Yanzhou Coal’s First-Quarter Profit Falls 11% on Prices, Costs

Yanzhou Coal Mining Co. (1171), China’s fourth-largest producer, recorded an 11 percent drop in first- quarter profit as prices fell and operating costs increased.

Net income declined to 2.2 billion yuan ($349 million), or 0.4457 a share, from 2.48 billion yuan, or 0.5034 yuan, a year earlier, the Shandong-based company said today in a statement. Sales gained 54 percent to 14.4 billion yuan.

Chinese coal prices in the first quarter fell from a year earlier as inventories climbed on slowing demand and the government announced a price cap. Salable coal production rose 30 percent to 14.7 million metric tons in the quarter, while cost of coal sales rose, Yanzhou Coal said.

The average price of the company’s coal products fell 10 percent to 654.1 yuan a ton in the first quarter from a year earlier, Yanzhou Coal said. Spot prices at northern Chinese ports were capped by the National Development and Reform Commission at 800 yuan a ton since the start of the year.

The benchmark price of thermal coal with an energy value of 5,500 kilocalories a kilogram at Qinhuangdao port rebounded to a 13-week high of 780 yuan to 790 yuan a ton as of yesterday, according to data today from the China Coal Transport and Distribution Association. That’s down 2.2 percent from a year earlier.

The cost of coal sales more than doubled to 9.03 billion yuan in the first quarter after the company sold more of the commodity from external purchases than from its own mines, according to the statement.

Yanzhou, which acquired Felix Resources Ltd. for A$3.1 billion ($3.2 billion) in 2009, received approval last month from the Australian government for its A$2.05 billion takeover of Gloucester Coal Ltd. (GCL) The company is seeking assets in Canada, Indonesia and Mongolia to boost overseas output.

The shares fell 1.7 percent to close at HK$16.50 in Hong Kong, before the earnings announcement. The benchmark Hang Seng Index dropped 1.8 percent. Yanzhou’s stock in Shanghai gained 0.7 percent to 23.71 yuan.

To contact Bloomberg News staff for this story: Helen Yuan in Shanghai at hyuan@bloomberg.net

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net

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