There is enough reason to be excited about Coal India’s results, though the March 2012 quarter net profit does not highlight the underlying strength.
The most notable fact in the company’s number is the rise in realisation, which has increased 20% as compared to previous year. This along with a volume push of 7.5% and a year-end compensation of Rs 1,000 crore helped the company post a 29% revenue growth over the previous year.
This buoyancy in revenue was not reflected in the company’s bottom-line as Rs 3,000 crore had to be provided for one-time revaluation of actuarial liabilities, which has risen due to a revision in wages. Employee cost has increased from Rs 5,622 crore in March 2011 to Rs 9,068.8 crore in March 2012. Employee cost stood at Rs 4,593.5 crore in December 2011.
Though this cost is one-time and will not be present in the June quarter, the company will continue to benefit from the increase in blended realisation which has moved up to Rs 1,500 per tonne as per a Kotak Securities report.
Blended realisation was helped by higher e-auction sales which gave a realisation of Rs 2,852 per tonne and accounted for 12% of the total volume.
Coal India posted an 8% increase in volume on a year on year basis to 122.8 million tonne. Logistics continues to affect the company as can be seen from the difference in production and dispatch figures. The company posted a production of 145 million tonnes while it could dispatch only 123 million tonnes. Despite lowering its production figure for 2012, the actual figure of 436 million tonnes falls short of its 440 million tonne revised target.
Coal India’s cash pile has resulted in higher other income component of Rs 2328 crore as compared to Rs 1855.9 crore in March 2011 and Rs 1319.1 crore in December 2011. It posted a net profit of Rs 4013.4 crore as compared to Rs 4221 crore in March 2011 and Rs 3868 crore in December 2011. The stock responded to these numbers by rising 2.14% to Rs 321.80.
Though the company’s number going forward are expected to be better on account of higher realization and employee cost falling back to the average levels, there are other issues that will impact the stock price. These include government interference with regard to price hike, mining bill and the Fuel Supply Agreement, which the company has been asked to sign after a Presidential diktat.