Hindustan Zinc – Hit by Falling Prices

Hindustan Zinc’s (HZL) 1QFY09 PAT fell 30% yoy to Rs8.5bn on the back of a sharp decline in zinc LME prices. Revenues fell 17% yoy to Rs16.4bn despite higher volumes. EBITDA margins fell to 60% from 73% in 1QFY08 and 65% in 4QFY08.

Zinc volumes rose 38% to 128,000 tonnes and lead volumes rose 27% to 17,300 tonnes. Concentrate sales fell 81% to 10,500dmt due to higher smelter production. The benefit of higher volumes was more than offset by a 42% decline in zinc LME prices to US$2,115/t.

HZL enhanced its zinc capacity by 88,000 tpa to 669,000 tpa in April08. HZL has also announced further capex of Rs36bn, which will hike zinc capacity by 210,000 tpa and lead capacity by 100,000 tpa taking the total to 1.07m tpa by 2010, together with mining and captive power capacities.

The company is expected to report a drop in EPS for FY09 to Rs 93.5 a decline of 10% over FY08.