Coal India earnings speak volumes, Q1 net up 64 pct

Mumbai: Coal India, the world’s largest coal miner, on Friday said its fiscal first quarter profit surged 64 percent, beating street estimates, as stronger sales and a price increase effected in February boosted margins.

[caption id=“attachment_60326” align=“alignleft” width=“380” caption=“India holds 10 percent of the world’s coal reserves but local supplies are falling short of demand. Reuters”]  [/caption]

India holds 10 percent of the world’s coal reserves but local supplies are falling short of demand as the country builds more power plants, and as domestic coal projects run into environmental and land acquisition delays.

Power-hungry India, where frequent black-outs are common, aims to halve its peak-hour power deficit of nearly 14 per cent in two years.

Asia’s third largest economy is likely to import 135 million tonnes of coal in the financial year that began April 1, spurred by demand that is forecast to grow 11 percent a year.

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Earlier this week, state-run Coal India said it was in talks for one acquisition each in Indonesia, Australia and the United States, but was awaiting the government’s nod to go ahead with the deals.

The company, which faces stiff competition for resources, was in advanced talks with Indonesia’s Golden Energy Mines to buy up to 40 percent of its assets, sources had told Reuters in May.

But local private rival GMR Infrastructure said on Friday it had reached a deal to buy a 30-percent stake in Golden Energy for $ 450 million to $ 550 million in cash.

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Coal India has also reportedly been in talks with US miners Massey Energy and Peabody Energy for coal assets in the United States and Australia.

Kolkata-based Coal India, in which the Indian government sold a 10 percent stake last year for $ 3.4 billion in the country’s largest IPO ever, has set aside $ 1.3 billion for acquisitions this fiscal year.

Q1 net profit soars

Coal India said net profit rose to 41.44 billion rupees in its fiscal first quarter , from Rs 25.26 billion a year ago. Net sales grew 27 per cent to Rs 144.99 billion.

A Reuters poll of seven brokerages had forecast net profit of Rs 36.1 billion for the quarter on net sales of Rs 142.6 billion.

The company said sales for the April-June period rose 5.2 percent to 106.3 million tonnes, while coal production rose 1.2 percent to 96.3 million tonnes.

The profit was boosted by a 30-percent price increase that the company effected in February for some of its customers.

Coal India prices coal about two-thirds lower than global prices, in part because of comparatively low quality coal. Despite the price increase, itscoal prices remain 30-60 percent lower than international rates.

The company has said it will effect the next round of price increases after it works out the cost increase from the ongoing wage negotiations with its unions.

Shares in Coal India, the country’s second-most valuable firm at about $ 54 billion, closed down 0.3 per cent ahead of the results in a Mumbai market that fell 1.3 percent.

The stock, which was included in India’s main stock index earlier this week, is the best performer among the components of the index. It has risen more than 22 per cent so far this year, outperforming a nearly 18-per cent decline in the main index.

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