Hindustan Zinc's quarter net profit falls 26% to ₹2,038 cr amid low zinc prices

Hindustan Zinc Ltd. (HZL), a subsidiary of Vedanta Ltd., recorded a 26% year-on-year (y-o-y) decline in its consolidated net profit to ₹2,038 crore for the quarter ended March 2024 as lower zinc prices drove down revenue. This is against a net profit of ₹2,583 crore in the corresponding quarter last fiscal year.

The total sales for the company were down by 11% to ₹7,549 crore against ₹8,281 crore in the corresponding quarter of the previous year. The company attributed this fall to lower zinc and lead prices with lower lead volumes, however, the company said higher zinc and silver volumes, silver prices, and favorable exchange rates partly offset this.

“Prices of zinc are getting back to normal while silver remains high. So, we will continue to work on our costs to keep them low so that we maximize the margin when the prices are going up. And we will continue this, month after month, to focus our efforts on delivering more and more in quantity,” said Arun Misra, CEO, HZL. 

“We believe the current operating rhythm will continue in the next quarter, and we will continue to produce at the current production level,” added Misra.

During the fourth quarter ended March 2024, the company recorded earnings before interest, tax, depreciation, and amortization (Ebitda) of ₹3,637 crore with a 47% margin. 

“Despite the plunging metal prices... it's the fifth consecutive quarter of sustained cost reduction, clocking the lowest cost in the last 3 years,” said Sandeep Modi, CFO, HZL.

“I firmly believe that the challenges encountered throughout the year have strengthened our resilience and fortitude, propelling us to strive for even greater performance in the upcoming year towards our aspired annual targets and strong balance sheet,” Modi added.

During the financial year ended March 2024, the company recorded a consolidated net profit of ₹7,759 crore, a decline of 26% y-o-y from ₹10,511 crore recorded for FY23. Consolidated revenue from operations stood at ₹28,932 crore for FY24, a 15% y-o-y decline on account of lower zinc prices and volumes.

The company, Misra said, withstood the market headwinds during the year, ensuring the preservation of margins and shareholder value. Furthermore, fuelled by its robust silver maximization strategy, he said, globally, HZL is now the third largest silver producer.

“FY 2023-24 has been a year of solid growth for HZL, with mined metal, refined metal, and silver recording their highest historic production levels, supported by a backdrop of fatality-free operations. As part of our strategy, it was driven by our increased focus on silver & metal production and cost optimization," Misra added.

Mined metal production during the quarter was 299 kilo tonnes (kt), marginally down y-o-y. However, on account of improved mined metal grades annual mined metal production rose by 2% y-o-y to 1,079 kt.

Refined zinc production for the quarter was 220 kt, up 2% y-o-y while refined lead production for the quarter was 53 kt, down 2%. For the full year, refined zinc production stood at 817 kt, marginally down YoY, and refined lead production was at 216 kt, up 3% y-o-y, on account of pyro operations being operated on lead mode for longer duration during the year to maximize silver production.

The company has also set out a project capex of $270-325 million for FY25. At the end of the financial year 2024, the company's total borrowings stood at ₹8,455 crore.

“Company has a robust free cash flow from operations post capex of ₹9,004 crore for FY24 (sustenance capex of ₹3,038 crore and growth capex of ₹1,172 crore) contributing to a healthy balance sheet,” it added in a statement.