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Coal India: Operating Margins Under Pressure Due To One-Offs - Views on News from Equitymaster
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  • Dec 22, 2016 - Coal India: Operating Margins Under Pressure Due To One-Offs

Coal India: Operating Margins Under Pressure Due To One-Offs
Dec 22, 2016

Coal India has announced the second quarter results of financial year 2016-2017 (2QFY17). The topline and the bottomline declined by 7.3% YoY and 77.4% YoY respectively during the quarter.

Performance summary:
  • Income from operations declined by 7.7% YoY during 2QFY17. Fuel Supply Agreement (FSA) sales declined by 9.7% YoY to 93 MT. E-auction sales increased by 26.5% YoY to 19 MT with realisation declining by 25% YoY to Rs 1,348 per tonne. CIL's overall off-take and production declined by 4.9% YoY & 3.7% YoY to 115.9 MT & 104.4 MT respectively. However, average realization of coal decreased by 2.9% YoY to Rs 1,350 per tonne due to 25% YoY fall in e-auction price on the back of low demand from sponge iron and cement companies.
  • CIL's employee cost increased by 14.6% YoY to Rs 84 billion on the back of large wage provision. Similarly, on account of higher other expenses (up by 15.6%), contractual expenses (up by 5.5%), stripping activity adjustment of Rs 1.4 billion and provisioning of Rs 2.7 billion took a toll on operating profit. Operating profit declined by 78.2% YoY. Similarly, operating margins contracted by 15.3%.
  • Other income declined marginally by 0.2%YoY. Depreciation saw a marginal increase of 6.3% YoY. Interest cost declined by 13.2% YoY during the quarter.
  • Net profit plunged by 77.4% YoY during 2QFY17 on the back fall in operating profit coupled with higher effective tax rate of 56%.

    Financial Snapshot
    (Rs m) 2QFY16 2QFY17 Change 1HFY16 1HFY17 Change
    Net Sales 169,576 156,451 -7.7% 359,133 334,411 -6.9%
    Other operating income 5,323 5,675 6.6% 10,946 11,933 9.0%
    Total Income 174,899 162,126 -7.3% 370,080 346,344 -6.4%
    Total Expenses 140,827 154,699 9.9% 290,553 296,370 2.0%
    Operating profit (EBITDA) 34,072 7,426 -78.2% 79,526 49,975 -37.2%
    Operating profit margin (%) 20.1% 4.7% 22.1% 14.9%
    Other income 14,159 14,125 -0.2% 28,785 25,432 -11.6%
    Interest 1,117 970 -13.2% 56 1860 3250.8%
    Depreciation 6,509 6,921 6.3% 11,439 13,592 18.8%
    Profit before tax & exceptional items 40,605 13,661 -66.4% 96,816 59,954 -38.1%
    Exceptional item 22 0
    Tax 14,062 7,660 -45.5% 33,757 23,300 -31.0%
    Net Profit 26,543 6,002 -77.4% 63,038 36,654 -41.9%
    Net profit margin (%) 15.7% 3.8% 17.6% 11.0%
    No. of shares (m) 6316
    Basic diluted earnings per share (Rs) ^ 18.4
    P/E ratio (x) * 15.6

    * On trailing 12 month basis

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