China Coal Energy Co, the nation's second-largest producer of the fuel, has reported a 59-percent increase in first-half earnings, thanks to higher sales and prices.
However, if the firm's equity investment in China Cosco Holdings Co was excluded to better reflect its core business, net profit would have risen a much more dazzling 127 percent.
Net income rose to 4.22 billion yuan (US$617 million), from 2.65 billion yuan a year earlier, on international accounting standards, China Coal reported to Shanghai's and Hong Kong's stock exchanges yesterday.
Its stake in China Cosco Holdings Co incurred a fair value loss of 916.4 million yuan in the first half, versus a gain of 391.2 million yuan a year ago. The miner subscribed for 40 million A shares in China Cosco's Shanghai initial public offering last May as a strategic investor.
Coal producers in China are expanding capacity to meet the fast-growing power demand as the fuel feeds about three quarters of the nation's generating capacity. Domestic spot prices had repeatedly surged to record highs this year because of demand and the closure of small, unsafe mines.
However, the government has over the past month stepped up price controls on thermal coal to ensure peak summer season supplies to power stations, which are struggling with surging fuel costs and state-set tariffs.
Turnover was up 57 percent to 26.6 billion yuan, China Coal said. Raw coal production rose 15.2 percent to 49.98 million tons, while average coal sales prices increased 33.6 percent to 455 yuan a ton. The firm said it "seized the favorable opportunity of sustained increase in prices in the spot market and increased the proportion of spot sales appropriately in respect of the additional output," while ensuring supplies to key users under long-term contracts.
Separately, Datong Coal Industry Co, another Chinese coal producer, forecast yesterday its profit for the first half would jump by between 155 and 205 percent.
(Shanghai Daily July 30, 2008)