Hindustan Zinc, a ancillary of Vedanta Resources, is likely to post a 35 per cent de-growth year-on-year (YoY) in profit at Rs 1,491 cr for July-September quarter, as per average of estimates of analysts.
The total income from operations may fall 17 per cent to Rs 3,365 cr in the quarter ended September 2016 as compared with Rs 4,033.5 cr in same period last year, due to lower sales volumes in spite of higher realisations.
Operating profit is seen declining 21 per cent to Rs 1,700 cr and margin may contract 320 basis points (bps) to 50.5 per cent in same period because of steeply lower refined zinc and lead metal production.
Operating profit is seen declining 21 per cent to Rs 1,700 cr and margin may contract 320 basis points (bps) to 50.5 per cent in same period because of steeply lower refined zinc and lead metal production.
Factors
- On a year-on-year basis, the street has already factored in weak results however sequentially there may be an improvement
- Results may see improvement on a sequential basis because of higher production and prices
- Realisations may be higher however offset because of lower mined metal volumes, in line with yearly mine plan
- Zinc volumes are expected to be lower because of drop in contribution from the Rampura Agucha mine
Limited supply of refined zinc at a global level resulted in strong zinc prices:
- Zinc jumped 45.2 per cent in 2016
- Lead prices up 9.1 per cent QoQ
- LME average zinc prices up 17 per cent QoQ and 22 per cent YoY
Sales volumes lower year-on-year but may recover quarter-on-quarter:
- Lead volumes down 22 per cent YoY but up 30 per cent QoQ
- Zinc volumes down 35 per cent YoY but up 17 per cent QoQ
- Saleable silver volumes down 7 per cent but up 19 per cent QoQ
Zinc has been the giant outperforming base metal this year:
- Rally can be attributed to depleting supply due to mine closures
- Growth in demand from China
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