Hindustan Zinc has reported expected quarterly numbers. However the company expects the zinc production to increase by more than $100/ tonne for the financial year.
This would take the cost to $1,225-$1,275/ tonne, due to issues with coal availability, which have led to higher coal costs.
However, the company expects coal availability to improve in Q3 and Q4.
CEO and MD of company, Arun Mishra was interviewed and he spoke about the privatisation plans for Hindustan Zinc. While laying out a more detailed timeline for the process, he suggested that the company expects the government to hold a roadshow for Hindustan Zinc by November/December this year.
EBITDA per Tonne, Improvement on Margins, Cost Pressures
The company has reported EBITDA per tonne of Rs 1,800 for the September quarter. Further guidance would depend on LME prices
Speaking about the improvement on margins, he said that LME price is at $3,000 per tonne and our cost remains at $1,200/tonne. This is where we get $1,800 EBITDA per tonne. We have given a revised guidance of about say $50 to $100 per tonne increase in costs, but if LME increases by $50 per tonne, the EBITDA margin will remain the same.
Speaking about the cost pressures, he said that there are two costs. He said that we expect coal prices globally to come down.
We see some green shoots in coal exchanges, whether you talk about South African coal or Indonesian coal. But Australian coal remains high, as also the mix of coal that we feed to our plant. The plant can feed upto 30 percent of the Indian coal. But, the company is currently at 14-15%.
Now, traditionally, we have not been able to secure so much coal from Coal India. Of course, in Q2 we have seen a better coal percentage compared to Q1. This quarter, we expect Coal India’s supply to increase considering we are out of the monsoon season. Expect Q4 to be better in terms of availability. That way we will be able to manage some amount of input costs by having more domestic coal. Also, we expect South Africa and Indonesia or another coal cost to be much cheaper too.
Cost-per-tonne guidance for financial year, Volumes and Capex outlook For FY23
Right now, the coal cost is between Rs 20,000 per tonne and Rs 22,000 per tonne. The same time last year it was about Rs 9,000 per tonne; I don’t expect the delta of Rs 11,000 per tonne to vanish so soon. But it just needs to come down by another Rs 4,000 or 5,000 per tonne at least on the imported coal side. And we will expect about 15% basket of domestic (coal supply) to increase to 25% of the basket size so that overall our cost comes down.
We have revised cost guidance if the coal cost doesn’t come down. But, if it does, we should be able to manage around 1,200-1,210 dollars per tonne kind of a cost. Overall, we are looking at a $100 per tonne increase from $1,125 to $1,175 to $1,225 to $1,275 per tonne.
Speaking about the volume and capex, on the volume side, we have always maintained we will be producing about 1 million tonnes (MT) on the metal side. If we look at the H1 performance, we have already produced 0.5 million tonnes. We expect quarter three, and quarter four to be equal to quarter one or even better than quarter one numbers. So, 1 million tonnes is achievable as we stand today, if you look at the last four quarters, the volumes added up, they are already above 1 million tonnes. So, capacity is not a constraint. We have got enough metal and ore supply. All that we need is to convert this into sales and we are pretty confident we’ll be beating the guidance by good numbers.
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