Hindustan Zinc Q2 Results: Net corrects sequentially due to high input costs, lower metal prices

The company reported a 36% year-on-year growth in its consolidated top line to Rs 8,336 crore but it corrected by 11% sequentially. Earnings before interest, tax, depreciation and amortisation (EBITDA) grew 32% on-year to Rs 4,390 crore. However, EBITDA took a 17% hit sequentially on account of high power and fuel costs.

Power accounted for around 45% of the company’s costs, compared to a historical average of around 30-32%. This was due to high coal prices, about 90% of which the company imports from countries like Indonesia and South Africa.

Subsequently, consolidated profit improved 33% year on year but went down by 13% sequentially to Rs 2,681 crore.

The average price of zinc on the London Metal Exchange (LME) during the quarter was $3,271 per tonne, higher than the $2,991 last year but significantly lower than the $3,915 in the preceding quarter. Prices of lead and silver saw a similar sequential dip.

However, the company controlled its costs to offset some of the impact of the reduction in metal prices, said Arun Misra, chief executive of Hindustan Zinc.

“We limited the impact by better control over mining to get better grades of ore and through better recovery of metal in the mill,” Misra told ET post earnings.

The depreciation of the rupee also helped the company improve its realisations during the quarter. A weaker rupee aided a benefit to the tune of Rs 150 crore compared to the previous quarter, said Sandeep Modi, the deputy and interim chief financial officer of the company.

Going forward, Misra expects zinc prices on the LME to remain between $3,000 and $3,200 per tonne, lower than the peak of $4,500 reached in March but significantly higher than the historical average.

The company has retained its guidance of refined metal production in the range of over 1 million tonnes, including silver production of 700-725 tonnes in FY23. The capex guidance has been maintained in the range of $125-150 million.

The stock of Hindustan Zinc closed 0.88% higher on the BSE Friday, compared to a marginal increase on the benchmark Sensex. The earnings were declared during trading hours.