Hindustan Zinc Expects Margin Expansion On Cost-Cutting Measures, Stable Metal Prices

Hindustan Zinc Ltd. expects an expansion in its operating margins on the back of cost-cutting measures and stable metal prices, the company’s Chief Executive Officer Arun Misra has said.

In an interview with NDTV Profit, Misra discussed the company’s cost management efforts, noting that Hindustan Zinc focused more on domestic coal to cut expenses. The Vedanta Group company released its second quarter earnings on Oct. 18.

“Our domestic coal percentage has gone up to 47%, which earlier used to be near 10-15%. That has reduced the cost of power generation. Our renewable power component in the power mix has gone up from 8.5% to 14%. It is likely to become 23% this quarter and 30% by year-end,” he said.

These steps will continue to contribute to the company’s efforts to reduce its costs, the top executive noted.

“If you look at this year’s H1 versus last year’s H1, the prices have become slightly better. The average pricing has become $2,800 per tonne, compared to $2,500 per tonne. So there is about a $300 increase. At the same time, we have cut the costs as well on an H1-to-H1 basis from $1,170 per tonne to $1,090 per tonne,” he said.

Hindustan Zinc increased its operating margins to 40% in the quarter ended September 2024 from 34% during the same quarter in the previous fiscal. The company’s CEO hoped to sustain these margins.

“As far as we can control the cost and prices remain stable, our margins will also remain stable or increase, going forward,” Misra said.

Hindustan Zinc’s revenue in Q2 of FY25 rose 21.5% year-on-year to Rs 8,252 crore, while its Ebitda increased 31.3% to Rs 4,123 crore. Net profit during this period climbed 34.6% YoY to Rs 2,327 crore.

The mining company also plans to utilise its capacity to the fullest. The capacity from its smelter is about 1.12 million tonnes, but it has never been tested, Misra said.

“This year, we plan to go up to 1.1 million tonnes. With the current production level of 5,24,000 tonnes in the first half, if we double that, it is about 10,48,000 tonnes. But we will do better than that,” he said.

Shares of Hindustan Zinc Ltd. advanced 3% on Monday to touch an intraday high of Rs 521.80 apiece on the NSE. The stock was trading 0.49% higher at Rs 509 per share at 11:47 a.m., compared to the benchmark Nifty 50's dip of 0.35%.