Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hindustan Zinc Ltd (BOM:500188, Financial) reported its highest-ever first quarter mined and refined metal production at 253,000 tonnes and 262,000 tonnes, respectively.
- The company achieved a significant cost reduction of 7% year-over-year, contributing to a 19% increase in net profit.
- Hindustan Zinc Ltd (BOM:500188) has commenced renewable power supply, with 8.5% of its overall power requirement being catered to by renewable energy.
- The company launched the world's first low-carbon green zinc, produced using renewable energy, which boasts a carbon footprint 75% lower than the global average.
- Hindustan Zinc Ltd (BOM:500188) expanded its domestic primary zinc market share to 78% from 75% last year.
Negative Points
- The company experienced a fatal incident at its Rampura Agucha underground mine, highlighting ongoing safety challenges.
- Saleable silver production dropped by 7% year-over-year due to work-in-progress accumulation.
- There is uncertainty regarding the potential financial impact of a Supreme Court judgment on environmental levies, which could affect the company's contingent liabilities.
- The global zinc prices have been volatile, with uncertainties in the Chinese economy and European slowdown impacting the market.
- The company faces potential challenges in maintaining its cost guidance amidst fluctuating coal prices and power costs.
Q & A Highlights
Q: What are your thoughts on the recent Supreme Court judgment regarding the state's power to levy additional charges, and how might it impact Hindustan Zinc?
A: (Sandeep Modi, CFO) We are awaiting the Supreme Court's final order. The INR142 crore environment cess remains a contingent liability. We believe we have strong legal grounds to argue against any retrospective application of such charges.
Q: Given the decline in production costs, why not revise the cost guidance more optimistically?
A: (Sandeep Modi, CFO) We remain confident in our guidance of $1,050 to $1,100 per tonne. While we are optimistic about maintaining lower costs due to factors like better coal prices and renewable energy, we prefer to stay conservative in our official guidance.
Q: Can you provide more details on the operational timeline and expected contribution of the Debari roaster project?
A: (Arun Misra, CEO) The Debari roaster is expected to be commissioned by Q4 FY25, potentially adding 45 kilotons per annum of zinc production. The cost structure will remain consistent with our current production costs.
Q: What is the status and expected output of the Bamnia Kalan mine?
A: (Arun Misra, CEO) The Bamnia Kalan mine has a potential of about 5 million tonnes of ore with grades similar to the Rajpura Dariba mine. We expect to see the first mineral output by August or September 2026.
Q: How do you see the global demand and pricing for your low-carbon zinc offering?
A: (Arun Misra, CEO) The low-carbon zinc is primarily targeted at customers exporting galvanized steel to Europe, where there is significant pressure to reduce CO2 emissions. We expect this product to be well-received, and its value will be appreciated by our customers. The initial production will be around 60,000 tonnes annually, proportional to our renewable energy consumption.
Q: What is the current status of your renewable energy initiatives and their impact on costs?
A: (Sandeep Modi, CFO) Renewable energy now accounts for 8.5% of our power consumption, and we aim to increase this to 13%. The marginal cost of renewable power is about 30% lower than our highest-cost power sources.
Q: Can you provide an update on your cash and debt balances as of the first quarter?
A: (Sandeep Modi, CFO) As of the first quarter, we have a cash balance of INR10,885 crore and a debt of INR11,200 crore.
Q: What are your expectations for zinc prices and their impact on your financial targets?
A: (Arun Misra, CEO) We are optimistic about zinc prices stabilizing around $2,900 to $3,000 per tonne and silver at $30 to $32 per ounce. These assumptions are factored into our target EBITDA of $2.7 billion.
Q: How do you plan to utilize the additional balance from the general reserve and retained earnings conversion?
A: (Sandeep Modi, CFO) This conversion provides flexibility to the Board for potential shareholder rewards. Specific uses will be decided by the Board and are not yet determined.
Q: What was the mine development run rate during the quarter, and can you indicate the capital and revenue split?
A: (Sandeep Modi, CFO) The mine development run rate was 25 kilometers for the quarter, with a 50-50 split between capital and revenue.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
