Coal India’s FY11 net rises 13% on higher realizations and price hike

Coal India’s FY11 net rises 13% on higher realizations and price hike

Kolkata: Coal India Ltd said net profit for the year ended March rose 13% to 10,867.35 crore, or 17.19 per share, due to higher realization from sales through electronic auctions and washed coal, besides a price hike in February.

Net revenue jumped 12.6% to 50,233.6 crore, the company said on Wednesday.

Sales by volume increased only 2% over the previous year to 424.5 million tonnes (mt), for which it blamed the railways.

Coal India said the railways could provide only 162 rakes a day on average during the year, at least 23 short of the requirement.

Production during the year, which remained flat at 431.32 mt, suffered because of this and its inability to secure the environment ministry’s clearance to expand mining. The production target for fiscal 2011 was 460 mt, which for fiscal 2012 has been reduced to 454 mt, according to acting chairman N.C. Jha.

In the current year, the miner needs 175 rakes a day on average from the railways, Jha said. Currently, it is receiving around 166 rakes a day.

Despite the not-so-impressive results, the scrip gained 7, or 1.9%, to close at 377 on the Bombay Stock Exchange, while the benchmark Sensex index fell 164.73 points, or 0.9%, to 17,847.24 points.

“We expect Coal India’s production to increase in the current fiscal because it should be able to sort out issues with the environment ministry," said Puneet Goel, director at consulting and audit firm KPMG.

However, in the current year, Coal India could see “some pressure" on net profit because of a wage hike, which is to be announced next month, according to Bhavesh Chauhan, senior research analyst at Angel Broking Ltd.

This could be offset to an extent by changes in some key provisioning norms. In fiscal 2011, the company provided 2,618.46 crore for the removal of earth to expose coal seams beneath. Under new norms, such provisions will not have to be made at all.

Some 12,000 crore already provided for such removal is to be written back to reserves, shoring up the company’s net worth, according to finance director A.K. Sinha.

In the quarter till March, net revenue was at 15,016.16 crore, 18.3% higher than the previous quarter, largely on account of the price increase in February. Figures for the fourth quarter of fiscal 2010 aren’t available because the state-owned firm did not release quarterly figures until it got listed last year.

In fiscal 2011, Coal India managed to sell 45.67 mt, or 10.6% of its production, through electronic auction, earning 8,891.13 crore in net revenue from it, 34% more than the previous year.

For the current year, the miner, which has a cash reserve of around 43,000 crore, has created a provision of 6,000 crore for overseas acquisitions, according to Jha. It is currently pursuing investment opportunity in a coal asset owned by Peabody Energy of the US.

It is also looking to get into long-term import agreements with miners abroad to bridge the gap between demand and domestic production. Bids for such supply contracts were received till Wednesday, Jha said. They are to be opened on Thursday.