Arun Misra, CEO,
You could have reported a little bit of a muted quarter which is essentially on anticipated traces as a result of subdued commodity costs. What’s the outlook on the subject of commodity costs? Do you suppose that the massive upcycle that all of us had been speaking about is over already?
It is extremely tough to foretell within the present scenario. First, it’s not as subdued because it appears to be like this quarter. Internet revenue has jumped 56% over the identical quarter final yr. After all, sequentially. Should you take a look at This autumn to Q1 of this yr, there was a 6% bounce in internet revenue. So efficiency has been fairly good and as per our expectations on the amount aspect, there was a ten% uptick in comparison with the identical quarter final yr.
After all, it’s flat in comparison with This autumn. The factor to observe right here is This autumn usually is one of the best ever quarter in any month of operation. That is the primary time that in Q1, we have now repeated This autumn efficiency and that provides way more promise for the long run.
I’ve all the time been vocal concerning the commodity upcycle that we noticed in zinc costs. Anyplace between $2,900 to $3,200 per tonne is the proper value for zinc and it ought to stabilise at that. We’re not apprehensive about that as a result of our future calculations are primarily based on round $2,900-3,000 tonne solely. Now we have to handle prices and that’s our greatest fear.
The commodity enter costs, mainly coal costs haven’t softened the way in which the steel costs have softened and that provides us a whole lot of alternative for considering and at present we had a steerage of $1,125-1,175 per tonne of price, whereas present prices are at about $1265 a tonne. So we have to cut back about $80-90 a tonne and we should always hold working for that.
You spoke about the fee pressures as a result of rise in commodity costs however how has the demand image been? After I discuss concerning the demand image, I’m asking about zinc, lead and silver. Has there been any impression of inflation and a doable recession on demand circumstances each domestically in addition to internationally?
First, at any time when zinc costs cross $3,500 a tonne, you’ll all the time see hesitation, particularly the spot to guide the portions. We did see that when the costs had been too excessive, there have been no contraction in demand. Home demand is sort of robust. We’re promoting anyplace between 39,000-40,000 tonnes a month. We’re in a position to export anyplace between 25,000 and 30,000 tonnes a month of zinc. Lead demand is sort of robust.
Someday in This autumn of final yr, it appeared like there can be some slowdown in lead demand, however we see that it has come again fairly robust in Q1. All our order books are full and I don’t see any concern on the demand aspect in lead and zinc. When the European Union’s stimulus package deal was introduced, the push for galvanized metal was nonetheless there in Europe and the US can also be investing loads on infrastructure. The Authorities of India will proceed to put money into infrastructure. It offers us hope that India zinc ought to develop greater than 3% yr on yr foundation, whereas worldwide we’d see 1.5-2% form of progress.
However margins had been underneath slight strain and that was due to the rise in coal costs. Contemplating that commodity costs have corrected fairly a bit after Q1, how have enter price strain formed up? Consequently what does it imply on your margins going ahead?
Regardless of the steel costs softening, the softening in coal costs has not occurred and we’re nonetheless hopeful that going ahead, coal costs would come down however we aren’t stopping at that. We’re taking a look at all doable choices of maximising using home coal.
This quarter, about 10% of our coal basket was provided from home coal mines of
Restricted and it’s greater than what we had in This autumn of final yr. Now we have bought an enormous backlog of provide settlement pending with Coal India Restricted and I’m positive that with this pattern of manufacturing that they’ve displayed, monsoon could herald slight slowness however Q3 onwards, we should always have the ability to get greater than 25-30% of our coal basket in home coal. By that point, worldwide coal costs would additionally soften.
The federal government has made it very clear that they intend to divest stake in Hindustan Zinc. What has been the progress on this explicit entrance? How quickly ought to we anticipate the divestment course of to start out?
To one of the best of my data, the federal government is understanding the modalities, the principles, laws, how a lot, when. With the present volatility within the inventory market, maybe it was not the proper time, so it’s for them to resolve. I might not speculate on that and albeit talking, it doesn’t concern Hindustan Zinc a lot. Authorities being the half proprietor of Hindustan Zinc, they need to resolve the best way to deal with this topic.