Coal India’s volume game yields result, soft price a concern

13 February 2017

World’s largest miner Coal India Ltd has embarked on higher volume despite tepid demand and soft coal prices and the strategy seems to be paying off dividends.

“Even coal prices are soft, we are trying to produce and sell more coal to offset the negative impact of soft thermal coal prices as far as possible,” a top Coal India official told PTI.

The December ’16 (Q3) quarter production was 147.73 mt against a production of 104.37 mt in the previous quarter. When compared to even corresponding December ’15 quarter, production was higher by about four million tonne.

Coal India strategy for higher volume game despite soft prices is in sharp contrast to common strategy to lower production to match with demand.

The official said, in the Q3 period the miner was able to come out with very low profit with volume strategy.

Almost 80 per cent Coal India coal goes to the power sector and it saw PLF slipping to even 60 per cent in the recent past resulting lower sales.

Coal India in the Q3 period consolidated net profit has jumped nearly five fold to Rs 2884.4 crore against Q2 (July-Sept ’16) period profit at Rs 600 crore.

The miner pushed larger quantity of coal in the e-auction route helped to bolster profit.

“In the current Q3 period e-auction sales were 25.19 million tonne against 15.16 million tonne in the corresponding period of last year.

Coal India realisation from e-auction had dropped by Rs 302 per tonne in the current quarter under review over 2015-16 corresponding quarter the company was a reason for lower profit in the current quarter over December 15′ quarter.

The softer interest rate regime had also had an impact of Rs 306 crore in lower interest earning during the quarter. At the same time, employees benefit expenses have gone up to the tune Rs 772 crore.

CIL today reported a 22 per cent decline in consolidated net profit at Rs 2,884.4 crore for the third quarter ended December 31.

Net profit came in at Rs 3,718 crore in the same quarter.

Source – Outlook