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Eric Ng

China Shenhua Energy, the listed unit of the nation's largest coal producer Shenhua Group, posted 37.67 per cent  growth in first-quarter net profit on the back of higher sales volume and price.
The company's net profit amounted to 6.77 billion yuan (HK$7.57 billion) in the three months to March,  up from 4.92 billion yuan in the year-earlier period based on international accounting standards.
Turnover surged 28.66 per cent to 23.79 billion yuan on the back of a 10.3 per cent rise in weighted average coal price to 345.1 yuan a tonne, and a 21.7 per cent jump in sales to 56.7 million tonnes.
Gross profit margin edged down to 48.45 per cent from 49.34 per cent, as the cost to produce each tonne of output rose 6.9 per cent  to 74 yuan.
The cost increment is milder than the 10 per cent to 15 per cent rise for the whole of this year as indicated by management last month.
An 11.3 per cent jump in material, fuel and power costs per tonne of output was offset by a 5.2 per cent decline in personnel expenses and a 4.7 per cent fall in unit maintenance expense.
UOB Kay Hian analyst Karen Li said the result was ahead of her estimate of a 30 per cent net profit growth, due primarily to lower than expected tax burden and selling and administration expenses.
'The gross margin was largely in line with my expectation,' she said. 'But its effective tax rate turned out to be only 17 per cent against my estimate of 25 per cent.'
The first-quarter net profit amounts to 21 per cent of the 32.22 billion yuan full-year average net profit forecast of 27 analysts polled by Thomson Reuters.
Shenhua Energy's export price averaged 461 yuan a tonne in the first quarter, 37.6 per cent higher than the 334.9 yuan a tonne average of domestically sold coal. The premium widened from 31.9 per cent last year.
To keep more coal for the tightly supplied domestic market, Beijing has in recent years cancelled export tax rebates and introduced an export tax, besides cutting export quotas.
Coal producers are enjoying robust profit growths, as an annual 14 per cent to 15 per cent power demand growth in recent years and similar growth in steel and construction materials output expansion supported output growth.
The central government has ordered the closure of small and unsafe mines to prevent accidents, further tightening  supply and  propping up prices.
Mainland spot market coal price has gained  20 per cent in  the first quarter, while annual contract prices have risen around 15 per cent, according to Yanzhou Coal.
Coal companies' bulging first-quarter profits  were in sharp contrast  to those of their power generator customers, with many suffering losses from a 21-month freeze in power tariffs as Beijing fights an  11-year-high inflation.
Analysts   expect mainland coal prices to remain high amid tight supply, rising operating costs and rising international prices.
Shenhua Energy's share price gained 4.04 per cent to HK$38.60 yesterday. Yanzhou Coal climbed 6.05 per cent to HK$14.38.



Shenhua Energy profit rises 37.7pc on higher sales volume and price