Coal India, the world's largest coal producer, posted a 19 percent rise in second-quarter profits on Friday and said it expects to step up production this year after years of sluggish output. The state-controlled miner, which produces about 80 percent of India's coal, is under pressure to ease energy shortages at home but has struggled for years to raise output due to problems in obtaining environmental and regulatory approval.
Output levels have remained nearly flat for the past two years and it missed its production target last year. The company is aiming to supply 464 million tonnes of coal this fiscal year ending next March, an increase of about 7 percent, and said on Friday production in the fiscal second quarter which ended in September was up 11 percent at 89.1 million tonnes, after taking additional steps to maintain output despite heavy monsoon rains.
"I am confident. We expect to maintain our target despite constraints," Chairman S. Narsing Rao told reporters in Kolkata after the results on Friday. Coal India said its net profit in the three months to end-September rose to 30.8 billion rupees ($565 million), short of the average forecast of 32.2 billion rupees given in a Reuters poll of analysts. Net sales rose 11 percent to 146 billion rupees, which compared with an average forecast of 149 billion.
Coal India, the country's fifth-largest company by market value, has been a favourite with investors, despite underperforming the main stock index this year. Twenty-nine of the 40 analysts covering Coal India rate the stock a 'buy' or 'strong buy', according to Thomson Reuters Starmine data. Coal India has been able to charge higher prices to some customers after changing its pricing system this year, even though international coal prices have fallen by nearly 30 percent.
The company still prices domestic coal at 45 to 70 percent below international prices, in part to keep costs low for power producers, its main customers but India's business tycoons have been pressing the government to help with supplying the generators with more coal, to help solve the country's power shortages. Earlier this year the miner agreed to supply a minimum of 80 percent of the coal needed for 48 new power projects, but has indicated it may need to import some of the fuel. Shares in Coal India, valued at nearly $40.7 billion, closed 0.7 percent lower ahead of the results.