Vedanta Resources Regulatory News (VED)

"A record year for EBITDA & Net Profit on the back of record production; Board approves expansion plan"

Highlights for the quarter

§ EBITDA at Rs. 3,660 Crore, up 12% q-o-q

§ Record refined silver production at 170 MT, up 28% q-o-q

§ Record refined lead production at 50kt, up 9% q-o-q 

Highlights for the year

§ Record EBITDA at Rs 12,376 Crore, up 27%

§ Record Net Profit at Rs 9,276 Crore, up 12%

§ Record annual production of refined silver at 558 MT, up 23%

§ Record annual production of refined zinc-lead at 960kt, up 18%

§ Total dividend of Rs 8.0 per share (400%) amounting to Rs. 4,068 Crore including DDT

Udaipur, April 30, 2018: Hindustan Zinc Limited today announced its results for the fourth quarter and full year ended March 31, 2018.

Mr. Agnivesh Agarwal, Chairman -

"The financial year 2018 was marked by strong performance from all our underground mines and many benchmarks were set. We reached a new milestone this year with a complete transition to underground mining and are on track to reach 1.2 mtpa mined metal capacity by FY2020. Our strategic vision is to grow our output to 1.5 mtpa and I am delighted that the Board has approved the first phase of expansion towards achieving it."

Financial Summary

(1) Excluding Captive consumption of 1,570 MT in Q4 FY 2018 as compared with 1,633 MT in Q4 FY 2017 and 1,786 MT in Q3 FY2018. For the full year, it was 6,946 MT as compared with 5,285 MT a year ago.

(2) Excluding captive consumption of 8.2 MT in Q4 FY2018 as compared with 8.6 MT in Q4 FY 2017 and 9.3 MT in Q3 FY2018. For the full year, it was 36.4 MT as compared with 27.4 MT a year ago.

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

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

Quarter:

The fourth quarter recorded the highest ever production from underground mines. Total mined metal production in Q4 was 255kt, up 6% q-o-q and down 18% y-o-y. The sequential increase in production was on account of higher ore grades while the y-o-y decrease was driven primarily by decline in overall ore grades due to transition from open cast to underground mining.

The Company recorded highest ever lead and silver metal production during the quarter. Integrated lead metal production was 50kt, 9% higher q-o-q and 11% higher y-o-y on account of higher mine feed and smelter efficiency. Integrated silver production was at 170 MT, up 28% sequentially and up 22% y-o-y due to higher silver feed and smelter efficiency. Integrated zinc metal production was 206kt, 3% higher q-o-q and 4% lower y-o-y in line with availability of mined metal.

Full Year:

The production of mined metal, refined metal and silver for the year were the highest ever and in line with guidance provided at the beginning of the year. Mined metal production for FY 2018 was 947kt, 4% higher y-o-y. This was driven by higher ore production from underground mines, partly offset by lower open-cast production and lower ore grades.

Integrated zinc, lead and silver production were higher by 18% y-o-y, 21% y-o-y and 23% y-o-y respectively to record highs, in line with uniform flow of mined metal.

Financial Performance

Quarter:

Revenues during the quarter were at Rs. 6,277 Crore, an increase of 6% q-o-q and flat y-o-y. On a y-o-y basis, higher metal prices and lead & silver volumes were offset by nil mined metal sales, lower zinc volumes and rupee appreciation. The revenue was impacted by Rs 335 Crore due to lower realisation from forward sale of 165kt of zinc & lead metal.

The cost of production before royalty (COP) for zinc during the quarter was at Rs. 59,569 per MT ($925), down 10% sequentially in INR (9% in USD) and up 12% y-o-y in INR (17% in USD). The sequential decline was driven by higher metal production, higher overall grades and increase in linkage coal. The y-o-y increase was primarily on account of higher imported coal prices, higher diesel prices and lower overall grade due to mine mix even as metal production was flat.

EBITDA for the quarter was Rs. 3,660 Crore, up 12% q-o-q and down 3% y-o-y.

Net Profit for the quarter was Rs. 2,505 Crore, up 9% q-o-q and down 18% y-o-y. In addition to higher depreciation and tax rate, Net Profit was impacted by a one-time exceptional loss of Rs 51 Crore related to gratuity provision for earlier years as per the ceiling enhancement announced recently.

Full Year:

For the full year, revenues were up by 28% y-o-y driven primarily by higher metal volumes and prices partly offset by impact of rupee appreciation. COP was higher by 14% in INR (18% in USD) at Rs. 63,583 ($976) primarily due to 38% increase in imported coal prices & metcoke prices and about 15% increase in diesel prices and lower ore grades, partly offset by higher metal production. EBITDA increased by 28% to Rs. 12,376 Crore, the highest ever for the Company.

The full year Net Profit was up by 12% to a record Rs. 9,276 Crore on higher revenue & EBITDA and lower depreciation. Investment income during the year declined on account of lower rate of return resulting from a broader decline in interest rates as well as lower investment corpus on account of special dividend payment. Net Profit was also impacted by a one-time exceptional gain of Rs 291 Crore in Q2 related to the Supreme Court's favourable judgement on DMF levies as reduced by Rs 51 Crore on account of one-time provision for gratuity.

With effect from April 1, 2017, the Company has changed its depreciation & amortisation methodology resulting in a lower charge for the quarter and the full year by Rs 110 Crore and Rs. 321 Crore respectively.

Dividend

On March 16, 2018, the Board of Directors declared second interim dividend of 300% i.e. Rs. 6 per share (300%) on equity share of Rs. 2. Together with the interim dividend of Rs 2 per share (100%) paid in October 2017, the aggregate interim dividend paid during FY 2018 was Rs 8 per share (400%) amounting to Rs. 4,068 Crore including DDT. In view of the second interim dividend, no final dividend is recommended.

Outlook

Mined metal and refined zinc-lead production in FY 2019 is expected to be slightly higher than that of last year, filling the gap caused by completion of open-cast production. Silver production is expected to be in the range of 650 to 700 MT.

COP before royalty is projected to be in the range of USD 950 to 975 per MT in FY 2019. Tax rate is expected to trend up while quarterly depreciation expense is expected to be in the range of Rs 350 to Rs 400 Crore. The project capex on mining and smelter expansions is expected to be approximately USD 400 million in FY 2019.

Expansion Projects

The announced mining projects are progressing in line with the target of reaching 1.2 million tonnes per annum (mtpa) of mined metal capacity in FY 2020.

Update on ongoing expansion projects

Capital mine development during the year was 38,501 meters, an increase of 65% from a year ago.

The underground production at Rampura Agucha continues to ramp up strongly and achieved an ore production run-rate of 3.0 mtpa during the quarter. The south ventilation shaft system was commissioned during the quarter. Off shaft development is on track and production from shaft is expected to start in Q3 FY2019.

During the quarter, Sindesar Khurd's main shaft equipping was completed and winder installation commenced. Production from the shaft is expected to start as per schedule in Q3 FY2019. Civil and structure erection for the new mill is ongoing and expected to be commissioned in Q2 FY 2019. During the quarter, orders were placed for paste fill plants for both Rampura Agucha and Sindesar Khurd mines.

MoEF has given environment clearance for expansion of ore production at Kayad mine from 1.0 to 1.2 mtpa. At Zawar mine, civil construction for the new mill is progressing well and is expected to commission by Q4 FY2019. The Fumer project is progressing as per schedule and expected to commission in mid-FY 2019.

Next phase of expansion announced

Based on a long-term evaluation of assets and in consultation with global experts, the Company is evaluating plans to increase its mined metal capacity from 1.2 mtpa to 1.5 mtpa. The Board has approved the Phase I of this expansion which will increase mined metal and smelting capacity from 1.2 mtpa to 1.35 mtpa through brownfield expansion of existing mines at an estimated capital expenditure of around Rs. 4500 Crore.

Phase I includes incremental ore production capacity of 0.5 mtpa each at Rampura Agucha, Sindesar Khurd and Rajpura Dariba mines bringing the total capacity to 5.0 mtpa, 6.5 mtpa and 2.0 mtpa respectively. The capacity of Zawar mines will be increased by 1.2 mtpa to 5.7 mtpa. These projects will take total ore production capacity to 20.4 mtpa and mined metal capacity from 1.2 mtpa to 1.35 mtpa. Phase I will be completed in three years and will be done concurrently with the ongoing expansion which is now in its final stages.

Reserves & Resources

During the year, gross additions of 19.5 million tonnes were made to reserves and resources (R&R), prior to depletion of 12.6 million tonnes. As at March 31, 2018, the combined R&R were estimated to be 411.3 million tonnes, containing 35.7 million tonnes of zinc-lead metal and 1.0 billion ounces of silver. Overall mine-life continues to be more than 25 years.

Liquidity and investment

As on March 31, 2018, the Company's cash and cash equivalents was Rs. 20,395 Crore invested in high quality debt instruments and the portfolio is rated "Tier -I" (implying Highest Safety) by CRISIL.

Contribution to Government

In FY 2018, we contributed Rs. 9,301 Crore to Government treasury through royalties, taxes and dividends.

Earnings Call on Monday, April 30, 2018 at 5:30 pm (IST)

The Company will hold an earnings conference call on Thursday, April 30, 2018 at 5:30 pm IST, where senior management will discuss the Company's results and performance. The dial in number for the call is:

Dial In: +91 22 6280 1340

For further information, please contact:

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 411.3 million MT and average zinc-lead reserve grade of 10.5% with 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:

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 and South Africa. 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.