Overall tax rate for the company rises to 28.3 per cent China Coal Energy, the nation's second-largest coal company by capitalisation, posted a 5.1 per cent fall in full-year profit after the end of preferential tax treatment of some subsidiaries. Net profit fell to 3.17 billion yuan last year from 3.34 billion yuan in 2005. Turnover edged up 0.54 per cent to 30.23 billion yuan, as growth in coke and mining machinery sales were offset by a decline in coal sales. Coke is made from coal and used in steel production. The earnings were in line with the company's own forecast of 3.14 billion yuan made in its initial public offering document in December last year, while falling 1.5 per cent short of the 3.22 billion yuan median estimate of 10 brokerage analysts polled by Thomson First Call. The overall tax rate for the company, which produces and trades coal, rose to 28.3 per cent from 17.6 per cent in 2005. Coal sales volume dropped 4 per cent to 88.45 million tonnes, as a 24 per cent decrease in sales of coal sourced from third parties to 31.3 million tonnes more than offset a 12 per cent increase in coal mined by the company to 57.15 million tonnes. Even so, the change in sales mix lifted the coal operation's operating profit margin to 19.2 per cent from 16.1 per cent in 2005, as self-mined coal commands a higher margin than sales of third-party coal. Chairman Jing Tianliang said the company had signed this year's coal sales contract with an average price increase of 28 yuan a tonne, compared with the industry's 20 yuan to 30 yuan rise - equivalent to an increase of 6.6 per cent to 10 per cent. Beijing-based China Coal, which gets most of its output from Shanxi province, plans to raise output to 80 million tonnes this year and 120 million tonnes by 2010. Mr Jing said the company had budgeted 60 billion yuan of capital expenditure for the next five years. It aims to raise coal output capacity to 88.7 million tonnes this year and to more than 100 million tonnes by 2010. Of this year's capital expenditure of 10.2 billion yuan, 5.91 billion yuan will be spent to expand coal output capacity, 2.83 billion yuan to develop coal-based chemical projects and 1.03 billion yuan to raise mining equipment production capacity. The company may acquire from parent China National Coal Group a coal mine in Shuonan, Shanxi province, Mr Jing said, without giving a timetable. The mine contains four billion tonnes of geological reserves, which need to be further explored and developed to produce a recoverable reserves figure. China Coal had 3.51 billion tonnes of proved and probable reserves at the end of last year. China Coal has taken a 38.75 per cent stake in a 21 billion yuan plant in Inner Mongolia to turn coal into three million tonnes of dimethyl ether annually. The plant, undergoing a feasibility study, is targeted to be completed by 2010. Dimethyl ether is a clean-burning fuel whose production is encouraged by the government as an alternative to petrol and diesel. China Coal shares, which have more than doubled from their HK$4.05 offer price, fell 2.55 per cent yesterday to HK$8.42 after the results announcement.
