Why Did Vedanta's Hindustan Zinc Experience a 26% Profit Decline in Q1?
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Synopsis
Hindustan Zinc has reported a significant profit drop of 25.6% for Q1 FY26, raising concerns about the impact of fluctuating metal prices and production volumes. However, the company has achieved notable cost efficiencies and continues to invest in renewable energy initiatives.
Key Takeaways
- 25.6% decline in consolidated net profit for Q1 FY26.
- Revenue dropped by 14.5% compared to previous quarter.
- Achieved the lowest zinc production cost in first quarter history.
- Invested Rs 49 crore in renewable energy initiatives.
- Maintained a strong EBITDA margin of approximately 50%.
Mumbai, July 18 (NationPress) Hindustan Zinc, a subsidiary of Vedanta, announced a substantial 25.6% sequential decline in its consolidated net profit for the first quarter of the fiscal year 2026 (Q1 FY26). The profit has slipped to Rs 2,234 crore, down from Rs 3,002 crore recorded in the preceding quarter (Q4 FY25), as per their stock exchange disclosure.
When compared year-on-year (YoY), the profit saw a decrease of 4.7% from Rs 2,345 crore in Q1 FY25.
The company’s operational revenue also faced a downturn, standing at Rs 7,771 crore for the June quarter, which is 14.5% lower than the Rs 9,087 crore reported in the March quarter.
On a yearly basis, the revenue dropped by 4.4% from Rs 8,130 crore, as indicated in their filing.
This revenue decline was primarily attributed to lower volumes and softening prices of zinc and lead. Nonetheless, this impact was somewhat mitigated by stronger silver prices, favorable currency exchange rates, and improved earnings from by-products.
According to its regulatory submission, Hindustan Zinc's EBITDA for the quarter was Rs 3,860 crore, reflecting a 2% decline compared to the same period last year.
The decrease was largely due to reduced production volumes and softer metal prices. Still, the company managed to uphold a robust EBITDA margin of around 50%.
Additionally, Hindustan Zinc reported a major milestone: achieving the lowest zinc production cost in any first quarter since transitioning to underground mining.
The cost was recorded at $1,010 per tonne, which is 9% lower than the same quarter last year.
This improvement is attributed to enhanced metal grades, increased use of domestic coal and renewable energy, better by-product revenue, and a decrease in input costs.
However, the benefits were partially offset by lower production volumes. Earlier, on June 11, the Board of Directors announced an interim dividend of Rs 10 per equity share for FY26, with June 17 set as the record date.
On the renewable energy front, Hindustan Zinc stated that it is procuring 530 MW of renewable power continuously through a long-term agreement with Serentica Renewables India Private Limited.
As part of this green energy initiative, the company has invested Rs 49 crore until June 2025.
Point of View
It’s essential to recognize the complexities of Hindustan Zinc's recent financial performance. The decline in profit is concerning, yet their strategic shift towards renewable energy and cost-management initiatives signals a proactive approach in navigating market volatility. The company's commitment to sustainability is commendable, and it will be interesting to see how these efforts impact future results.
NationPress
21/07/2025
Frequently Asked Questions
What caused Hindustan Zinc's profit decline?
The profit decline was primarily due to lower production volumes and softer prices of zinc and lead.
What was Hindustan Zinc's Q1 FY26 profit?
Hindustan Zinc reported a profit of Rs 2,234 crore for Q1 FY26.
How much did the company's revenue drop?
The company's revenue from operations fell by 14.5% to Rs 7,771 crore in the June quarter.
What are the future initiatives of Hindustan Zinc?
Hindustan Zinc is focusing on renewable energy sourcing and has invested Rs 49 crore in green energy initiatives.
Did Hindustan Zinc pay dividends this fiscal year?
Yes, Hindustan Zinc declared an interim dividend of Rs 10 per equity share for FY26.
