Monday, March 18, 2013

Bringing out the Mettle in The Metal

Hindustan Zinc has gained from consistent increase in productivity and efficiency, besides favourable market conditions.

Over eight years have passed since the acquisition of Hindustan Zinc by Vedanta from the Indian government. And going by the results, the Anil Agarwal owned group has been able to progressively give it global size and scale, while keeping it internally strong. The most certain evidence of that is the way the company has emerged post the slowdown.

HZL showed a huge jump of 41% in net sales yoy for FY 2009-10, when it posted sales of Rs. 80.16 billion. Profit After Tax grew by 48% yoy for the period and stood at Rs.40.41 billion. That was admittedly from the low base of the previous year, where the company saw a decline in toplines and bottomlines owing to recession. For the half year ending September 2010, the company has registered net sales of Rs.41.13 billion (growth of 24.58% yoy) and profits of Rs.18.39 billion (growth of 11.24% yoy). The margins were lower than expected due to high stripping costs, storage costs and cost of power owing to higher cost of coal.

COO Akhilesh Joshi comments to B&E, “The key reason for the growth is volume growth as well as improved efficiencies.” In all, Vedanta has invested around Rs.100 billion through HZL. Production capacity increased to 879000 tonnes per annum (TPA) for Zinc (from 169000 TPA in 2002) and 85,000 TPA for lead (from 35000 TPA in 2002). Going the integrated route has been another key contributor to increased efficiencies. Through investments in exploration, the company has added 152 million tones of resources over the years as opposed to depletion of 26.3 billion tones. In FY 2009-10, the company expanded ore production capacity to 8.60 million tonnes per annum through expansion in the Rampura Agucha mine. It also commissioned the 210,000 tonnes per annum Hydrometallurgical Zinc Smelter at Dariba Smelting Complex. In addition, it has developed captive power capacity of 394 MW. The acquisition of Anglo Zinc, when completed, will add significant capacities, and make it the world’s largest zinc producer; besides improving its exposure to European and African markets.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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