Coal India stock plunges 4.42%, ends at 6-mth low of Rs 292.25
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Coal India’s (CIL) stock slumped to a six-month low on Wednesday, closing at 292.25, down 4.42%. CIL, the world’s largest coal producer, registered its lowest quarterly profit for the July-September period since its listing.
The company’s net profit for the quarter dropped by 77.4% to R600.4 crore from R2,654.34 crore a year ago. The company’s net income from operations has gone down by 7.8% to R16,212.5 in 2016 from R17,489.8 in 2015.
A Kotak Equity report dated December 14 said, “Weak volumes (-5% yoy), realisations at R1,350/ton (-2.9% yoy) and a large increase in wage cost on account of provisioning for wage settlement led to 76% yoy decline in net income for Coal India at R6 billion (KIE R20 billion). Earnings weakness was exaggerated on account of a 25% yoy decline in e-auction realisations R1,348/ton; R7-bn provisions for wage revision; and high effective tax rate at 56% for the quarter.”
Coal India, which revises salaries of over 3 lakh employees, had a dampening impact this quarter. The salary hiked in Q2FY17 increased the employee benefits expense by 14.6% to R8,406.9 crore from R7,334.28 in the QFY16. The company, which produces around 84% of India’s total coal produce, dropped net sale by 6.8% to R3,3441.1 in Q217 from R35,913.34 in Q216, revealed company presentation submitted to BSE. The presentation also revealed that the company’s production during the same period fell 3.5% to 104.41 million tonne (mt) and the offtake fell 5% to 115.93 mt. “We highlight that the high fixed cost business model of Coal India makes earnings very sensitive to volume and price changes. While the street had already factored weak volumes and potential provision for wage cost, the sequential decline in e-auction realisations further added to the earnings woes,” said the report.
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