The gain in topline was primarily due to higher metal volumes, higher silver prices aided by rupee depreciation partly offset by lower zinc & lead LME prices. Zinc sales volume increased 8% y-o-y and lead by 30% y-o-y in line with higher production. OPM inclined by 520 bps to 52%, thus, operating profit (OP) zoomed by 39% to Rs 2,952 crore.

• The Company total mined metal production for the quarter (Q2FY21) was up 9% y-o-y to 238kt on account of higher ore production resulting from better mine planning and effective targeting with increased use of technology. However, this was partly offset by decline in metal grades and lesser ore treatment. H1FY21 MIC production was up 2% y-o-y in line with higher ore production and increased recoveries, offset by a slight dip in overall metal grades.

• Integrated metal production was 237kt for the quarter, up 13% from a year ago. Integrated zinc production was 180kt, up 9% y-o-y, while integrated lead production was up 29% y-o-y to 57kt in line with higher MIC production, better grades and increased operation of pyro-lead smelter. Integrated silver production was 203 MT, soaring 51% y-o-y on account of higher lead production and better silver grades at SK. H1FY21 metal production was up 2% at 439kt in line with mined metal availability, while silver production was 9% higher y-o-y to 320 MT in line with lead production and improved silver grades at SK.

• Zinc cost of production before royalty (COP) was $919 (Rs 68,228) per MT for the quarter, lower by 12% y-o-y. H1FY21 COP was $965, down 9% y-o-y. The COP benefitted from a number of cost reduction initiatives yielding results, further supported by decline in coal, metcoke and cement prices.

• During Q1FY21, LME Zinc prices declined 1% to $2,335 per MT and Lead prices fell 8% to $1,873 per MT, but Silver prices gained 43% to $24.26/oz.

Management Comments

Commenting on the Q2 performance, Mr Arun Misra, Deputy CEO, said: "On back of streamlined operations, we continue to deliver record volumes despite the challenges posed by the pandemic. We are setting up Hindustan Zinc for its next phase of growth and are confident to deliver superior value to our stakeholders in a sustainable manner."

The total income from operation inclined by 25% to Rs 5,660 crore for second quarter ended September 2020. The incline in revenue was primarily due to higher metal volumes, higher silver prices aided by rupee depreciation partly offset by lower zinc & lead LME prices. Zinc sales volume increased 8% y-o-y and lead by 30% y-o-y in line with higher production.

The Zinc & Lead segment revenue, contributing 75% of total revenue, added 11% to Rs 4,249 crore, while Silver segment revenue, contributing 22% of total revenue, rose 116% to Rs 1,242 crore. The Wind Energy revenue, contributing 1% of total revenue, fell 35% to Rs 42 crore.

Zinc cost of production before royalty (COP) was $919 (Rs 68,228) per MT for the quarter, lower by 12% y-o-y. H1FY21 COP was $965, down 9% y-o-y. The COP benefitted from a number of cost reduction initiatives yielding results, further supported by decline in coal, metcoke and cement prices.

Operating margin (OPM) inclined by 520 bps to 52%, thus, operating profit (OP) gained by 39% to Rs 2,952 crore. The rise in OP was primary on account of higher revenue and lower operating costs.

At segment level, PBIT of Refined Zinc & Lead segment inclined 52% to Rs 1,221 crore, while Silver PBIT rose 117% to Rs 1,080 crore. Wind Energy segment PBIT dropped 44% to Rs 28 crore.

The other income dropped 34% to Rs 390 crore. Interest cost rose by 172% to Rs 68 crore. Depreciation cost was up 10% to Rs 652 crore. Thus, PBT advanced by 26% to Rs 2,622 crore. The taxation outgo increased to Rs 682 crore from Rs 6 crore corresponding previous quarter. The effective tax rate increased to 26% from 0.3% corresponding previous quarter. Thus, the net profit declined by 7% to Rs 1,940 crore.

For half year ended September 2020, the total income from operation of the company was up 2% to Rs 9,649 crore. OPM decreased by 140 bps to 47%, thus OP declined 1% to Rs 4,528 crore. Other income rose 5% to Rs 1,070 crore, thus, PBIDT was flat at Rs 5,602 crore. With rise in interest cost by 122% to Rs 122 crore and rise in depreciation by 6% to Rs 1,196 crore, the PBT fell by 3% to Rs 4,286 crore. The taxation outgo increased 69% to Rs 987 crore. The effective tax rate rose by 990 bps to 23%. Thus, net profit fell by 14% to Rs 3,299 crore.

For the financial year ended March 20210 (FY 2020), the total income from operation of the company was down 12% to Rs 18561 crore on account of an average 12% decline in LME prices and lower volume, partly offset by higher silver prices and rupee depreciation.

OPM decreased by 290 bps to 47.7%, thus OP declined by 17% to Rs 8847 crore. Zinc COP excluding royalty was $1047 (Rs. 74,172), higher by 4% y-o-y (5% in Rs).

Other income rose 9% to Rs 1934 crore, thus, PBIDT declined 13% to Rs 10781 crore. With drop in interest cost by 1% to Rs 112 crore and with rise in depreciation by 21% to Rs 2279 crore, the PBT, as a result, fell 20% to Rs 8390 crore. The taxation outgo decreased 37% to Rs 1585 crore. The effective tax rate fell 500 bps to 18.9%. Thus, net profit dropped by 14% to Rs 6805 crore.

The board of directors of Hindustan Zinc Limited at its meeting held today, has approved interim dividend of Rs. 21.30 per equity share i.e. 1065% on face value of Rs. 2 per share for the financial year 2020-21 amounting to Rs. 9000 crore. The record date for the purpose of determining the eligibility for payment of interim dividend will be 20 October 2020.

• Environmental Clearance (EC) recommended by Expert Appraisal Committee for Zawar mine expansion from 4 to 4.8 mtpa.

• Both the back-fill plants at Zawar are under commissioning and operation is expected to start in Oct'20.

• Due to ongoing Covid-19 restrictions including visa restriction of Chinese nationals, commissioning of Fumer plant at Chanderiya is delayed and efforts are ongoing for an early commissioning.

• As on September 30, 2020, the Company's gross cash and cash equivalents was Rs 27,631 Crore as compared to Rs 20,437 Crore at the end of the first quarter (June'20). During the quarter, Company's raised Rs 5,020 Crore through issuance of non-convertible debentures and a term loan. In addition, short-term commercial paper of Rs 4,778 Crore is outstanding as at end of September 2020. Consequently, the Company's net cash and cash equivalents as at end of September 2020 was Rs 17,833 Crore as compared to Rs 15,480 Crore at the end of the first quarter (June'20) and was invested in high quality debt instruments and fixed deposits.

Outlook

The Company's expects to achieve mined metal and finished metal production of 925-950 KT each and saleable silver production of c.650 MT in FY21. Company's also guided zinc cost of production to remain below $1,000 per MT and project capex between USD100 million and USD140 million for the year.

The scrip closed trading at Rs 222.95 on 20^th October 2020 on the BSE.