Yanzhou Coal
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Results divide analysts on outlook for Yanzhou Coal

Yanzhou Coal

Yanzhou Coal Mining's third quarter results have drawn a mixed reaction from analysts commenting on its profit outlook.

While sales volume is expected to remain strong in the remainder of the year, continued pricing pressure due to the weak global economy could dampen profit growth early next year, according to some analysts.

The Shandong province-based H share reported a 46 per cent year-on-year rise in net profit to 842.6 million yuan (about HK$794.88 million) for the first nine months of this year. Turnover rose 23.27 per cent to 5.94 billion yuan.

The main revenue growth drivers were a 10.1 per cent year-on-year increase in coal sales volume to 25.86 million tonnes, and a 10 per cent rise in its average coal sales price to 225.80 yuan a tonne.

Domestic sales volume rose 5.8 per cent year-on-year to 14.99 million tonnes, with export sales climbing 16.6 per cent to 10.87 million tonnes.

Merrill Lynch said it expected market consensus for Yanzhou Coal's full-year net profit would drop by about 3 per cent.

Brokerage houseCLSA in Hong Kong said the market consensus figures for this year were too high, adding there was room for the company's coal export contract price to come down next April, given Japan was considering raising taxes on imported coal.

Yanzhou Coal is forecast by analysts to post a 29.88 per cent rise in net profit to 1.26 billion yuan from last year's 970.9 million yuan, according to Thomson Financial First Call's consensus estimates.

Merrill pointed out that average selling prices in the third quarter fell by 5 per cent from the first half - with the domestic price dropping 3 per cent and the export price by 7 per cent.

Bank of China International (BOCI) said: 'We believe that, with prices on world markets weakening, export contracts negotiations starting at the first quarter of 2003 will face price pressures.'

However, JP Morgan said it expected domestic prices to remain stable in the fourth quarter, and that profits next year would be supported by the closure of small and illegitimate mines.