Yanzhou Coal
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Miner slips into neutral

Yanzhou Coal

YANZHOU Coal Mining produces low-sulphur coal from its Shandong mines for sale to electrical power plants and other users in East Asia.

Salomon Smith Barney recently placed a neutral recommendation on the stock because short-term earnings prospects looked unexciting and it was trading near the brokerage's fair value.

An improved outlook for coal prices should translate into higher profits for the company in 2000-02. Although coal prices were expected to remain weak this year, Yanzhou Coal's price recovery should start in the second half and prices should pick up 2.7 per cent next year.

The company also should benefit from lower transport costs in both domestic and overseas markets.

Any yuan devaluation would be positive for the company because its production costs primarily were in yuan while 34 per cent of its sales volume last year was overseas, the brokerage said.

The increase in the value-added tax rebate on coal exports, from 9 per cent to 13 per cent, in April would save the company 25 million yuan this year and 44 million yuan next year, Salomon Smith Barney said.

Stephen Seawright