Yanzhou Coal Mining, a listed unit of the mainland's fourth-largest coal producer, expects profit to rebound this year after two consecutive years of decline, on the back of expected higher coal prices and sales volume. Executive director Wu Yuxiang yesterday said the company aimed to raise sales volume by 8.2 per cent to 37.5 million tonnes, including two million tonnes from its Australian mine, which started operations in October and one million tonnes from its Tianchi mine in Shanxi province that started in November. Sales target of its six mines in Shandong province is 34.5 million tonnes compared with last year's actual sales of 34.33 million tonnes. The company has signed contracts to sell 13.03 million tonnes of coal this year at an average 19.2 per cent price increase from last year. Mr Wu expected the remaining 21.5 million tonnes of the sales target to be sold in the spot market at higher prices than last year, both in the domestic market and overseas. 'Our net profit should be higher this year than last year; it is just a matter of by how much,' he said. Yanzhou Coal last Friday posted a 17.6 per cent fall in net profit to 2.37 billion yuan, below the 2.83 billion yuan mean estimate of 21 analysts polled by Thomson First Call. A 2.1 per cent fall in average coal sales price to 341.12 yuan a tonne and a 6.6 per cent rise in production costs to 170.15 yuan a tonne more than offset a 6.7 per cent rise in sales volume. Earnings were also crimped by higher salaries and raw materials prices to build facilities as well as village settlement costs. Mr Wu expected village settlement costs to fall to 500 million yuan this year from 900 million yuan last year. A net loss of 46 million yuan was recorded in the fourth quarter according to mainland accounting standards, due to a rise in administration expenses related to its new projects such as the Australian mine. The company has budgeted 4.14 billion yuan of capital investment this year, up from 3.36 billion yuan last year. Its 41 per cent-held Yushuwan mine in Shaanxi province will come on stream this year with an annual capacity of eight million tonnes, which is expected to increase to 20 million tonnes in five years. A 100,000 tonne-a-year coal-to-methanol project will also come on stream this year. Mr Wu said its gross profit margin was about 50 per cent based on methanol sales price of about 2,750 yuan a tonne, slightly higher than Yanzhou Coal's overall margin of 45.5 per cent last year. The company's shares yesterday fell 2.3 per cent to HK$7.94.