China Shenhua Energy, the listed flagship of the country's largest coal producer, Shenhua Group, expects production costs to keep rising for the rest of the year after recording a better than projected first-quarter profit.
Net profit was 7.94 billion yuan (HK$9 billion) in the quarter, up 17.19 per cent from 6.77 billion yuan a year ago. The company is expected to earn 28.1 billion yuan for the full year, up from 26.59 billion yuan last year, according to 25 analysts polled by Thomson Reuters.
First-quarter turnover grew 14.2 per cent year on year to 27.16 billion yuan, on a 0.5 per cent rise in coal sales to 57 million tonnes and a 15 per cent jump in weighted average pre-sales-tax selling price to 396.80 yuan a tonne.
Unit production cost surged 25.1 per cent to 92.6 yuan a tonne but fell 2.4 per cent from last year's average. Shenhua said it may keep rising in the rest of the year and may exceed last year's average.
'Shenhua's results were likely better than market expectation because of higher sales volume and prices in the spot market,' said Nomura Securities analyst Donovan Huang. 'This is due to the deadlock in contract sales negotiations.'
But he said profit performance may not be as good later this year on a year-on-year basis as coal's sale price is expected to fall while production costs keep rising.
First-quarter spot market sales grew 71.6 per cent year on year to 19.4 million tonnes, with the average price up 45.9 per cent to 387 yuan a tonne. This contrasted with a 17.4 per cent fall in long-term contract sales to 33.7 million tonnes and a 3.9 per cent rise in average price to 368.10 yuan.
