Coal India First Quarter Profit Declines on Lower Prices

  • Profit fell 14.7 percent year-on-year to 30.7 billion rupees
  • Average price of coal declined 9 percent to 1,338 rupees a ton

Coal India Ltd., the world’s biggest miner of the fuel, reported its first profit decline in four quarters, as lower prices negated gains in output and shipments.

Profit for the three months ended June 30 dropped 14.7 percent to 30.7 billion rupees ($458 million) from 36 billion a year ago, the Kolkata-based miner said in a stock exchange filing. Revenue fell 6.3 percent to 178 billion rupees from 190 billion rupees a year ago. The company reported earnings based on the newly introduced Indian Accounting Standards, which is in line with International Financial Reporting Standards.

State-run Coal India, which produces more than 80 percent of India’s coal, earned an average price of 1,338 rupees per metric ton during the quarter, according to the filing. That compared with 1,465 rupees a year ago, calculations by Bloomberg show. High inventories at power plants and subdued demand weighed on earnings, said Abhishar Jain, analyst at Centrum Broking Ltd.

Coal production during the period rose 3.6 percent to 125.67 million tons, while shipments rose 3 percent to 133.24 million tons, according to provisional estimates by the company.

A steep decline in electronic auction prices dragged profit lower, offsetting gains in shipments, Jain said. Coal India earned 1,570 rupees a ton on auction sales, compared with 2,184 rupees a ton a year ago. Average price for coal sold through term contracts was at 1,239 rupees per ton in the quarter ended June 30.

Coal India sells about 20 percent of its produce in auction sales outside of long-term contracts. These sales are usually at a premium to the contract prices, which makes their contribution to earnings bigger than their share in sales volumes.

Lower other income, earned through investing its cash reserves, also weighed on the profit. The coal miner’s other income fell about 21 percent to 11.3 billion rupees in the first quarter.

The company continues to face subdued demand from power producers, which account for three-fourths of its shipments. India’s coal-fired power plants are under-utilized because of inadequate purchases by cash-strapped state electricity retailers.

Total expenses fell 3.2 percent to 148.3 billion rupees from 153.2 billion rupees a year ago, the company said in the statement. Costs are set to rise as the company discusses a pay revision with workers’ unions. The company revises salaries of its nearly 300,000 non-executive workers every five years, with the last revision taking effect from July 2011.

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