Silver surge, weak rupee lift Hindustan Zinc’s Q2 profit despite lower output

The ongoing silver rally and a weaker rupee helped Hindustan Zinc Ltd report a 14% year-on-year jump in its profit for the September quarter, offsetting a sharp dip in metal production.

The company, which makes zinc, lead and silver, reported a consolidated profit of ₹2,649 crore for the quarter. Revenue for the quarter was up 4% to ₹8,549 crore, its highest ever for the July-September period.

Silver production during the quarter was down by a fifth compared to last year to 147 tonnes, limiting the company’s ability to benefit from the ongoing boom in silver prices. Lead production too dropped by 29% to 45,000 tonnes, while zinc production inched up by 2% to 202,000 tonnes.

Moreover, the company has cut its silver sale forecast for the year to 680 tonnes from 700-710 tonnes earlier. Silver is recovered as a byproduct of zinc and lead production.

"Looking ahead, we have revised our FY2026 refined metal guidance to 1,075 kilotonnes plus/minus 10,000 tonnes per annum and silver guidance to 680 tonnes plus/minus 10 tonnes per annum, considering lower plant availability and lower silver input during the first half of the year," said Arun Misra, chief executive officer (CEO) of Hindustan Zinc, in a post-earnings interaction with analysts.

Given that silver production in the first half was relatively slow, achieving the 680-tonne annual guidance will require a stronger second half, said Mishra. “To meet this target, we have redirected resources from other mines to the SK Mine and introduced incentives for contractors and workers to focus on extracting high-silver stopes,” he said, adding that this will help the company maximize output while prices remain strong.

The Sindesar Khurd (SK) Mine, located in Rajasthan, is an underground operation and one of India’s largest sources of silver production.

Prices of silver were, on average, 34% higher year-on-year during the quarter at $39.4 per ounce, even as zinc and lead prices remained relatively flat. The precious metal has now crossed $50 per ounce. Every $1 increase in silver price adds about ₹200 crore in the company’s earnings before interest, tax, depreciation and amortization (Ebitda), as per an investor presentation.

This reflected in the company’s margins. Ebitda, a measure of operating income, rose nearly 7% to ₹4,209 crore despite the lower production numbers. Ebitda margin also improved 139 basis points to 49.2%.

Silver contributed as much as 40% to the company’s profit during the quarter, chief financial officer Sandeep Modi said. “We are well-positioned to leverage commodity tailwinds while strengthening our sustainable value creation through disciplined cost management, growth projects, value-added offerings, and critical mineral development.”

Profitability support

The rupee's downward slide versus the US dollar also helped the company’s profitability. Every ₹1 fall versus the dollar adds about ₹200 crore to the company’s Ebitda. According to its investor presentation, the rupee was on average ₹3.55 lower to the dollar during the quarter compared to the preceding year.

The company’s profitability was also aided by better cost management, with the cost of producing zinc falling 7% year-on-year to $995 per tonne.

“I am delighted to share that we have delivered the best-ever second quarter mined metal production with a 5-year low zinc cost of production of $994 per tonne, reflecting the continuous operational excellence, technology intervention and dedication of our people,” said CEO Misra.

Shares of Hindustan Zinc closed 1.29% lower on the BSE at ₹500.05 compared to a 0.58% gain in the benchmark Sensex. The earnings were disclosed during market hours.

In August, the company’s board approved an investment of ₹3,823 crore in a tailings reprocessing plant at Rampura Agucha with a feed capacity of 10 million tonnes per annum. Expected to be completed by the last quarter of FY28, this plant will help the company extract valuable minerals that exist in trace quantities in its mining waste after extracting zinc, lead and silver.

Earlier in June, the company disclosed its plans to invest ₹12,000 crore in expanding its metal refining capacity by 250,000 tonnes per annum. Presently, the capacity is about 1.1 million tonnes a year. The company said that it has “locked in” the contractors for this expansion, which is expected to be completed by the second quarter of FY29.

Meanwhile, commissioning of the company’s planned 510,000 tonnes a year fertilizer plant at Chanderiya has been delayed by 12-18 months. It is now expected to be operational by the first quarter of FY27. The plant will use sulphuric acid that is generated by the company as a by-product, helping it improve its margins.