Coal giant's profit slips further
Unbooked sale, rising costs and delayed mine opening blamed as prices stay high on strong demand
H share Yanzhou Coal Mining, one of the mainland's largest and most profitable coal miners, saw its net profit continue to decline during the first three months of this year after an 8.7 per cent slide to 2.88 billion yuan last year.
The company's net profit in the quarter slipped 26.5 per cent year on year to 582.5 million yuan based on China's accounting standards, with the blame on the not-yet-booked sales of 980,000 tonnes of coal to Zou Province Power Station.
Yanzhou Coal Mining also recorded a flat coal price of 354.96 yuan per tonne on average during the period.
While coal prices and industry profits hit their peak in the past five years thanks to a tight supply of the commodity, Yanzhou Coal was buffeted by higher costs and a delay in removing villages to make way for mining projects.
'Last year was a year full of hardship, but the group's operating result remained good,' chairman Wang Xin said yesterday.
'With increasing demand for coal in both the mainland and overseas market in 2006, the coal price will remain at high levels. The group's production volume will realise restorative growth.'
The company's priorities this year would be placed on improving operational management and the profitability of coal mines, he added.
'The goal is to control the [company's] costs at a level lower than that of 2005,' Mr Wang said.
Mr Wang did not elaborate on cost details, but analysts said a heavy increase in management pay was to blame for the poor performance given an 87 per cent jump in compensation to the group's managerial staff, which numbers 2,013 in a workforce of 29,674.
Last year's net earnings lagged behind a consensus of 3.21 billion yuan in a poll of 23 analysts.
The final dividend was slashed 42.3 per cent to 15 fen per share, but a special dividend of 7 fen per share was proposed. The full-year payout totalled 22 fen per share, or 15.38 per cent lower.
Sales of coal shrank 14.5 per cent to 32.48 million tonnes last year on poorer sales in domestic and overseas markets. Turnover dipped 3.92 per cent to 12.44 billion yuan.
Production of coal had been disrupted until earlier this month since the third quarter of last year as a consequence of the delayed removal of six villages located above a coal reserve.
Prevailing robust demand sent coal prices 28.3 per cent higher to 349.5 yuan per tonne last year. Prices for coal exports saw the steepest increase at 37.4 per cent to an average 404.37 yuan per tonne, while the domestic selling price soared 26.1 per cent to 333.74 yuan per tonne.
The strength of coal prices underlined strong economic growth in the United States, Japan and the remainder of Asia, with demand arising from energy markets, Mr Wang said.
He added that India was an emerging market in the region for the demand of coal.
