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Informist, Friday, Oct. 18, 2024

By Rajesh Gajra

MUMBAI – Hindustan Zinc Ltd. expects its net debt level to fall to INR 20 bln by the end of March, the company's management told analysts in a post-earnings conference call Friday. With cash and cash equivalent of nearly INR 80 billion and total borrowings of INR 136.7 billion, the company's net debt was INR 56.7 billion as of Sept. 30.

Addressing a query on whether the net debt level will hinder future dividend payouts, and whether the issue was discussed by the company's board at its meeting on Friday, the management said dividend declaration was not on the agenda of Friday's board meeting and was, therefore, not discussed.

In Apr-Sep, Hindustan Zinc generated free cash flow from operations of INR 70.37 billion, out of which INR 36.05 billion came during the September quarter. This does not include capital expenditure of 20.05 billion in Apr-Sep, of which INR 10.04 billion was incurred in the September quarter. The company's management said it will tweak the capital allocation as per ongoing and new capital expenditure incurred on existing and new plants.

GUIDANCE UNCHANGED

The quarter ended September was the best quarter in the last few quarters in terms of metal production and volume growth. The company produced 198,000 tonnes of saleable refined zinc in Jul-Sep, up 7% on year. The volume sold matched the production. Similarly, Hindustan Zinc produced and sold 63,000 tonnes each of saleable refined lead for the September quarter, up 12% on year. It produced and sold 184 tonnes of silver, up 2% on year.

In April, the company had guided for combined refined zinc and lead production of 1.08 million-1.10 million tonnes, and saleable silver production of 750-775 tonnes, for 2024-25 (Apr-Mar). In Friday's investor call, the company's management said that given the good production performance of zinc and lead in the first half of the current financial year and considering a similar improvement in the second half, it was confident of meeting the full year guidance. In Apr-Sep, combined refined production of zinc and lead have risen 5% on year to 524,000 tonnes, while silver production has declined 3% on year to 350 tonnes.

In April, the metals manufacturer, in which promoter Vedanta Ltd. owns 63.42% shares, and the government owns 29.54%, had also given a cost of production guidance of $1,050-$1,100 per tonne for zinc for FY25. The company management told analysts during Friday's conference call that it was confident of achieving the cost guidance at the lower end of the range.

In Apr-Sep, the zinc cost of production without royalty was down 7% on year to $1,089 per tonne. In the quarter ended September, it was lower by 6% on year to $1,071 per tonne which the company said "was on account of higher volume, better linkage coal availability, further supported by softened coal and input commodity prices and operational efficiencies."

FACTORIES UPDATE

To a question on whether plans of setting up a talked-about zinc smelter factory in Gujarat were still on the table, the company's management indicated that it was not being considered any more. In FY24, Hindustan Zinc commissioned a zinc fumer plant at Chanderiya in Rajasthan for recovery of metals from smelter residue. The company has produced 3.3 tonnes of silver and 1,500 tonnes of metal, but has faced "many technical difficulties" in recent months. "We could not get Chinese experts at site because of various visa issues but we have been taking their help remotely," the management said in the call. The company expects the issues to be resolved soon and production resuming from the end of December quarter or early part of March quarter.

The company said progress for the new 160,000 tonnes per annum roaster factory at Debari in Rajasthan was on track with final commissioning targeted by the March quarter. It said the 510,000 tonnes per annum factory being set up by Hindustan Zinc Fertilisers Private Ltd. had a commissioning target of Jul-Sep 2025.

Given the price trajectory in September, when zinc fell 2% sequentially and was up 14% on year at $2,779 per tonne, the company's management said it has taken a strategic hedge of an open position for 99,000 tonnes of zinc at $3,008 per tonne for the expected production of Oct-Mar. Similarly, silver prices have risen 2% on quarter and 25% on year to $29.4 per ounce, and the company has hedged and taken an open position for 83 tonnes of silver at $32.26 per ounce, for the expected production of Oct-Mar.

Shares of Hindustan Zinc ended Friday at INR 506.50, down 0.3%, on the National Stock Exchange of India.  End

US$1 = INR 84.07

Edited by Vidhi Verma

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