Zinc-tastic: More Production, Lower Costs Lead to Better Sales and Profits

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India’s largest producer of zinc, Hindustan Zinc Ltd. (HZL), part of the Vedanta Group, has declared that its output of lead and zinc in first quarter of 2013-14 significantly improved compared to the first half of 2012-13.

A combination of factors were responsible for this. The company had benefited from an increase in lead and zinc prices over the preceding quarter, and higher production volumes accompanied by a drop in production costs.

HZL’s sales rose 22.5 percent to approximately US $725 million in the March quarter over the preceding one. Sales of lead and zinc were the main contributor to this performance with a 29.8 percent increase in revenue.

But adding a damper was silver, whose sales were down by 5.2 percent. The reason?

An 8 percent fall in silver’s price realizations. But the cheer was that even though sales here were a tad down, the segment profit rose by 49.8 percent.

The recovery in sales in the country’s largest zinc company had started in December, and the March quarter had seen further improvement. Mined metal output had gone up by 11.6 percent on a sequential basis, while refined metal output from integrated operations (from mine to metal) had also gone up.

Production, too, was up. The production of metal touched 260,000 tons in Q4 and 870,000 tons in FY 2012-13, compared to 223,000 and 830,000, respectively, in the previous corresponding periods. Integrated production of refined zinc was up 8 percent sequentially to 181,000 in Q4.

However, integrated production of refined zinc was down 4 percent in Q4 and 12 percent in FY 2012-13 from a year ago. The decline in zinc metal production was largely because of lower metal in concentrate (MIC) production in the first half compared to the second half.

The company’s operating profit rose 41.6 percent, and operating margin advanced 7 percentage points, propelled by the zinc and lead segments profits, up by 50.3 percent.

Continued in Part Two…

Sohrab Darabshaw contributes an Indian perspective to MetalMiner.

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