Coal India Ltd (CIL), the country’s largest coal miner, registered a decline in sales in the quarter ending 30 Sept’21 (Q2FY’22) as supplies were significantly affected due to the monsoon.
Coal sales (excluding washed coal and by-products) grew 11% y-o-y to 145.04 million tonnes (mn t) in Q2FY’22 against 130.51 mn t in Q2FY’21, in tandem with the revival in economic activities. However, the sales volumes were down 8% q-o-q compared to 157.67 mn t in Q1FY’22.
The company witnessed a decline via both modes of sale, fuel supply agreement (FSA) and e-auctions, on a quarterly basis. Incidentally, the impact was more pronounced in case of the former as it led to a drastic fall in power plant inventory levels.
It is important to note that power plants in the country secure long-term supplies via FSA. However, at a time when electricity demand was strong, FSA coal supplies were down 7% q-o-q to 118.03 mn t in Q2FY’22 compared to 127.48 mn t in Q1FY’22.
Price realisation remains subdued
The price realisation for raw coal sales was almost flat q-o-q at INR 1,421.15/t in Q2FY’22 against INR 1,427.53/t in Q1FY’22, while a modest rise was registered y-o-y from INR 1,416.4/t in Q2FY’21.
The price especially with regard to FSAs fell to its lowest since Q1FY’21, to INR 1,381.75/t in Q2FY’22.
In contrast, auction prices fared better as buyers were seen actively procuring coal at higher bid prices. Auction sales garnered an average price of INR 1,593.36/t in Q2FY’22, 11% higher y-o-y from INR 1,437.36/t in Q2FY’21.
Eventually, the disparity between these prices improved to INR 212/t during the quarter, registering a significant progress from the lows of INR 25/t seen in the year-ago period.
Financial highlights
In terms of the financial results, the company reported a decline in net profit in Q2FY’22.
Exhibiting trend similar to the sales volume, the company’s turnover increased 10% y-o-y to INR 23,291.08 crore in Q2FY’22, but was down 8% q-o-q compared to INR 21,153.07 crore in Q1FY’22.
Total income in the second quarter was marked at INR 24,072.83 crore. On the other hand, expenses rose 12% y-o-y to INR 20,424.52 crore in Q2FY’22, mainly on account of employee benefits and contractual obligations, and reduced quarterly net profit.
Consolidated net profit fell y-o-y to INR 2,936.91 crore in Q2FY’22 against INR 2,948.12 crore in Q2FY’21, which was also down 7% q-o-q from INR 3,169.86 crore in Q1FY’22.
Higher demand to push sales
In order to revive the condition at the power plants, CIL has stepped-up its coal supply post the monsoon. In fact, coal dispatches increased 17% m-o-m to 56.66 mn t in Oct’21, which is the highest recorded in this fiscal.
The power plants are still reeling under low inventories which will take some time to attain normative level, requiring additional supplies from CIL.
Besides, the company is expecting higher revenues once the residual bookings via auctions where sales happened at elevated prices in Aug-Sept’21, get concluded. The trend is likely to continue due to strong demand from the non-power sector whose supplies are currently regulated.
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