Coal India Ltd., one of the world’s top producers of the fuel, reported a 17% decline in profits following a 12-times surge in provisioning for higher staff wages.
Net income at the state-run miner dropped to 55.33 billion rupees ($676 million) in the three months through March from 66.93 billion rupees in the same period a year earlier, according to an exchange filing on Sunday. That compares to a 77.5 billion rupee average of analysts’ estimates compiled by Bloomberg.
The company made 58.7 billion rupees of provisions for higher wages to its non-executive staff during the quarter versus 4.8 billion rupees a year earlier which ate into revenue gains, according to the earnings statement.
The Kolkata-based miner reported a jump in other key operational parameters, including shipments volumes and average prices earned on every ton of sales. “Profit after tax would have been the highest ever in any quarter had the provision not been made,” Coal India said in a separate press statement. Profit for the full year through March rose to a record, the company said.
Coal is used to generate about three-quarters of India’s electricity and surging consumption has seen the supplier lift production and sales in recent months. Peak electricity demand hit a record in April, stoking fears of a repeat of disruption last summer, when a surge in industrial and residential energy consumption overwhelmed supply.
Supply shortages help bolster earnings for the coal miner, as it can get customers to pay higher premiums in open market auctions to secure uncontracted supplies.
Coal India has said it has ample stockpiles to meet summer demand, though limited rail capacity continues to challenge some producers in reaching far-flung consumers. Temperatures are also forecast to rise sharply in several parts of the country in coming weeks, adding pressure on supply.
The producer’s total costs climbed 30% during the quarter, driven by the salary increase provisions. The miner reached an agreement with workers’ unions in January to raise base salaries for its non-executive staff.
