Hindustan Zinc Ltd (BOM:500188) Q2 2025 Earnings Call Highlights: Record Production and Strong ...
Revenue: INR 8,252 crore, up 22% YoY.
Net Profit Before Exceptional Item: INR 2,389 crore, up 38% YoY.
Net Profit After Exceptional Item: INR 2,327 crore, up 35% YoY.
EBITDA: INR 4,164 crore, up 33% YoY.
EBITDA Margin: Over 50%, highest in last eight quarters with a 450 bps YoY increase.
Cost of Production: USD 1,071 per ton, lower by 6% YoY.
Mine Metal Production: 256,000 tons, up 2% YoY.
Refined Metal Production: 262,000 tons, up 8% YoY.
Silver Production: 184 metric tons, up 2% YoY and 10% sequentially.
Domestic Primary Zinc Market Share: Improved to 78% from 71% last year.
Hedging Gain: INR 60 crore through strategic hedging program.
Release Date: October 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Hindustan Zinc Ltd (BOM:500188) recorded its highest ever second quarter and half year mined and refined metal production.
The company achieved a significant cost reduction of 6% over the previous year, contributing to a net profit growth of 35% year on year.
Hindustan Zinc Ltd (BOM:500188) has increased its renewable energy power capacity, aiming for a 70% renewable power share, significantly reducing carbon emissions.
The company has maintained a strong EBITDA margin, clocking over 50%, the highest in the last eight quarters.
Hindustan Zinc Ltd (BOM:500188) has improved its domestic primary zinc market share to 78% from 71% last year.
Negative Points
An unfortunate incident occurred at the Sindesar Khurd underground mine, resulting in the loss of two lives.
The company faced technical difficulties with the fumer, impacting its ramp-up and production efficiency.
Hindustan Zinc Ltd (BOM:500188) has not revised its cost of production guidance despite achieving lower costs, indicating potential future uncertainties.
The company is currently dealing with a net debt situation due to substantial dividend payouts.
There are ongoing discussions and uncertainties regarding the expansion to a 2 million ton mine run rate and related exploration strategies.
Q & A Highlights
Q: The Pyro plant was run on lead mode during the quarter. Was this to exhaust existing inventory or to take advantage of higher silver prices? What will be the mode of operation going forward? A: Arun Misra, CEO: We operated on lead mode to take advantage of silver prices. Once we switch modes, returning to zinc requires further distillation. We aim for a continuous operation of four to five months to manage silver in WIP. We plan to switch back to zinc plus lead mode towards the end of the year, depending on zinc prices.
Q: Given the good control on cost of production this quarter, why hasn't the cost guidance been revised? A: Sandeep Modi, CFO: Renewable energy has helped reduce costs, and we expect further benefits as renewable power share increases. We aim to achieve the lower end of our cost guidance, but prefer to maintain the current guidance for now.
Q: Can you share highlights from the consultant's report on expanding to a 2 million ton mine run rate? A: Arun Misra, CEO: The report confirms feasibility, and we are in discussions with global contractors for mine development. We expect to appoint contractors by November. The project is feasible, focusing on mine development and logistics.
Q: What is the sensitivity of EBITDA to changes in zinc and silver prices? A: Sandeep Modi, CFO: Operational factors like lead MIC and concentrate availability also drive pricing decisions. At current silver prices, zinc would need to be around $3,400-$3,500 for break-even in silver and zinc EBITDA.
Q: Do you have any hedges for the second half or next fiscal? A: Sandeep Modi, CFO: We have hedged 100,000 tons of zinc at $3,008 per ton and 83 metric tons of silver at $32.26 per ounce for the second half. No hedges are in place for the next fiscal year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.