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Eric Ng

China Shenhua Energy, the listed unit of the nation's largest coal miner, posted a 43.6 per cent growth in profits for the first half, but prospects for the remainder of the year are clouded by price caps imposed by Beijing.
Net profit for the coal, power, rail and port conglomerate was 14.15 billion yuan (HK$16.08 billion), up from 9.85 billion yuan a year earlier,  the company said in a preliminary report yesterday.
The results were in line with the 14.44 billion yuan forecast  by Goldman Sachs analyst Shen Song.
No turnover figures were provided. Operating profit climbed 32.5 per cent  to 19.73 billion yuan.
Basic earnings per share, excluding extraordinary items, rose 31.9 per cent to 71.9 fen.
Results for the previous period were restated to allow like-for-like comparison after the company acquired coal and power assets from its parent firm in August last year.
Last month, Shenhua reported that washed coal output grew 17 per cent from a year earlier to 89.6 million tonnes, while coal sales, including amounts sourced from third parties, rose 17.7 per cent to 115.1 million tonnes. Power sales  were up 31 per cent at 44.14 billion kilowatt-hours in the  first half.
Shenhua's profit was buoyed by sharply higher coal prices but squeezed by a freeze on power tariffs, which were raised only by an average 5.3 per cent on July 1 for the first time in two years.
The spot  coal price for delivery at the Qinhuangdao port in northern China has surged by almost 70 per cent since the start of the year and has doubled year on year to almost 1,000 yuan a tonne.
Spot prices have far outstripped those of one-year supply contracts signed earlier this year, which rose only about 15 per cent from last year. That means spot prices are now twice  the contract prices.
Shenhua is  believed to have sold about 70 per cent of its output through contracts this year and the remainder in the spot market.
To contain inflation and help loss-making power companies, Beijing imposed price caps first on coal sold at mines in mid-June and then on coal sold at ports in the middle of last month. This raised fears that more policies may be forthcoming because  price caps  have been largely ineffective in the fragmented sector.
'While some investors might be concerned that this economic environment poses a threat to the long-term thermal coal price, we believe there is a structural shortage, which is likely to be recurring,' UBS analyst Ghee Peh wrote in a research note.



Shenhua reports 43.6pc earnings rise but price caps dim prospects