Kuzbassrazrezugol, the country's second-largest coal producer, increased first-quarter profit fourfold from a year earlier, according to a company report obtained by Bloomberg.
Net income at the company — which has attracted investors including BlackRock Investment Management, East Capital Asset Management and Fidelity Investment Asset Management — jumped to 1.81 billion rubles ($58 million), from 437 million rubles a year earlier, the report showed.
Kuzbassrazrezugol has previously used so-called transfer pricing, or selling overseas shipments through a foreign trading company owned by the producer's parent, to strip out exports from its earnings, Alfa Bank said in a research note in January. The methodology shifts profits from the listed company to the trading subsidiary owned by the main shareholders, it said.
"It seems the company, which used to consolidate most of its profits at its trading companies in Europe, has now shifted to posting more cash flows domestically," said Ilya Brodsky, vice president of Specialized Research & Investment Group.
Kuzbassrazrezugol's biggest domestic competitor is Siberian Coal and Energy Company, or SUEK.
Stepan Dubkov, a spokesman for Kuzbassrazrezugol in Kemerovo, declined to comment.
More than 80 percent of the coal exported from Russia is sold via offshore units that allow producers to pay less tax, the Audit Chamber said in July 2009.
Offshore trading companies accumulate "significant" coal revenue as producers sell to them at a discount of 30 percent to 54 percent of global prices, the state financial watchdog said on its web site. "The Russian budget is losing significant tax revenue," it said.
The Federal Anti-Monopoly Service in 2008 ordered Mechel, the country's biggest coal supplier to steelmakers, to cut domestic prices. The action came after Prime Minister Vladimir Putin said Mechel sold to a Swiss unit at one-quarter of the price it charged domestically.
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