China Shenhua predicts smaller sales growth
China Shenhua Energy, the listed unit of the mainland's largest coal producer Shenhua Group, saw its share price fall after it predicted small production and sales growth this year despite posting an annual result that was in line with market expectations.
The company is aiming for a 2.8 per cent rise in production volume to 289.9 million tonnes and for sales to grow 6 per cent to 410.5 million tonnes. This contrasts with last year's output growth of 14.8 per cent and a sales rise of 23.7 per cent.
Sanford Bernstein senior analyst Michael Parker said the growth drop-off looked odd, given the firm had made a hefty gross profit margin of 73 per cent from its own mines.
'Instead of guiding production growth down, why isn't Shenhua doing everything it can to produce as much coal as it can?' he wrote in a research note. 'Where does the growth come from [this] year?'
China Shenhua chairman Zhang Xiwu played down the issue, saying targets would likely be overshot.
'Based on figures from this year's first two months, we believe we can achieve 300 million tonnes of output and 425 million tonnes of sales for the full year,' he said. This represents an output growth rate of 6.4 per cent and sales growth rate of 9.7 per cent.
CCB International analyst Karen Li said the drop-off may be a bit exaggerated, noting that the growth rate of output from its own mines had already slowed last year, since out of the 14.8 per cent growth, 10 per cent was driven by acquisition of mines from its parent. This means just 4.8 per cent was driven by its own mines.
Parker said China Shenhua was planning for spot-market sales to account for 59 per cent of total sales, up from 54 per cent last year.
The shift would help shore up average selling prices, since spot prices are 50 per cent higher than contract prices.
China Shenhua relied primarily on sales volume growth last year to achieve a 17.6 per cent rise in net profit to 45.68 billion yuan (HK$55.95 billion), as production costs offset higher coal prices.
Meanwhile, Yanzhou Coal Mining, the listed unit of mainland coal miner Yankuang Group, aims to lift output this year from its own mines by 7.2 per cent to 60 million tonnes of coal and raise sales by 24.5 per cent to 80 million tonnes - including volumes purchased from other miners, said chairman Li Weimin.
Yanzhou aims to control production cost rises within 10 per cent after an 11.5 per cent rise last year. Underlying net profit grew 15.5 per cent to 8.56 billion yuan last year.
China Shenhua's share price yesterday fell 2.4 per cent to HK$33.05, while that of Yanzhou edged up 0.2 per cent to HK$16.74.
