Coal companies see higher profits in Q1

Labourers shovel coal at a coal storage site in Hefei, Anhui province July 21, 2011.[Photo/Agencies]

China's listed coal companies made more money in the first quarter aided by rising coal prices, Securities Daily reported Thursday.

As of April 26, among the eight coal companies that released their first-quarter financial report, seven said their net profits saw large increases, except Henan Shenhuo Coal & Power Co Ltd.

Pingdingshan Tianan Coal Mining Co Ltd reported a 102.96 percent increase in its first-quarter operating revenue, while net profits surged 7962.83 percent to 317 million yuan.

Among the 11 coal companies that released their Q1 profit forecast, seven said they expected higher earnings, three forecasted that they could reverse previous losses, and one hoped to reduce loss.

Jizhong Energy Resources Co Ltd estimated its net profits at 155-310 million yuan in the first quarter, up 3587.67-7275.33 percent year on year. Last year, the company posted a net profit of 270 million yuan, an increase of 1422.70 percent from the previous year.

Anhui Hengyuan Coal Industry and Electricity Power Co Ltd also expected to make a net profit of 287 million yuan in the first quarter, jumping about 5878.06 percent from a year earlier.

All coal companies attributed the earnings hike to sharply rising coal prices and robust demand.

Coal prices in China have surged since last year, as a result of the government's effort to curb industrial overcapacity. Premier Li Keqiang said in the Government Work Report that China will reduce coal production by at least 150 million tons this year.

However, coal prices are expected to see a decline in the second quarter, Deng Shun, a coal researcher at GF Futures told the newspaper. Normally, April and May sees weak demand. Furthermore, enterprises have produced too much coal due to high profits, Deng added.

The National Development and Reform Commission said Wednesday that the government will encourage coal companies to merge and restructure to increase efficiency in the industry and take measures to return thermal coal prices to a reasonable range.