Coal Energy halves waste processing yoy in 8MFY12

Coal Energy (CLE PW) reported on Friday unremarkable mom production figures for both mined coal (134.7kt) and coal recovered from waste (17.6kt) in February 2012. On a yoy basis, coal mining grew 1.7x, while waste processing fell 12.3x. The result implies the company increased coal mining 67% yoy to 1,054 kt and decreased production of coal recovered from waste by 58% yoy to 140 kt. The company explains the yoy decline in coal production from waste by the absence of demand for middling last month.

Coal Energy’s coal output statistics, kt

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                            1QFY11  2QFY11  3QFY11  4QFY11  1QFY12  2QFY12  3QFY12E

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Mining                      212       255       259         334        389       395       404

Waste recovery           49        50        450         19          52         53         53

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Source: Company data, Concorde Capital estimates

Alexander Paraschiy: The poor waste processing result seems to be the result of a large comparison base rather than a dramatic change in demand for coal. The company showed exceptionally high coal waste output numbers in both February and March of 2011 (217 kt per month), which was far above all other monthly results (6.3 kt – 17.6 kt per month). We conclude the company was selling unrefined coal waste directly from waste dumps in February and March 2011. The two possible explanations for this phenomenon are: 1) a one-off spike in demand for waste, or 2) Coal Energy’s attempt to show a larger number for coal extracted/sold before its IPO: middling sales allowed the company to increase by 45% its pre-IPO coal output result for 9M11.