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Coal India profit down 15% in Q1

Trend likely to continue in the July-September quarter

Decline in e-auction realisation sent Coal India profits down by nearly 15 per cent to Rs 3,065 crore in the April-June 2016 quarter.

Net sales was also down by a little over 6 per cent to Rs 17,796 crore, compared to the corresponding period of last year.

The trend is likely to continue in the July-September quarter, according to analysts.

Though e-auction sales were up by nearly 4.5 million tonnes during the first quarter, average price realisation was down by 28 per cent from Rs 2,184 a tonne to Rs 1,570 a tonne.

With incremental production directed to power generation utilities, offering the lowest price among all consumers, CIL’s profit increase has been dependent on volume sales and e-auction realisation over the last couple of years.

Continued slowdown in the economy, coupled with heavy liquidation of coal stock at the power plant end saw coal sales increasing by a mere 2.98 per cent during the quarter against the projected growth of over 9 per cent.

In the past, CIL managed such situations better by virtue of earnings from cash deposited at banks. But the miner was forced to spare good part of it over the last three years through higher dividend. (The share buy back will further squeeze the cash reserve.)

Moreover, declining interest lowered yield from the cash deposits.

The net result is earning from cash deposit was down by Rs. 254 crore. Mining activity slows down with the onset of the monsoon in June.

Lower demand for electricity and arrival of cheap hydro electricity impacts demand for fuel. But this season has been exceptionally bad to Coal India with demand from power sector practically remaining flat.

CIL profits likely to remain under serious pressure in the second quarter, told an analyst associated with a financial institution.

Though e-auction sales were up by nearly 4.5 million tones during the first quarter, average price realisation was down by 28 per cent from Rs. 2,184 a tonne to Rs. 1,570 a tonne.

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