Strong coal price boosts top producer’s earnings
|Visitors walk past the stand of Shenhua Group during an exhibition in Tianjin, China, May 12, 2013. (Photo / dfic.cn)|
China Shenhua Energy shares surged 16.28 percent to close at HK$19.14 in Hong Kong on Monday after the Chinese mainland’s biggest coal producer reported a 41 percent jump in net profit for last year.
The company also said profit grew at least 50 percent year on year in the first two month of this year and estimated the coal price would remain in a reasonable range between 500 yuan (US$72.43) and 570 yuan per tonne this year.
The city’s benchmark Hang Seng Index gained 0.79 percent to 24,502 points.
A rebound in the coal price and upbeat demand boosted Shenhua’s earnings 41.1 percent to 24.91billion yuan last year compared with 2015. Revenue expanded 3.4 percent to 183.13billion yuan. Basic earnings per share were 1.252 yuan.
The company recommended a special dividend of 2.51 yuantogether with the final dividend of 46 fen per share, a payout of2.97 yuan per share or 59.07 billion yuan for 2016 amid abundant cash flow and investment expenditure.
“Our decision to issue the special dividend is to answer our shareholders’ calls for higher dividend and increase our rewards to shareholders. It’s not affected by external factors, such as government or outsiders’ proposals,” Shenhua president Ling Wen said.
Coal prices surged on the mainland last year, snapping four years of decline, as a result of government efforts to curb industrial overcapacity. The price index of Bohai Bay thermal coal was 593 yuan per tonne at the end of last year, a rise of 222 yuan from the beginning of the year.
Shenhua expected changes in demand and government measures would gradually rationalize the market this year. The company set its coal production and sales volume targets for this year at 298 million tonnes and 407 million tonnes, up 2.8 percent and up 3.1 percent respectively from last year. Its power output target was 214.7 billion kilowatt-hours, down 2.7 percent. Capital expenditure would amount to 35 billion yuan this year.
“We will accelerate the implementation of a clean energy development strategy in 2017, by further renovating 12 coal-fired generators with the total capacity of approximately 7,820 MW to build a green model in the coal-fired power industry,” Ling said.
Credit Suisse raised its profit forecast on Shenhua for this year 19 percent after the announcement of better-than-expected results. The target price was raised from HK$14 to HK$15.30 to reflect the higher Qinhuangdao coal price forecast this year. However, Credit Suisse warned that the spot coal price had been at the peak, creating downside risk in the second half of the year.The stock was maintained at Underperform.email@example.com