Coal India

We knew all long that numbers would come in subdued for Q4/FY14 but what we were sure about was the company once again missing the production target – the only suspense was to the extent to which it would miss the target. The largest coal producer of the world, in Fy14 produced 462 MT as against the target of 482 MT, shortfall of 4%. In Fy13, it had missed the target by 2.6%. Now for FY15, the company has set the production target of 507 MT  and overall offtake target is at 520 MT. Well, the newly sworn in PM has said that getting Coal India to work at its full potential will be a priority; so one can only hope that in current fiscal, the story of meeting the targets might change.

Financially, the lower production and thus offtake did show. Net sales was almost flat at Rs.19,998 crore, a rise of less than 1%. Operating profit slipped 16% (YoY) at Rs.5108 crore and margins slipped to 25.5%, down 250 bps. The over 8% surge in operating costs led to the dip in profits. The biggest expense was employee costs at Rs.7000 crore, which ate away 35% of the net sales. Over and above this money being spent on employees, there is also contractual expenses – its next big ticket expense item. The company ended the quarter with a net profit at Rs.4434 crore, down 18%. Other income of Rs.2384 crore helped shore the bottomline to some extent.

The company ended the fiscal with a 13% drop in consolidated net profit at Rs.15,112 crore and net sales came in flat at Rs.68,810 crore. It spent close to Rs.28,000 crore on employee expense. As at 31st March 2014, cash at hand stood at Rs.52,389 crore. It declared a total dividend of Rs.29/share (FV at Rs.10/share).

Clearly, Coal India is a case of strangulation by the Govt; hopefully the new Govt will give it a fresh breath of life.