The silver lining in the otherwise falling trend in Hindustan
Zinc Ltd's sales and profit was the silver metal itself.
An analysis of the September quarter results declared by the miner today
revealed silver's rising contribution to the company's revenue and earnings
before interest and tax.
In Jul-Sep, the miners's revenue from silver sales increased sharply by
25% on year to 4.82 bln rupees aided by steady production and around 30% on
year increase in silver prices. Revenue from zinc and lead declined year on
year by 14% and 10% each to 27.0 bln rupees and 5.0 bln rupees respectively.
This trend extended to, and was accentuated in, the first half of
2016-17. In Apr-Sep, silver revenue rose 26% on year to 8.4 bln rupees while
zinc sales fetched 46.2 bln rupees, 25% lower than the year-ago period.
Volume growth in the first half of 2016-17 was 6% on year to 196 mln
tonnes in silver, while zinc and lead volumes contracted by 37% and 17%
An analyst said the fall in zinc and lead volume and sales was on
expected lines and silver production was expected to increase as well. If the
company management wants to, it can ramp up the silver production from around
450 mln tonnes to 730 mln tonnes, he said.
Operating margin from silver held steady for the miner in contrast with
falling margins in zinc and lead.
The earnings before interest and tax in silver in the September quarter
was 3.8 bln rupees, giving a margin of 79.2%, down just 30bps from the
year-ago quarter. The EBIT margin in zinc, lead and other metals, taken
together, in Jul-Sep fell 600 bps to 37.9%.
The first half of 2016-17 saw a higher difference in the EBIT margin
growth rates. EBIT margin in silver went up sharply on year by 250 bps to
78.6% on year, while that in zinc, lead and others fell by a steep rate of
1010 bps to 29.3% year on year.
The company said in its earnings statement that integrated silver
production was up 6% on year in first half of 2016-17 despite lower mined
metal, on account of significantly higher production from Sindesar Khurd
mine. "For the full year, integrated silver production will be higher than FY
2016", the company said.
In 2015-16, the revenue from silver had increased by nearly 17% on year
while revenues from zinc, lead and other metals fell 6.2%.