Coal India is set to announce its fourth quarter results today. The company's sales are seen up 14% at Rs 14430 cr versus Rs 12692 crore. EBITDA is seen up 41% at Rs 4768 crore versus Rs 3375 crore.
EBITDA margin is seen at 33% vs 27%. Net profit is seen up 42% at Rs 3734 crore versus Rs 2626 crore.
Factors At Play:
-Dispatches may increase 5% QoQ
-realizations to increase 6.2%QoQ
· Co increased coal prices of Grade A & Grade B coal by 30% on Feb 27, 2011
· Price increase is partly to offset cost increases (~10% YoY) given increased staff costs (Dearness allowance increased by 50%) and other costs.
· Employees Wages and Benefits in FY11Q3 at Rs.4500 cr, should come in much higher
· Global coal prices have increased 20%+ since 3QFY11, and could lead to improved realizations for e-auctions.
· Have 70 million tonne of coal stocks that we had at the end of previous fiscal.
· 70 million tonne of coal stock translates to nearly 1/6th of our production merely 2 months production which is undesirable.
· There is an issue of movement of coal from the pithead to the consuming centers.
· Have been able to liquidate 4.5 million tonne of coal from stocks recently
Production:
· Coal India reported flat production of 431mt for FY11(unchanged YoY)
· Down 6.5% from its target driven by project delays and infrastructure constraints.
· Production in FY11 was estimated at approx 440m tons
· Raised selling prices to selective customers in Q4 FY11 to offset lower production.
· The new pricing mechanism would offer more exposure to the spot coal market
· Expect spot-based sales volumes to rise to 23% in FY12 from 16% in FY11.
· Production target for FY12 at 454mt
Further Price Hike on cards:
· Co may raise price of coal from July 1, 2011
· To increase prices to offset wage hike
· To decide on price hike by end of June
· Co to decide on another price hike post wage increase which may Increase wages by 30% In FY12
· To accommodate the proposed proposed mining bill
· Total Wage Bill Increase At 32% In FY11
Coal India fuming at the Planning Commission's move of curbing down the amount of coal offered for e-auctioning:
· Feels e-auctions of coal should continue as e-auction has approval of the Supreme Court.
· States that the PSU will continue its 10% e-auction unless there is a new directive.
· 81% premium in e-auction comes over fuel supply agreements (FSA) and it will facilitate clearance of huge inventories.
· Any change in the e-auction policy will call for changes in the new coal distribution policy.
· Planning Commission had said that 10% of coal, which is e-auctioned by Coal India, should be cut down.
· The commission feels that CIL should adopt pool pricing for thermal coal and should also plan for import of coal.
· E-auction accounts for 11-12% of CIL's volumes and CIL's FY12E earnings could be hit 26% if discontinued
· 80% of the offered coal to e-auction goes by road and only 20% goes by rail.
· Power sector is demanding some coal from the e-auction.
· Ended up last year with 70 million tonne of coal stock.
· The last fiscal had offered to the power sector something around 335 million tonne of coal.
· But what reached them or what they could lift was only 304 million tonne.
· Feel that the e-auction should continue because this provides for only 10% of our total produce to those needy consumers who have not been getting linkages
· Providing linkages to the non-coal sector consumers was stopped since 2001.
· But by and large the entire power sector has been untouched from an increase in prices so far.
· Feels the infrastructure in the Indian Railways needs to be increased.
· The target for volume off take is 454 million tonne for FY12 and 11% of that would go for e-auction
· Have earmarked 347 million tonne for the power sector.
· There is absolutely no chance of this 50 million tonne being sold at fuel supply agreement (FSA) prices
Indian Railways:
· Indian Railways have increased the availability of rakes.
· In April 2010 the average rakes availability was 158 per day and this year April it has been 180 per day, which is about 22 rakes per day availability increase.
· Hoping this trend continues as it will help in liquidating stock
Source:Moneycontrol
Thanks and Regards,
Sanchari Sinha
Summer intern at DENIP Consultants
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