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Shenhua profit rises to five-year high as China curbs boost coal

Shanghai

CHINA Shenhua Energy Co, the country's biggest coal miner, said profit jumped to the highest level since 2012 as robust demand and government efforts to rein in overcapacity helped bolster prices.

Net income climbed to 47.8 billion yuan (S$9.9 billion) from 24.9 billion yuan a year ago, the Beijing-based miner said in a statement on Friday to the Hong Kong Stock Exchange.

Revenue rose 35.8 per cent to 248.7 billion yuan. The company, which also runs power stations and railroads, had flagged the profit jump in January.

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Coal prices were supercharged last year as China pressed on with efforts to cut overcapacity by shuttering some mines and restricting imports, aiding major producers including Shenhua, Yanzhou Coal Mining Co and China Coal Energy Co. Demand was also underpinned by robust economic growth. Still, there's concern the good times will end as prices have eased in recent months and analysts are warning of further declines as mines ramp up output.

Spot coal at the Chinese port of Qinhuangdao averaged 36 per cent higher last year and hit 751 yuan in January, the most since 2012, according to China Coal Resource. Prices, which have since eased to 636 yuan as of March 19, may decline about 5 per cent this year, Shanxi-based Fenwei Energy estimates.

Shenhua targets output this year of 290 million tonnes after posting a 1.9 per cent rise to 295.4 million for 2017. Coal sales will also slide to 430 million tonnes, from almost 444 million tonnes. As the country brings on new "advanced" capacity mines this year, the nation's overall coal output will likely increase while imports will remain steady, the company said.

Shenhua proposed a final dividend of 0.91 yuan per share for 2017, a far cry from the large special dividend the previous year that sent its shares jumping.

Separately, Yanzhou said Friday that net income jumped more than fourfold to 7.36 billion yuan. Revenue gained almost 48 per cent to 151.2 billion yuan, the Shandong-based miner said.

The company's coal sales last year rose 29 per cent to 96.8 million tonnes after new mines in Inner Mongolia started operation and the acquisition of Coal & Allied Industries Ltd in Australia was completed in September, it said. Net income was also helped by its subsidiary, Yancoal Australia Ltd, swinging to a record profit from a loss the previous year, the company noted.

Yanzhou also reported impairments of more than 2.2 billion yuan, including bad debts and depreciation of inventory. A company statement showed the bulk of the writedowns came from almost 1.5 billion yuan in assets held by Inner Mongolia Xintai Coal Mining Co. BLOOMBERG