• The Company total mined metal production in Q3FY20 was 235kt, up 7% sequentially on account of higher ore production and better overall grades. From a year ago, mined metal production was down 5% in Q3 and 3% YTD on account of lower grades at Kayad and Sindesar Khurd (SK) mines, partly offset by higher ore production.

• Integrated metal production was 219kt for the quarter, up 4% sequentially driven by 7% increase in zinc production to 178kt while lead production declined by 7% to 41kt. Integrated zinc production increased in line with higher mined metal availability. The decline in integrated lead production was due to temporary issue at DSC lead smelter. Integrated silver production was 149 MT, up 11% sequentially on account of higher silver grades at SK mine. From a year ago, integrated metal & silver production declined 9% and 16% respectively in Q3 and by 3% and 9% respectively YTD in line with lower mined metal production, lower lead production and lower silver grades.

• For Q3FY20, zinc metal cost of production before royalty (COP) was $1077 (Rs. 76,571) per MT, higher by 3% (4% in Rs) sequentially and higher by 8% y-o-y (7% in Rs). For the nine-month period, zinc COP excluding royalty was $1065, higher by 4% y-o-y (5% in Rs.). The COP during the quarter and the year so far has benefited from lower imported coal prices and higher linkage coal. The sequential increase in COP is due to higher mine development expenses and increased one-time repair & maintenance costs, partly offset by higher volume, operational efficiencies and lower coal costs. The y-o-y increase in COP in Q3 and 9-months included lower grades, higher mine development expense, higher cement prices and lower acid credits, partly offset by lower power costs. The COP has been impacted by higher electricity duty on captive power plants from Rs 0.40 to Rs 0.60 per unit starting July 2019.

• During Q3FY20, LME Zinc prices declined 9% to $2388 per MT, while Lead prices rose 4% to $2045 per MT and Silver prices rose 19% to $17.3/oz.

Management Comments

Commenting on the Q3 performance, Mr Sunil Duggal, CEO, said: "We have delivered good performance in a challenging market environment and are committed to maintain the growth trajectory. We remain focused on our fundamentals of sustainability, efficiency, technology & digitisation to maintain industry leadership and deliver healthy return to our shareholders."

Mr Swayam Saurabh, CFO, said: "Our target is to maintain cost leadership by bringing in operational efficiencies and higher productivity though technology adoption and digital transformation, aided by completion of our key projects."

The total income from operation declined by 16% to Rs 4672 crore for third quarter ended December 2019. The decline in revenue was primarily due to lower volume and a 9% decline in zinc LME prices, partly offset by a recovery in lead LME & silver prices.

The Zinc & Lead segment revenue, contributing 84% of total revenue, dropped 18% to Rs 3908 crore, while Silver segment revenue, contributing 15% of total revenue, rose 2% to Rs 692 crore. The Wind Energy revenue, contributing 1% of total revenue, rose 44% to Rs 26 crore.

Zinc cost of production before royalty (COP) during the quarter was $1077 (Rs 76571) per MT, higher by 8% y-o-y (7% in Rs). The COP during the quarter has benefited from lower imported coal prices and higher linkage coal. The y-o-y increase in COP in Q3 included lower grades, higher mine development expense, higher cement prices and lower acid credits, partly offset by lower power costs. The COP has been impacted by higher electricity duty on captive power plants from Rs 0.40 to Rs 0.60 per unit starting July 2019.

Operating margin (OPM) declined to 220 bps to 49%, thus, operating profit (OP) dropped by 19% to Rs 2289 crore. The drop in OP was primary on account of lower revenue from operation.

At segment level, PBIT of Refined Zinc & Lead segment dropped 39% to Rs 1097 crore, while Silver PBIT rose 4% to Rs 613 crore. Wind Energy segment PBIT rose to Rs 8 crore from Rs 2 crore corresponding previous quarter.

The other income declined by 19% to Rs 445 crore due to market to market gains last year. Interest cost declined by 18% to Rs 42 crore. Depreciation cost rose by 22% to Rs 597 crore on account of higher ore production and higher capitalization. Thus, PBT declined by 26% to Rs 2095 crore. The taxation outgo decreased 25% to Rs 475 crore. Effective tax rate rose 30 bps to 22.7%. Thus, the net profit declined by 27% to Rs 1620 crore.

For Nine Months ended December 2019, the total income from operation of the company was down 9% to Rs 14170 crore on account of an average 9% decline in LME prices and lower volume, partly offset by higher silver prices and rupee depreciation.

OPM decreased by 190 bps to 49%, thus OP declined 13% to Rs 6883 crore. Zinc COP was higher by 4% to $1065 per MT (up 5% to Rs 74881), due to lower imported coal prices and higher linkage coal.

Other income rose 18% to Rs 1464 crore, thus, PBIDT declined 9% to Rs 8347 crore. With rise in interest cost by 55% to Rs 96 crore and rise in depreciation by 30% to Rs 1726 crore, the PBT fell 16% to Rs 6525 crore. The taxation outgo decreased 41% to Rs 1059 crore. The effective tax rate fell to 16.2% from 23.1% corresponding previous period. Thus, net profit dropped by 8% to Rs 5466 crore.

For the financial year ended March 2019 (FY 2019), the total income from operation of the company dropped 4% to Rs 22,118 crore. OPM decreased by 500 bps to 50.5%, thus operating profit declined by 13% to Rs 10,670 crore. Other income rose 4% to Rs 1,782 crore. With drop in interest cost by 54% to Rs 113 crore but rise in depreciation by 27% to Rs 1,883 crore, the PBT before EO fell 15% to Rs 10,456 crore. With NIL EO income during the period as against Rs 240 crore EO income corresponding previous period, the PBT after EO dropped by 16% to Rs 10,456 crore. The taxation outgo decreased 22% to Rs 2,500 crore. With drop in effective tax rate by 240 bps to 23.9%, net profit fell by 14% to Rs 7,956 crore.

• The ongoing mining expansion is in its final phase and on track to achieve capacity of 1.2 million MT per annum.

• Capital mine development increased by 23% y-o-y to 13.3 km in Q3 and by 17% to 36.4 km YTD.

• At Rampura Agucha, UG shaft was commissioned and ore hauling from shaft is expected to start in February 2020. This will allow RA UG to achieve 4.5 mtpa production. Furthermore, it will provide an opportunity to explore Galena zone underneath the shaft.

• At Zawar, the two backfill plants are under commissioning and back filling into voids is expected to commence in February 2020. This will improve mine stability and provide an opportunity for pillar mining to remove left-out high grade ore.

• The Fumer plant at Chanderiya is undergoing hot commissioning and expected to produce first metal by February 2020.

Liquidity and investment

As on 31 December 2019, the Company's net cash and cash equivalents was Rs. 19,513 Crore as compared to Rs. 16,952 Crore at the end of FY 2019 and was invested in high quality debt instruments. The portfolio continues to be rated "Tier –1" implying Highest Safety by CRISIL.

The scrip closed trading at Rs 216.20 on 20^th January 2020 on the BSE.