Vedanta Resources PLC Hindustan Zinc announces Q3 FY18 results (2570C)

TIDMVED

RNS Number : 2570C

Vedanta Resources PLC

18 January 2018

Vedanta Resources plc

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London W1J 8DZ

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www.vedantaresources.com

18 January 2018

Vedanta Resources plc

Hindustan Zinc announces Q3 FY2018 Results

Vedanta Resources plc's subsidiary Hindustan Zinc Limited announced its results today for the second quarter ended 31 December 2017.

Hindustan Zinc Limited

Results for the Third Quarter and Nine Months Ended December 31, 2017

"EBITDA up 18% y-o-y in Q3 and 46% YTD on robust underground mine production and firm metal prices"

Highlights for the quarter

-- Mined metal production at 240kt, up 10% q-o-q and down 13% y-o-y

-- Refined zinc-lead metal production at 245kt, up 7% q-o-q and flat y-o-y

-- Refined silver production at 132 MT, down 6% q-o-q and up 12% y-o-y

-- EBITDA at Rs. 3,261 Crore; up 7% q-o-q and 18% y-o-y

Highlights for 9M

-- Mined metal production at 693kt, up 16% y-o-y

-- Refined zinc-lead metal production at 704kt, up 28% y-o-y

-- Refined silver production at 387 MT, up 24% y-o-y

-- EBITDA at Rs. 8,717 Crore; up 46% y-o-y

Udaipur, January 18, 2018: Hindustan Zinc Limited today announced its results for the third quarter and nine months ended December 31, 2017.

Mr. Agnivesh Agarwal, Chairman -

"I am pleased to report that underground mines contributed to 85% of total production during the year so far, underpinning our successful transition to a fully underground mining company. In the six years of our transformational journey, we have consistently delivered higher production, profitability & record dividends, supported by increasing metal prices. The target of 1.2 million MT of mined metal production is now within our reach."

Financial Summary

(In Rs. Crore, except as stated)

 
 Particulars                                           Q3                    Q2                     9M 
=========================================  =========================  ================  ========================= 
                                             2018     2017    Change    2018    Change    2018     2017    Change 
=========================================  =======  =======  =======  =======  =======  =======  =======  ======= 
 Sales 
 Zinc                                       4,433    4,094      8%     3,903     14%     12,115   8,701     39% 
 Lead                                        788      649      21%      638      24%     2,021    1,484     36% 
 Silver                                      519      483       7%      557      -7%     1,511     1325     14% 
 Others                                      106       95      12%      134      -21%     392      390       1% 
 Total                                      5,846    5,321     10%     5,232     12%     16,039   11,900    35% 
=========================================  =======  =======  =======  =======  =======  =======  =======  ======= 
 EBITDA                                     3,261    2,757     18%     3,052      7%     8,717    5,964     46% 
 Profit After Taxes                         2,230    2,320     -4%     2,545     -12%    6,651    5,259     26% 
 Earnings per Share                          5.28     5.49     -4%      6.02     -12%    15.74    12.45     26% 
 (Rs., not annualised) 
=========================================  =======  =======  =======  =======  =======  =======  =======  ======= 
 Mined Metal Production ('000 MT)            240      276      -13%     219      10%      693      595      16% 
=========================================  =======  =======  =======  =======  =======  =======  =======  ======= 
 Refined Metal Production ('000 MT) 
 Integrated Refined Metal 
            Zinc                             200      205      -3%      192       4%      585      456      28% 
 Saleable Lead(1)                             46       39      18%       38      20%      118       94      26% 
 Zinc & Lead                                 245      244       0%      230       7%      704      550      28% 
            Saleable Silver(2,3) (in MT)     132      118      12%      140      -6%      387      314      24% 
 Total Refined Metal 
      Zinc                                   200      205      -3%      192       4%      585      457      28% 
      Saleable Lead(1)                        46       39      18%       38      20%      118       94      26% 
      Zinc & Lead                            245      244       0%      230       7%      704      551      28% 
      Saleable Silver(2,3) (in MT)           132      118      12%      140      -6%      387      314      24% 
 Wind Power (in million units)                57       53       8%      143      -60%     356      373      -5% 
=========================================  =======  =======  =======  =======  =======  =======  =======  ======= 
 Zinc CoP without Royalty (Rs. / MT) (4)    66,118   58,067    14%     63,288     4%     64,079   57,198    12% 
 Zinc CoP without Royalty ($/ MT) (4)       1,022     861      19%      984       4%      994      852      17% 
=========================================  =======  =======  =======  =======  =======  =======  =======  ======= 
 Zinc LME ($ / MT)                          3,236    2,517     29%     2,963      9%     2,935    2,230     32% 
 Lead LME ($ / MT)                          2,492    2,149     16%     2,334      7%     2,331    1,913     22% 
 Silver LBMA ($ / oz.)                      16.73    17.19     -3%     16.84     -1%     16.92    17.88     -5% 
 USD-INR (average)                          64.74    67.46     -4%     64.29      1%     64.49    67.12     -4% 
=========================================  =======  =======  =======  =======  =======  =======  =======  ======= 
 

(1) Excluding Captive consumption of 1,786 tonnes in Q3 FY 2018 as compared with 1,731 tonnes in Q3 FY 2017 and 1,634 tonnes in Q2 FY2018. For 9M, it was 5,376 tonnes as compared with 3,652 tonnes a year ago.

(2) Excluding captive consumption of 9.275 tonnes in Q3 FY2018 as compared with 8.918 tonnes in Q3 FY 2017 and 8.750 tonnes in Q2 FY2018. For 9M, it was 28.229 tonnes as compared with 18.745 tonnes a year ago.

(3) Silver occurs in Lead & Zinc ore and is recovered in the smelting and silver-refining processes.

(4) The COP numbers are after adjusting for deferred mining expenses under Ind-AS. Without this adjustment, Zinc CoP per MT without Royalty would have been Rs. 67,082 in Q3 FY 2018

Note:

1) Historical numbers have been revised as per Ind-AS reporting

2) Sales is reported net of Goods and Services Tax, whereas in the previous quarters Sales was inclusive of Excise Duty

3) Numbers may not add up due to rounding off; historical numbers may have changed due to regrouping

Operational Performance

Mined metal production in Q3 FY 2018 was up 10% sequentially at 240kt due to higher ore treatment. The y-o-y decrease was 13% driven primarily by decline in overall ore grades due to mine mix and lower production from Rampura Agucha open-cast mine, even as total ore treated was higher. For the nine-month period, mined metal production was up by 16% to 693kt from a year ago due to higher ore production from underground mines, partly offset by lower open-cast mine production.

Integrated zinc metal production was 200kt tonnes, 4% higher sequentially and 3% lower y-o-y. Integrated lead metal production was 46kt tonnes, 20% higher q-o-q and 18% higher y-o-y. This was in line with availability of mined metal and smelters. Integrated silver production was at 132 tonnes, 6% lower q-o-q on accumulation of WIP and up 12% y-o-y in line with higher lead production.

For the nine-month period, integrated zinc, lead and silver production were higher by 28% y-o-y, 26% y-o-y and 24% y-o-y respectively, in line with higher availability of mined metal.

Financial Performance

Revenues during the quarter were at Rs. 5,846 Crore, an increase of 12% q-o-q and 10% y-o-y. The y-o-y increase was due to higher lead & silver volume and strong zinc & lead LME, partly offset by lower zinc volume and rupee appreciation. For the nine-month period, revenues were up by 35% y-o-y driven primarily by higher metal volumes and prices.

The cost of production before royalty (COP) for zinc during the quarter was at Rs. 66,118 per MT ($1,022), up 4% in INR and USD terms, compared to the previous quarter and up 14% y-o-y in INR and 19% in USD terms. The y-o-y increase was primarily on account of about 25% increase in prices of metcoke & imported coal and other commodities, and lower overall grades. For the nine-month period, COP was higher by 12.0% in INR and 17% in USD at Rs. 64,079 ($994) primarily due to over 50% increase in prices of metcoke & imported coal and other commodities.

EBITDA for the quarter came in at Rs. 3,261 Crore, up 18% y-o-y and 7% q-o-q while YTD EBITDA increased by 46% y-o-y to Rs. 8,717 Crore.

Net profit during the quarter was at Rs. 2,230 Crore, down 4% y-o-y and 12% q-o-q while for YTD net profit was up by 26% y-o-y to Rs. 6,651 Crore. Lower investment income on account of smaller corpus and lower rate of return and higher depreciation & tax rate partly offset gains in EBITDA. Excluding a one-time exceptional gain of Rs. 291 Crore in Q2 related to the Supreme Court's favourable judgement on District Mineral Fund levies, net profit during the quarter was at similar level as compared last quarter.

As announced last quarter, the Company has done forward sale of 220kt of zinc and 30kt of lead at $3,084 and $2,418 respectively for the period January to June 2018. Of this, 165kt (150kt of zinc and 15kt of lead) is for Q4 FY 2018 and remaining from April to June 2018. There were no further forward sales during the quarter.

Outlook

Production guidance for FY 2018 is reiterated with mined metal to be higher than FY 2017, refined zinc-lead metal of about 950kt, refined silver metal of over 500 MT. Zinc COP for FY 2018 is projected to be in the range of $950 to $975 per MT due to continued increase in commodity prices offsetting benefit of higher volume and cost efficiency measures. The Company is on track to achieve 1.2 million MT per annum (mtpa) mined metal production capacity by FY 2020.

Expansion Projects

Capital mine development increased by 55% y-o-y and was flat q-o-q to 9,685 meters during the quarter across all mines. For the nine-month period, capital mine development was 28,126 meters, up 69% as compared to corresponding prior period.

Rampura Agucha underground mine achieved the highest ever mine development for the quarter at 5,958 meters, 11% higher than the previous best. The underground mine has crossed ore production run rate of 2.0 mtpa. The main shaft hoisting system was commissioned during the quarter and is now in operation for waste hoisting. South primary ventilation system is progressing on fast track and expected to commission by end of January 2018. Off shaft development is on track and production from the shaft is expected to start as per schedule from Q3 FY2019.

Sindesar Khurd mine achieved mine development of 4,527 meters during the quarter. It crossed 4.5 mtpa run-rate for ore production during the quarter. Main shaft equipping is progressing as per schedule and on track for completion in Q4 FY2018, with production from the shaft expected to start as per schedule in Q3 FY2019. Civil and structure erection for the new 1.5 mtpa mill is going on at full swing and expected to commission in Q2 FY 2019.

Zawar mine achieved mine development of 6,555 meters during the quarter. Post completion of the Zawar mill debottlenecking to 2.7 mtpa, detailed engineering and site construction work for the new mill of 2.0 mtpa has commenced. The new mill is expected to commission in Q3 FY 2019.

Kayad and Rajpura Dariba: The Expert Appraisal Committee of MoEF has approved expansion of ore production at Rajpura Dariba from 0.9 to 1.08 mtpa and at Kayad from 1.0 to 1.2 mtpa. This will pave the way for higher production from these mines in the near future.

Fumer project at Chanderiya is progressing as per schedule. Civil construction work is 70% complete and the project is on track to get commissioned by mid-FY 2019.

Liquidity and investment

As on December 31, 2017, the Company's cash and cash equivalents was Rs. 19,176 Crore invested in high quality debt instruments. During the quarter, the Company paid off the remaining Rs. 593 Crore of short term commercial paper, which was raised in March 2017 to meet the special interim dividend funding requirement.

Earnings Call on Monday, January 18, 2018 at 3:30 pm (IST)

The Company will hold an earnings conference call on Thursday, January 18, 2018 at 3:30 pm IST, where senior management will discuss the Company's results and performance. The dial in number for the call is:

Dial In: [phone]

For further information, please contact:

 
 Preeti Dubey, CFA       Pavan Kaushik 
  Investor Relations      Associate Vice President 
  [e-mail]    Corporate Communications 
  Tel: [phone]    [e-mail] 
                          Tel: [phone] 
 

About Hindustan Zinc

Hindustan Zinc (NSE & BSE: HINDZINC) is the one of the largest integrated producers of zinc-lead with a capacity of 1.0 million MT per annum and a leading producer of silver. The Company is headquartered in Udaipur, Rajasthan in India and has zinc-lead mines at Rampura Agucha, Sindesar Khurd, Rajpura Dariba, Zawar and Kayad; primary smelter operations at Chanderiya, Dariba and Debari, all in the state of Rajasthan; and finished product facilities in the state of Uttarakhand.

Hindustan Zinc has a world-class resource base with total reserve & resource of 404.4 million MT and average zinc-lead reserve grade of 11.0%. The Company has a track record of consistently growing its reserve & resource base since 2003 and currently has a mine life of over 25 years.

The Company is self-sufficient in power with an installed base of 474 MW coal-based captive power plants. Additionally, it has green power capacity of 324 MW including 274 MW of wind power, 16 MW of solar power and 35 MW of waste heat power. The Company has an operating workforce of nearly 17,600 including contract workforce.

Hindustan Zinc is a subsidiary of the BSE and NSE listed Vedanta Limited (formerly known as Sesa Sterlite Limited; ADRs listed on the NYSE), a part of London listed Vedanta Resources plc, a global diversified natural resources company.

Disclaimer

This press release contains "forward-looking statements" - that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "should" or "will." Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, uncertainties arise from the behaviour of financial and metals markets including the London Metal Exchange, fluctuations in interest and or exchange rates and metal prices; from future integration of acquired businesses; and from numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive or regulatory nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.

For further information, please contact:

 
 Communications                    Finsbury 
 Arun Arora                        Daniela Fleischmann 
  Head, Corporate Communications    Tel: [phone] 
  Tel: [phone] 
  [e-mail] 
 Investors 
 Ashwin Bajaj                      Tel: [phone] 
  Director - Investor Relations     Tel: [phone] 
                                    [e-mail] 
 
  Sunila Martis 
  Associate General Manager 
  - Investor Relations 
 
  Veena Sankaran 
  Manager - Investor Relations 
 

About Vedanta Resources

Vedanta Resources plc ("Vedanta") is a London listed diversified global natural resources company. The group produces aluminium, copper, zinc, lead, silver, iron ore, oil & gas and commercial energy. Vedanta has operations in India, Zambia, Namibia, South Africa, Ireland and Australia. With an empowered talent pool globally, Vedanta places strong emphasis on partnering with all its stakeholders based on the core values of trust, sustainability, growth, entrepreneurship, integrity, respect and care. To access the Vedanta Sustainable Development Report 2017, please visit http://www.vedantaresources.com/media/214366/vedanta_sd_report_2016-17.pdf. For more information on Vedanta Resources, please visit www.vedantaresources.com

Disclaimer

This press release contains "forward-looking statements" - that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "should" or "will." Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, uncertainties arise from the behaviour of financial and metals markets including the London Metal Exchange, fluctuations in interest and/or exchange rates and metal prices; from future integration of acquired businesses; and from numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive or regulatory nature. These uncertainties may cause our actual future results to be materially different that those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.

This information is provided by RNS

The company news service from the London Stock Exchange

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January 18, 2018 04:37 ET (09:37 GMT)