sindesar Khurd and Kayar is on schedule.
- The cost of production of Zinc during the quarter increased to USD 780 per tonne (including royalty) against USD 670 per tonne in H1 FY09. The management expects the cost to come down in Q4 at USD 670 per tonne level and to further decline by about 5% in FY10.
- The tax rate for full year FY09 is expected at 18-19%.
- The company has expensed about Rs 900 crore so far in FY09 and expects capex of about Rs 1400 crore in FY10.
- The company has revised its target production of refined Zinc and lead metal for FY09 to 630,000 tonne (565,000 tonne zinc and 65,000 tonne lead) from 650,000 tonne guided earlier in Q2 FY09. The domestic demand for zinc has slowed down to some extent from galvanized steel industry.
- Cash and cash equivalents on 31st December 2008 was Rs 9317 crore. This includes Rs 6187 crore in debt mutual funds and Rs 3105 core in fixed deposits with banks. The company does not have any plan at the moment to distribute this cash.